The tax changes shaking up agency social work

Community Care speaks to social workers about incoming changes to tax legislation that councils hope will boost permanent staff numbers

Next week, as the new financial year kicks off on 6 April, tax reforms will come into effect that are set to shake up the recruitment marketplace for agency social workers.

Changes to so-called ‘IR35’ rules mean agency workers who had previously enjoyed the freedom to operate via their own limited companies, lowering their tax liabilities and enabling expenses to be offset against earnings, will instead mostly be taxed at source like their permanent colleagues.

Research published by Community Care last month found the number of social workers preferring locum work is on the increase. But councils are hoping the narrowing of the take-home pay gap between agency and staff jobs will help encourage social workers to rejoin their payrolls.

We spoke to 20 social workers at various stages in their careers, most of whom work in children’s services where demand for agency staff has been greatest, to find what the reforms will mean for them.

‘The money isn’t as fantastic as everyone thinks’

Every worker we interviewed said that despite agency pre-tax hourly rates remaining higher than for staffers, the incoming changes would have an appreciable impact on their personal situation.

“While on paper the money looks excellent compared to being permanent, it’s not actually as fantastic as everyone thinks once you factor in no holiday pay and no sick pay,” said one child protection manager who is shortly to take time out to deal with her own serious health issues.

She and others also pointed out that agency workers may spend hundreds or thousands annually on training and professional development.

People offered a range of motivations for sticking with agency work. Some had left permanent jobs as a reaction to stress or ill-health, poor management or bullying.

More than one of this group described being a locum as offering a mental ‘get-out-of-jail card’. This didn’t necessarily mean walking out of stressful or unpleasant placements, social workers said, but just knowing that it was their choice whether to extend them or not, and that they could take a break in between times. In some cases people said this had kept them in careers they might otherwise have left.

Others had financial reasons beyond the obvious ones; for example, because they had relied on the higher take-home pay as a means to manage debts or family outgoings, or to juggle work with carer’s responsibilities. Many cited the variety offered by agency work as its ongoing appeal, with several pointing out that this made them more rounded social workers, better equipped to solve problems because of knowledge picked up from doing the rounds.

“We bring a wealth of experience from working in many different local authorities and teams,” said one experienced children’s social worker. “We have the opportunity to see what works well and what doesn’t. We see situations with a clear, independent eye and are able to critique teams and share experiences.”

‘I’d rather sit in a typing pool than go permanent’

For some the prospect of returning to permanent employment is still tempting, especially younger workers on placements with employers they like.

“I’ve been fortunate to work in local authorities that have treated locums as equal to permanent staff; due to this I am now considering going permanent myself,” said one mother-of-two, who explained that benefiting from the tax breaks available so far to agency workers had meant the difference between getting on the property ladder or not.

But far more social workers said they had no intention of re-entering local authority employment and would be weighing up their options in light of the IR35 changes. A handful of older interviewees said they were now looking to bring their social work careers to a close, either to retire early or to look at alternative work.

“I will never return to permanent employment – I would rather sit in a typing pool with no stress,” said one social worker with 20 years’ experience.

Most people we spoke to, though, said they would be continuing, but would be cutting their cloth accordingly.

Five of the 20 interviewees said categorically that they would stop considering long-distance jobs, because they would no longer be able to set the expenses of travel or accommodation against their taxes. Some of these social workers had previously been travelling dozens or hundreds of miles to work, often to councils suffering severe staff shortages or Ofsted-related crises. One senior manager said she paid £500 a week in hotel expenses in order to work at the other end of the country.

“I certainly wouldn’t work far away from home again,” said another manager in her fifties working in a learning disability team. “[The changes] will be a big loss to the sector, as [needy] local authorities will lose a lot of experience – people who can go in and hit the ground running.”

‘Some councils will find this tough’

The picture of seasoned social workers potentially withdrawing or restricting their services was echoed by agency representatives we spoke to.

“Many of our locums have weighed their options due to the IR35 reforms, but we haven’t seen a notable increase in those deciding to take up permanent positions,” said Debbie Smith, chief executive of Caritas Recruitment.

“Rural-based local authorities will also certainly find it more challenging to attract locums, now contractors’ net earnings are decreasing and they’ll be unable to offset travel and accommodation expenses.”

Sarah Kay, director of recruitment at the Taylor Davenport agency, told Community Care the situation could become comparable to the crisis in the domiciliary adult care sector, where companies have handed back contracts because council fees have been too low.

“We predominantly work with local authorities in remote areas and under improvement – lots of our staff work all over the country,” she said. “Without being able to claim expenses they have said they will look for work closer to home.”

Kay added that her candidate numbers had dropped by about 10%, because many social workers are unhappy with local authorities applying a ‘blanket’ approach and placing their entire agency workforce within IR35.

