#89: UK Repeals IR35, Recession Risk at 80%
UK Freelancers Rejoice, US lawmakers take notice...what if instead of polarizing politics we gave individuals the freedom of working how they want?
Leaders, this week’s all about:
Continued proof of recession
A massive high five to the UK 🇬🇧
Tactical Human Cloud productivity hack
Before we get serious, Luca crushed the coffee shop this week.
🙌 UK Leads The Charge In Supporting Freelancers By Repealing IR 35
We can’t understate how important the UK’s decision to repeal IR35 is.
Quick Stats:
IR35 will be repealed April 6th, 2023
IR35 reforms in 2017 & 2021 put the liability of classification on the companies hiring contractors, resulting in companies shying away from hiring contractors
Repealing these reforms frees companies from misclassification risk and tax liability by putting the risk on the contractor, not the company
What’s the big deal?
IR35 was regulatory tech debt built for a world focused on full time employment. Repealing it shows the UK believes in a freelance future.
Misclassification risk is the leading barrier to freelancer adoption.
To put it very simple - companies can get in trouble if they classify someone as a freelancer when they should’ve classified them as a full time employee.
Why’s this even a thing? Why can’t companies just hire who they want, how they want, when they want?
Because the government needs their tax money, and full time employees carry a larger tax burden, along with being easier to track.
Because employment laws, and in most cases full economies (think healthcare, unemployment insurance, etc), were built in a time where full time employment was the default since it was the most efficient way to acquire and manage talent.
Because an entire industry has been built around protecting companies from mis-classification (take the Microsoft’s $97m misclassification lawsuit in early 2000’s) and managing over $1b external talent budgets per company (the typical enterprise workforce is atleast 20-50% contractors with well over $500m - $1b in spend).
Because Unions won’t go down easy, and the freelance economy inherently rids of Unions.
What’s the impact to the UK?
The freelance economy will accelerate in the UK.
If I could give Kwasi Kwarteng a fat kiss I would.
Why? Because even though I’m a proud American, the UK is showing how:
UK Freelance talent will be prioritized over other countries.
UK companies hiring freelance talent will have a location advantage in hiring freelance talent (yes, freelancers still meet you in person).
UK entrepreneurs building for the freelance economy will have an advantage over entrepreneurs in other countries.
I’d go so far to say this makes the UK a leading country to be a worker in since workers have a higher degree of choice than most countries.
What’s the US impact?
Just like Companies, Countries are in a war for talent, and repealing IR35 makes the UK a leading country for talent
We live in a global world. As Vinod Kartha, VP of Strategic Initiatives put it, “you now don't have any cultural barriers, any technology barriers, any regional barriers, any political barriers, to be able to tap the best talent anywhere at your fingertips”.
The UK obviously understands this, while American lawmakers are stuck either with their heads in the sand or their hands stuck in Union pockets as the only freelancer focused legislation was the brutal PRO Act.
Honestly, it is insanely embarrassing to tell leaders that the only areas we don’t recommend hiring freelancers from are Russia, Iran, and California.
Why California? Because they already have AB5 (the PRO Act tries to nationalize this), and their direction is towards difficult classification requirements that make it not worth the risk.
What Can We Learn From The UK?
In response to the PRO Act I proposed 5 ways to fix the freelance economy.
The first step is literally just waking up to the reality that individuals want choice, technology has enabled choice in flexible work, and the default of flexible work is the freelance economy.
This does NOT mean everyone will become freelancers. You will always need full time employees. But instead of full time being the default, remote first, independent first, and freelance first work will become the default, and both companies and countries need to compete for being the best place to be a freelancer and hire freelancers.
💩 80% Chance of Recession - How Can You Be Ready?
Steve Hanke, a professor of applied economics at Johns Hopkins University said “The probability of recession, I think it’s much higher than 50% — I think it’s about 80%. Maybe even higher than 80%”.
Honestly Morning Brew described our economy best 👇👇👇
We’ve stressed this a ton over the past 2 updates. Instead of repeating go check out prior weeks :)
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