IR35, Off Payroll Tax and the strategic imperative of developing Agile capabilities within your organisation
By: John Mcfadyen
Tags: Ir35, Capability Building, Agile Methodology, Strategy, Agile

IR35, Off Payroll Tax and the strategic imperative of developing Agile capabilities within your organisation John McFadyen Mar 11, 2020·7 min read

3 years ago, the ‘impossible’ happened. A referendum, won by the slimmest of margins, set the cat amongst the pigeons in a way that very few people in the UK were prepared for.

In January 2020, we officially left the EU, and despite three years of consultation, negotiation and talks, nobody understands what the ‘promised land’ is going to look like.

The staggering number of variables in play and the complexity of all the moving parts have stumped traditional ways of strategy formulation, planning and implementation.

How do you mobilise, execute and accelerate given something so nebulous and ambiguous?

In the Agile world, we see more and more of this.

Disruption, seismic shifts in the status quo and political/legislative decisions having an enormous impact on ‘business as usual’.

Volatility, Uncertainty, Complexity and Ambiguity.

With IR35, Brexit and other recent events, things are not as clear as many businesses are used too.

With IR35, Brexit and other recent events, things are not as clear as many businesses are used too.

Why is Agile Capability such a critical competence for organisations?

IR35 is a prime example of significant disruption, to both independent contractors and the companies they serve. Legislation shrouded in uncertainty and ambiguity.

It’s a piece of legislation that slipped under the radar for many people and organisations, given all the turbulence over the past year, and yet it comes into effect on the 6th of April 2020.

Many people don’t fully understand the legislation itself, nor do they have any insight into what impact this will have on their organisation, their customers and the markets they serve.

The lack of clarity, understanding and transparency has created a volatile environment for organisations and their contingent workforce.

An HMRC Assessment claims that the legislation aims to tackle ‘disguised employment’ and will have no significant impact on businesses.

A recent survey of almost 1,500 self-employed contractors by inniAccounts found that 53% intend to abandon their clients ahead of April 2020. 85% of whom have cash reserves to fund time away from contracting and are happy to do so for numerous reasons, including grave mistrust of HMRC.

‘Abandon their clients ahead of April 2020’. How is that insignificant?

While I do believe that the legislation creates opportunities for companies with strong internal Agile capability, I think it’s a potential crisis for those who lack that capability and are dependent on a contingent workforce.

Why?

Many companies have embarked on an Agile Transformation, and they are doing this because they understand and realise the essential nature of a responsive organisation.

They understand that to bring things to market is essential, but also that to respond to change in the business, in the customer base and the wider environment is equally important.

What we see now, especially with contractors stepping away in response to IR35, is that many companies have not built internal Agile capability. Instead, they perceived ‘Agile Transformation’ in the same light as many other processes within the organisation, ‘static-to-static’.

This is how things currently work. We’ll invest in Agile Transformation today and tomorrow, that is how we will work. Done.

What they failed to understand and appreciate is that Agile Transformation is a fundamental shift in an organisation’s DNA. It’s a culture of innovation, evolution and continuous improvement, which inevitably means that how we work tomorrow will not look the same as how we work next week and next month.

Responsiveness lies at the heart of Agility, and as such, markets and priorities determine the most valuable work that needs doing and the most effective way of doing that work. Scrum Masters, Agile Coaches and Agile Leadership are the change agents that lead the way.

Responsive is not the same as Reactive.

While customers, markets and people contribute to how we respond, ultimately, it is the way makers and pathfinders that shape markets in favour of being shaped by them.

This is why internal Agile Capability is of such vital importance. It’s more than simply understanding the Agile mindset and ‘methodology’, for lack of a better word. It’s about a culture that embraces change and opportunity for learning, excellence and incremental innovation.

It requires people who are deeply embedded in those organisations. People who have in-depth knowledge, skills and understanding. People who have a mission and purpose that is aligned with the organisation’s mission and purpose rather than a short or medium-term contract.

So companies need to be looking at how to create and embed that Agile thinking, mindset and culture within their organisations.

To cultivate and empower a high-performing, Agile organisation that can successfully survive and thrive regardless of what markets, competitors and unexpected political and legislative storms may throw at them.

How do you cultivate a high-performing, Agile organisation amid IR35 and Off-Payroll Tax?

When faced with a myriad of options and complexity, a map is always a great place to start. While the map isn’t the territory, it’s still an excellent guide to the territory and allows you to visualise the terrain effectively.

A Value Stream Mapping workshop is a great way to get a feel for the territory and visualise the gaps between how you believe things work and how they work.

Mapping out the end to end processes throughout the Value Stream and developing an understanding of how, when, who, what and why impacts the Value Stream allows you to make decisions that have an effect.

At Agile Centre, we gather the team who do the work on the coal face as well as the leadership that supports the Value Stream. It facilitates open discussion around the impediments to progress and enables leaders to understand why things happen and work the way they do.

It’s a great way to develop a deep understanding of the environment, understand impediments, and create solutions that have an impact in a short space of time. It also allows you to see the skills gaps that need to be filled and develop a healthy game plan to grow your skills and capabilities portfolio.

An Agile Capability Assessment is another good way to gain a rock-solid understanding of where you currently are versus where you want or need to be.

The best time to plant a tree was 20 years ago. The second best time is now. — Chinese Proverb

From a contractor’s perspective, there may be a period where a protest of sorts creates a vacuum of talent and skills in the market. Still, ultimately, there is going to be a period where those contractors are going to either (a) collaborate to form companies that serve their previous clients or (b) actively seek employment opportunities.

A Value Stream Map and Agile Capability Assessment enable you to plan for employment requirements versus the areas that would be better served by a company that actively solves a problem which is finite and measurable.

Some companies have as many as 50% to 60% of their highly skilled workforce in the form of independent contractors. Much of this is a result of ad-hoc decisions rather than strategic planning, and as such, offers cost-saving benefits as well as effectiveness and efficiency gains when aligned with strategic and operational requirements.

Leadership training in the form of Certified Agile Leadership and Workshops are an excellent way to realign thinking around Business Agility, organisational design and a culture that embraces the Agile mindset and thinking.

A lot of thought leadership in this space points to the importance of leadership supporting ‘Agile’, however, we believe that leaders need to drive actively and champion Business Agility for an Agile adoption to be successful.

And finally, coaching.

Consulting is the art of knowing the answer and telling someone else what that answer is. Simple, straightforward, and effective when all the variables are known.

Coaching is the art of discovering answers, developing solutions, and activating high-performance teams through collaboration, coaching frameworks and techniques. It aims to cultivate and embed a mindset of high-performance and creativity, supported by tools, that actively empower rather than inform.

It can be easy to feel that you’ve got to have the best ‘Agile’ people, with the most experience and most in-depth skill set, to transform as an organisation effectively but it isn’t the case.

Start where you are. Use what you have. Do what you can — Arthur Ashe

Developing Agile Capability is a process of meeting you where you are and optimising what you have with the intention of continuous, incremental improvements that lead you to the highest value contributions you’re capable of.

Start there. Trust the process. Trust your people.

Scrum doesn’t solve problems. It highlights issues that need addressing. As you move through each sprint, each evolution, and each review your company learns. The people in your organisation grow through the challenges that they go through.

Coaching combined with the right support, workshops, skills development programs and initiatives can achieve a great deal more than you imagine possible, in significantly less time than you thought.

Scrum, after all, is built on the value proposition of ‘the art of doing twice the work in half the time’.

Give me a call or send me a mail if you’d like to chat about the challenges IR35 presents you with and the potential opportunities that are available to you.

John McFadyen