In some cases such decisions contradict the results of an online tool developed by HMRC to act as a guide to individuals’ status, adding to people’s disillusionment. “Some workers are saying, ‘This won’t stick – it’s unlawful; unethical,’ and are taking a few months off to see what happens,” she said.

Kay and Smith said they could see regional memorandums capping agency pay becoming strained if shortages of experienced workers intensify. Both said they could foresee councils having to consider offering travel or accommodation funding as sweeteners. But, Kay added, the extreme budget pressures many councils find themselves under make such measures far less straightforward than they would have been a few years ago.

‘We anticipate changes in the pattern of agency work’

We contacted a number of local authorities to ask about their preparations for the IR35 changes, and whether they are looking at offering incentives to stop contractors leaving. A spokesperson for Northamptonshire council, which for the past two years of published statistics has relied on agency staff to fill half its social work posts, would only say that the authority is “currently looking at the impact of this legislation”.

Jo Davidson, workforce lead for the West Midlands Association of Directors of Children’s Services (ADCS), acknowledged that agency workers in the region had raised concerns about their ability to work at longer distances from their homes.

“We anticipate some changes in the pattern of agency work – more people working closer to home for example,” said Davidson, also the director for children’s wellbeing at Herefordshire council, which reduced its agency quota from 30% to 14% between 2015 and 2016.

“This may have a short-term impact, but the longer-term plan is to continue building the resilience of the permanent workforce and reduce the need for the scale of agency workers seen in recent years.”

Commenting on the possible national implications of the tax reforms, Rachael Wardell, chair of the ADCS workforce development policy committee, said many councils faced very different scenarios and so were making contingency plans to manage local impacts.

She added that she anticipated regional memorandums being updated to “mitigate any destabilising effect on the market, and to continue to bear down on costs”. Local authorities, said Wardell, are “not in a position to pay higher rates to compensate the loss of earnings some social workers may experience” as a result of IR35 changes.

Wardell agreed some workers may leave the profession altogether, but said she felt the narrowing of the pay gap between permanent and agency staff would ultimately lead more workers back into the local authority fold, at least in some regions.

“That being said, most social workers value the flexibility and work life balance offered through agency work over the money and we hope that committed social workers would remain in the profession despite these changes.”

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8 Responses to The tax changes shaking up agency social work

  1. Right to Reply March 30, 2017 at 1:24 pm #

    I am an agency SW & have been for a number of years. I have never chosen to be a limited company and been under IR35, so there is going to be little impact on my overall earnings when I looked into this. I don’t like the phrase in the article in which it states ‘will instead mostly be taxed at source like their permanent colleagues’. It is a myth often perpetuated in such articles and by Managers in organisations, that all agency workers are earning vast sums and not paying the tax and NI they do. My friends who are limited don’t always earn vast sums either. I have chosen to do this as I knew this was coming long ago and wanted to 1) be ready for it and 2) morally for me I didn’t want to not pay the tax, etc.
    I have done agency work as I like the flexibility; I can have breaks if I choose and I have worked in some very good teams and some not. If I had applied for a permanent position and then seen that it was not a good place to work I would have left and surely this would cost more money to the organisation, etc. I have been very badly bullied when I had a permanent post in the past (a long time ago) and this has influenced me, also I have managed, probably only through doing agency, to have a very varied experience of SW which I may have struggled to do in a permanent role. The downside is that I have to pay for training, etc. where I cannot get it where I am currently working and lose pay to attend, etc. and I have missed out on the post qualification part which in fact now makes it harder to get more skilled posts as this is often a requirement, but again the upside outweighs the downside being agency.
    How an organisation supports and treats me when I work there has influenced me in the past to apply for a permanent post, but I have been picky, which I can be. Unfortunately, I have turned two down when offered as the role changed after being offered them, it is not because I cannot get a permanent job (have done in the past), another myth I have heard bandied around. I also recently attended an interview to be asked ‘why I was still agency’ and said to me, ‘that having a permanent one is very different from being agency’. Needless to say I didn’t even want the job, offered to me or not.
    I have discussed with my managers/colleagues I have been working with that unless there are incentives, other than the pay rate, for agency then recruitment will be hard, especially in some areas of the country than others. Answers have ranged from ‘people fall over themselves to work here’, to agency will have to put up with the rate they are offered, etc. It is interesting that one LA has ongoing large numbers of vacancies at any one time due to location and low rates of both agency and SW pay compared with surrounding LA’s.
    I have been lucky and live in the areas I choose to work, but have had good colleagues come from miles away who are now leaving or considering leaving as will cost them too much. I am put off travelling and staying away due to cost of accommodation, etc. won’t be worth it.
    I agree that a permanent workforce should ideally be built up, but come on guys if you needed agency SW’s and have ongoing significant amounts of vacancies, it ain’t working. Use your agency workers more effectively, ie. specific projects. pieces of work rather than relying on them to carry large amounts of work; end the contract and actually impact on your permanent workers by doing this with the resultant of them leaving or going off on long term sick.
    Why is no-one consulting the agency SW’s themselves about how to use their role better and more effectively and what needs to be in a package for them to work somewhere.
    I have chosen an agency job with a quite low rate for the region and don’t solely go for the money Ms Wardell.

