At the start of April, as tax changes came into force that meant big drops for agency social workers’ earnings, many were predicting workplace upheaval.
Under tweaks to so-called ‘IR35’ rules, most locum social workers – along with public-sector colleagues such as nurses – can no longer lower their tax liabilities and claim business expenses by operating as limited companies.
The changes bring closer parity between agency workers and peers on permanent contracts – who also enjoy employee benefits such as professional development and holiday and sick pay.
Some councils had hoped the new new landscape would entice people back to steady jobs. But many practitioners told us at the time that they’d be more likely to stay agency but would no longer be willing to travel long distances for work.
Four months on, we interviewed 15 social workers, as well as agencies and professional bodies, to assess the immediate impact of the reforms.
Hit in the pocket
Almost all of the social workers we spoke to said they’d been hit in the pocket. Those that hadn’t either had alternative sources of income – such as other businesses, or pensions they had started to draw – or had switched to work that keeps them outside IR35; for example working as an expert witness.
Not everyone affected was able to quantify exactly how much their earnings had dropped. But many quoted figures of several hundred pounds a week once the loss of expenses and the requirement to pay employer’s national insurance contributions had been factored in.
The impact of the income squeeze also varied between interviewees.
“I thought I would be worse off than I am,” one Midlands-based practitioner said. “But I now realise I was previously putting away more than I needed to, so that has helped me a bit. And the weeks when I have got lots of visits, I can still claim mileage for those, so that really helps – it pays my petrol for whole week and tops up my wage.”
Others were faring much less well. Some mentioned cutting back on things they’d previously taken for granted such as holidays and family days out. More worryingly, another social worker said that all her savings were gone and that she had taken out two payday loans as she is “no longer able to make ends meet”.
People’s different situations meant they were exploring various options to adjust to their changing circumstances. As predicted in March, though, most said they would no longer be taking jobs that incurred significant travel expenses, which can no longer be claimed back.
Five social workers said they were at least considering going permanent, with many of those reporting that colleagues had already done so. But some pointed out they were doing so only because they had run out of other options and felt financially insecure in the wake of the IR35 shakeup.
“The bigger picture is, this won’t change – they have got us,” said one. “I’m 48 so you get little thoughts like, ‘What if I get sick?’ That’s what’s nudging me back towards permanent, but it’s not really the right motivation.”
In a similar vein, some who are opting to stay locums argued that their choice has never been about money, but about taking care of their wellbeing, staying motivated and having control of their situation, having had previous bad experiences with bullying or stress.
Other workers said they were weighing their options – and in some cases were already on their way out of the profession. “I decided to sell my house, get rid of my mortgage and take time out to do a few courses and start applying for new [non-social work] jobs for September – I feel lucky,” said one.
‘Business as usual’
Despite the signs within our small survey group of people considering a change of pathway, three agency bosses we spoke to said they had seen less turmoil than they were expecting.
“The world didn’t cave in – it’s business as usual for us,” said David Dickie, chief executive at Tripod Partners.
Sarah Kay, director of recruitment at the Taylor Davenport agency, said her firm had lost about 8% of its locum social work business at the time of the changes. “We have been lucky to win new business, so we are back to just above the same position, but you could argue we would have 8% more if the changes had not come into place.”
Debbie Smith, chief executive of Caritas Recruitment, said that in March her firm had seen a higher than usual temp-to-perm movement. “Post that point though, we haven’t seen an increase and a few who went permanent have come back out.”
Smith said she felt this reinforced the theory that most social workers choose to go locum for flexibility rather than for money.
Despite the overall picture seeming relatively stable, however, Smith and Kay said they were already seeing some more remote authorities struggling for staff as social workers became less able to travel – and in some cases having to offer subsidies. “It will be hitting those authorities’ budgets, but will help other councils in cities – they will pick up those workers who don’t want to travel,” Kay said.
Smith and Kay both also expressed concern about the proliferation of umbrella companies in the wake of the IR35 changes. These act as de facto employers for increasing numbers of locum social workers and process their earnings. In some cases, these firms promise rates of tax well below what workers pay if they go directly onto an agency’s PAYE payroll.
Just over half of the social workers we spoke to said they had gone down the umbrella company route. Several were angry that their agency had tried to force them to sign up for a particular firm. Some said they had experienced problems with not being paid on time, while others admitted to being worried they were involved with firms who were offering ‘too good to be true’ deals.
“Unfortunately we have seen the emergence of some dodgy umbrella solutions, preying on the transition of contractors [away from operating through limited companies],” said Smith.
“As part of [recruitment industry body] APSCo, the conversation we’ve been having with other social work suppliers is around being vigilant,” Smith said. “Each agency has its own list of compliant umbrellas – and if people are adamant they want to work through another umbrella provider, they need to make sure they are working compliantly.”
Kay added that her agency made a point of not recommending any particular umbrella company, instead directing workers to a list approved by the Freelancer and Contractor Services Association (FCSA) trade body.
“But there are people who come to us and say, we don’t want to work on this list; we have an umbrella company we want to work with,” said Kay, who reckons 70% of Taylor Davenport’s social workers had ‘gone umbrella’.
“I can have 10 people, all on the same base hourly rate but all ending up being paid pretty different amounts by different umbrella companies. We’ve spent a lot of time with our accountant looking at pay slips, but it’s hard to establish who is legitimate.”
Kay added that she is worried about contractors with such firms being hit with punitive retrospective tax bills down the line.
Ruth Allen, chief executive of the British Association of Social Workers (BASW), agreed that umbrella companies were an increasing problem.
“The issue of fraudulent umbrella service companies has been brought to the attention of BASW prior to these recent changes to IR35 – but much more in the last few months,” she said.
Allen added that BASW, which some social workers have criticised for not being supportive enough during the change period, was “intensively exploring” ways in which it could up its game. “[BASW is] looking at a range of member benefit alternatives including alternatives to existing umbrella companies,” Allen said.
While agreeing with recruiters’ assessment that little had changed in the big picture so far, Allen also warned that the IR35 changes posed serious potential problems for the overall workforce, and especially for rural councils and those with high caseloads, which are often most reliant on locums.
Almost 15% of respondents to an as-yet-unpublished member survey, she said, stated that they plan to leave social work due to the implications of the legislative updates.
“What this whole [situation] will do is to continue highlighting the fact that we have a workforce planning problem, in both adult and children’s social care at a national level,” Allen said. “The authorities that are doing OK are doing OK, but they are the minority in terms of being able to get the staff they want and keep them.”