IR35 is a complex issue for large businesses and the bugbear of most contractors’ lives. However, most businesses know that working under a Statement of Work (SoW) is a good way to remain on the right side of IR35.
In this post, we will explore how a SoW works, why it isn’t always the best approach and our solution to this problem.
What is a Statement of Work?
What exactly is a SoW, and how does it work? In its simplest form, a SoW contract is a document used to deliver a project. If the contractors are part of a SoW, the “scope of services” guides their work. Thus, this arrangement falls on the right side of IR35. Interestingly, there are many organisations that have built and are continuing to build solutions around this. Here at Mindful, we are a big fan of 6prog. 6prog is part technology and part people consultancy platform that enables businesses, managers, consultants, freelancers and recruiters to work together. Furthermore, in addition to built-in GDPR and IR35 compliance, 6prog operates on a delivery first model.
Deployed is also an extremely useful tool, and like 6prog, it allows you to sequentially build your SoW. Deployed is a single, unified and digital platform that offers guided scoping for companies and their suppliers. Early consensus means the practical elimination of scope creep, thus reducing the likelihood of disputes further down the line. These solutions are ideal for businesses and contractors alike, and go a long way in defending a relationship between a client and a contractor as one of business-to-business, rather than employer-to-employee.
If the contractors are part of a SoW, the “scope of services” guides their work. Thus, this arrangement falls on the right side of IR35.
Why a Statement of Work isn’t always the best approach?
Despite the benefits of a SoW contract, a number of roles would struggle to define milestones with this level of granularity. Furthermore, for a client, the administration of managing an evolving SoW is considerable. it’s therefore likely that they would need to renegotiate terms with their contractor. One such area of work is Commercial & Contracts Management. Their role is less goal-oriented but more preventative. It is far from easy for a client to define in advance and in great detail what will keep a consultant providing a Contract Management service. Therefore, a granular SoW approach might be difficult to achieve.
“A Statement of Work is compliant, but simply putting one in place to ‘escape IR35 reform’ is a big risk, particularly if the service your company provides and how it is delivered remains the same.” A cautionary piece of advice from Kingsbridge Contractor Insurance. HMRC’s IR35 assessment will be based on what happens in reality and a SoW will not protect anyone involved if it is not a true reflection of the actual work carried out.
Despite the benefits of a SoW contract, a number of roles would struggle to define milestones with this level of granularity.
Solving the Statement of Work conundrum
Does that mean such services are not candidates for outside-IR35 way of working? We don’t think so. A SoW does not necessarily have to be granular in detail. It can be broad. When you look to fill the role of a Commercial Manager, the first step we will engage you in is helping you define the service. Not convinced?
This is why we created new G-Cloud Virtual Commercial Management services offering. Here we pre-define services that can be applied to a range of Commercial situations that government departments are faced with. With our Virtual Commercial Manager service, you can now engage highly skilled contractors in a full-time, or part-time capacity. If you have a civil servant with great Commercial experience, yet they are working in an unfamiliar category, then our sounding board service may work for you. Alternatively, if you need something more involved, we could step it up with our deep-dive service.
We can help
A Statement of Work contract ensures that an agreement between a client and a contractor falls on the right side of IR35. However, some roles, such as Commercial & Contracts Management, aren’t suitable for a SoW. If you are unsure about using a SoW to onboard a contractor, we can help. With our Commercial expertise, we can help you make the right decision. Get in touch to see how we can help you on your next programme. Check out our Virtual Commercial Services website page and follow us on LinkedIn and Twitter to keep updated on future announcements.