  2. sandy beach March 30, 2017 at 7:59 pm #

    agree with the above poster this is a complicated issue and not solved by trying to push all workers into the same position, which from what l can see is disempowered. As an agency worker l have worked on a variety of rates across differnet LA’s and taken other self employed positions in addition to this to maintain my self employed status. Their are a number of agency workers who have been in post not for specific projects or to cover sickness or maternity but for an extensive lenght of time that l would regard as employed – having been working for the same LA / role for over a year. This confuses the issue and may be wha the HMRC are trying to prevent from occuring, however the culprits in this are the LA’s who choose to employ on this basis, to only employ people on a Ltd or umberella basis to then extracate themselves from the HMRC implications of liability instead of dealing with the individual contracts.

    Neither do the LAs appear to be mitigating against peoples views of why they wished to be self employed or agency, as a degree of separation from many dysfunctional teams and organisational practises. For instance l know of a team that are employing a manager who they wont get rid of as they cant replace them, however this person has caused practically a whole team under them to depart as they are incompetent and have no interpersonal skills at all. So the organisation will destroy its self to preseve itself, a strange kind of logic, but one small example of why people do not want to go permanant as to be stuck in this situation with no exit has already been the experience of many, they do not wih to repeat it.

    It is a difficult role / job / and it asks too much in regard to the expectation that is required in terms of hours. We are all placed against each other with the pressures of PI’s and inspections and it is difficult to maintain a sense of quality work. Add to this the pressure of the HCPC over your shoulder but not of your manager and after a while prehaps its just not worth it.


  3. J March 30, 2017 at 9:52 pm #

    Would love a job where I didn’t work 70 hours a week and work to live not the other way round!!!!

    I just want to be brave and leave !

  4. Joanne74 March 30, 2017 at 10:12 pm #

    As a single parent and locum SW these changes have hit me hard. However I’m
    Still better off than going permanent and my reasons for being locum remain- choice of where I work, flexibility, different opportunities and never being tied to an team: authority where I feel poor practice is taking place. IR 35 doesn’t change my morals.

  5. SC March 31, 2017 at 6:36 am #

    It is clear that rural areas such as Cumbria who have offered higher rates to attract workers are going to really struggle. Having worked away from home previously I know the costs are huge and workers will not be able to finance the travel and accomodation themselves which will leave a huge gap in the service.

    I have now taken up a permanent post, not because of finances, but because it suits me personally at this time. I second the views above it terms of agency working. The pay is higher, but not as much as people think and God help you if you become unwell. It is extremely risky and should reflect this in the pay.

    I predict tricky times ahead and lots of changes!!

  6. Keith March 31, 2017 at 8:04 am #

    Just come back from 4 months of burn out to find out I will lose a third of my wage. I have had to use an umbrella company who are aware of mine and other Ltd company workers predicament and are now offering terrible rates.
    I now have the LA, the agency, the payroll company and the umbrella company all taking a cut from the difficult job that will eventually make me ill again. How will this help my motivation to remain in this profession?
    This abhorrent joke of a Government agreed to spare White Van Man but gives the finger to those trying to keep our children safe. Absolutely disgraceful.

  7. Scarlet horizons March 31, 2017 at 9:23 am #

    Drastic times continue.
    The government wants increased tax returns
    The LA’s want more permanent staff( or do they?). More staff has costs to the LA too and less flexibility.
    Social Workers want manageable caseloads, good support, fair pay for the qualifications and long hours and respect and recognition for their work.
    As a Sw with 25 years experience, four post grad qualifications and a wealth of experience in different types of work, I no longer wish to return to permanent work. It’s not that can’t do it. It’s just that any more of this and my life expectancy will be curtailed. It probably is already!. I feel sad to be admitting this to myself.
    Agency work helped me to feel in control. I now feel that the rug has been pulled again but we are used to that.

    I have stopped work to watch what happens and think about personal next steps. Good luck fellow SWs you are to be commended for your resilience and commitment to caring for others. Perhaps time for me to hand over the baton.

  8. Jamie April 1, 2017 at 8:44 pm #

    Just a quiery or two. How do we get to pay into pension under IR35?
    Also when we do visits by driving, how do we get our expenses paid? I.e. If I pay for petrol I have already paid tax on it and then it gets paid with my wages then taxed again. If this travel is for visits how is it fair that I subsidise the la and get taxed on this expense.