The extension to the private sector of IR35 this April will focus the minds. Interim executives and the end-users of their services – client companies – will need to be clearer than ever about what constitutes an interim assignment. Given the current challenges and uncertainty businesses face, the experience of managing change and leadership transition is in demand. Interim executives are experts in the rapid transfer of these much-needed skills and experience.
The Government certainly needs a coordinated strategy on the UK’s workforce, skills and experience. This must include a sensible review of IR35, currently set to throw an indiscriminate dragnet across the self-employed. Without a legislative definition of ‘self-employed’, the Government has put the onus on us all to prove we’re not employees.
I agree that HMRC should collect all employment tax that is due – but harming a fully-working human economy is no way to manage tax avoidance. HMRC should not be blindly preventing companies hiring interim executives to help manage change, growth, transformation and leadership transition through imposing an unnecessary employment tax. Properly assigned and briefed interim executives are not employees. They are the guardians of business sustainability, helping businesses manage change, whilst also accelerating the transfer of knowledge and experience across the economy.
Whilst the Government needs to be clearer about its employment tax, my advice to client companies and interim executives is to keep calm and carry on. Just make sure you have a clear brief.
Each assignment should be split into stages, beginning with a clear briefing and, critically, end with a successful exit and handover.
In September 2019, Professor Steve Woods of Surrey Business School and I published the ground-breaking paper on the ‘interim assignment cycle’ – Effective Interim Leadership and Management: Development of a Cyclical Model of Interim Assignments. We proposed a framework for interim assignments, a cycle comprising stages of preparation, entry, delivery and exit. It was clear to us that understanding how to structure and manage assignments was a critical gap in global management and leadership research.
UK businesses, managing unprecedented change and uncertainty, cannot sit and wait for the Government to work out its tax avoidance strategy. If businesses have change, transformation and transition situations requiring interim expertise, then they should make sure they have a clear assignment brief and carry on. If followed, the interim assignment cycle will help mitigate the risk of paying unnecessary employment taxes.
Focus on the assignment – IR35 shouldn’t come into it
An essential characteristic of interim assignments is the temporary nature – meaning that the process from entry to exit is discrete, clearly defined and not open-ended. The delivery of the assignment is under the control of the interim executive, with the interim effectively made redundant at the end. Employment guarantees an open-ended offer of work, under the direction and control of the employer.
The four stages of the interim assignment cycle are preparation, entry, delivery and exit.
Preparation for an interim assignment is the stage where interim executives seek to understand the assignment and its associated demands. This may involve defining the terms of reference and scope of the assignment, meeting key stakeholders, and learning about the organisation and its culture. This part of the cycle involves extensive fact-finding and could be supported by an interim management firm if they were engaged to manage the interim hire. A schedule of work should be produced and agreed between the end-user company and the interim executive.
The entry stage refers to the first days in the assignment as the interim commences the key tasks and, albeit temporarily, joins the business. This stage comprises encounters with key stakeholders, during which it will be important for the interim to establish their credibility. Depending on the nature of the assignment, it may be necessary to take urgent decisions and start action quickly. Establishing the reality of the assignment and initiating key relationships are also critical steps in this stage. Some interim executives will review the brief after 10-14 days to see if it needs modifying.
The delivery stage of the interim assignment cycle involves the undertaking and completion of the main objectives of the assignment. These may involve necessary change, business turnaround or leadership transition activity, programme management, managing operations and maintaining the viability of the business.
The nature of the delivery stage will vary based on the main purpose of the assignment, and therefore the performance criteria that would indicate whether the assignment has been effective would also vary. However, the delivery stage can be differentiated into three sub-stages: post-entry, main delivery, and pre-exit. Post-entry involves looking for early impact beyond immediate actions of the ‘Entry’ stage. Main delivery entails the sustained effort of driving through the objectives of the assignment including managing conflict, politics and resistance. Pre-exit includes ‘legacy building’ activity, frequently alluded to in the description of interim work, setting the foundations for the more direct closure actions of the Exit stage.
One final feature of this stage is the emergence of new issues, which might extend the reach of the interim into wider areas of the business. In such situations, mini-cycles might be established requiring new preparation, entry, delivery and exit, to deal with discrete issues that emerge.
The exit stage of the assignment cycle comprises the transferring of knowledge to stakeholders or replacement permanent leaders in order to facilitate effectively leaving the organisation. The prospect of exit from the organisation differentiates the interim assignment from permanent leadership roles and provides a basis for interim action. For example, they may be able to take a robust and challenging approach to change without long-term political concern for future relationships. Handover to senior management is also a key step of this stage. An effective interim makes certain that their departure is well-managed and timed to ensure durability and sustainability of their work. In sum, the exit stage assures the legacy of the interim and the impact of the assignment is made long-standing.
The Interim Assignment Cycle: It’s the Assignment, Stupid
The cyclical nature of this model reflects the perspective of the interim, not the end-user client. From the client organisation’s point of view, successful completion of the assignment is reflected in the creation of a sustainable and effective business state, where further interim intervention is not needed in the short- and medium-term.
The key defining characteristics of self-employed work performed outside IR35 – where the end-user client need not pay employment taxes – are control and financial risk. This model, if followed, demonstrates that the interim executive controls the assignment and how it is delivered. The ongoing risk to interims is the lack of guaranteed further work beyond the assignment. They are constantly putting at risk their ability to deliver. To move on they must complete the assignment successfully and give a thorough handover.
Above all, focus on the assignment: make sure there is a clear brief with a beginning and an end.
Interims are arguably the silent and often unnoticed guardians of business sustainability. They make the difference in many situations between a business surviving or failing during difficult times. As management and business environments become increasingly uncertain and turbulent, there is a growing need for the contributions of interims to the continuity and long-term sustainability of organisations. Demand for their services is increasing not diminishing. Any indiscriminate tax regime which makes access to this market unattractive will unquestionably harm the UK economy and its ability to cope with change and uncertainty.
It’s our belief that the benefits of hiring an experienced interim executive are clear. When end-user companies need help to deliver change, manage uncertainty or cope with leadership transition, there are few comparable leadership resources.
Using the cycle as a framework when hiring interim executives keeps the focus on what’s important – the assignment. To get the full benefit of interim executives, end-user companies should always be clear about why they are hiring them. Client companies should have a clear assignment brief and let the interim use their experience to deliver it.
The Gov.uk information on IR35 and off-payroll working can be found here.