In April 2025, new Companies Act size thresholds
came into effect, altering how IR35 off payroll and compliance rules apply—a move impacting up to 132,000 companies by shifting responsibilities from clients to contractors in many cases rayneressex.com. Meanwhile, the government is pushing forward the Employment Rights Bill, raising concerns over unintended burdens for UK businesses.
IR35 & Company Size Threshold Changes
The revised thresholds streamline compliance for small companies, but firms nearing the limits must assess how IR35 classification and responsibility shifts affect contracting models and payroll risk exposure. Businesses failing to stay aligned may face unexpected tax liabilities or penalties.
Employment Rights Bill: Industry Concerns
The Bill proposes sweeping reforms including:
- A new Fair Work Agency to regulate umbrella companies and recruitment chains.
- Shifting PAYE responsibilities to agencies or end clients if no intermediary exists.
- Potential legal challenges via expanded strike rights and reduced zero-hours contracts.
Industry leaders warn that implementation could cost up to £5 billion annually and lead to 50,000 lost jobs, particularly in sectors reliant on gig and contract labour such as logistics, healthcare, and events.
Implications for SMEs
- Compliance complexity: Smaller employers may face administrative burdens estimating IR35 status and managing agency arrangements.
- Cost pressure: Paying former contractors via PAYE and new holiday rights could increase employment costs.
- Talent strategy: Businesses should consider converting key contractors to permanent roles where beneficial—or updating contracts to comply with new standards.
Action Steps for Business Leaders
- Review contractor arrangements: Audit off‑payroll contracts, especially if your company is near size thresholds.
- Estimate cost exposures: Model potential increased employment costs under PAYE and agency transitions.
- Engage trade associations: Be proactive via Chambers of Commerce, FSB, and IoD to influence implementation timelines.
- Prepare staff policies: Update HR handling of employment notices, union involvement, and dispute resolution systems.
What to Expect in the Next Month
- Parliamentary progression on Employment Rights Bill, including final amendments.
- Draft regulations detailing PAYE responsibility transition rules and Fair Work Agency oversight.
- Further guidance from Acas and HSE on contractor rights and safety responsibilities.
As the landscape changes around off‑payroll working and employment rights, UK businesses must stay vigilant. SMEs should ensure compliance, manage risk, and adapt workforce strategies before changes become statutory.