Contractors’ lives have been greatly enhanced thanks to fintech. They can now do everything much more efficiently, from invoicing and receiving payments to staying compliant with IR35. The technology is also enabling companies to more easily find the best talent and scale up.
Fintech is transforming many functions, but the one of the biggest areas of improvement is for independent contractors. A huge number of people have been quitting their full-time roles to become freelancers. There has also been a sharp rise in the companies hiring contractors to help meet their ambitious growth plans. That borne out by the fact that, since 2000, the European Union labour market’s freelance worker segment has increased by 45%. Because of this, investors and innovators have directed much effort and resources towards supporting this sector of the workforce.
Strong growth…
Among the sectors that have enjoyed the biggest increase in contractor registrations with umbrella companies are restaurants and events, construction and IT. But, many other industries can also successfully adopt contracting.
Technology is driving this growing army of contractors. It enables them to do everything online, from receiving payment and invoicing clients to staying compliant with IR35 and filing their tax returns. Indeed, its potential applications are almost limitless.
Keeping compliant
Above all, fintech allows contractors to stay up to date and compliant with the latest changes in tax rules. Among these, IR35 is the most important. A tax anti-avoidance legislation introduced by the UK Government in April 2000, it prevents contractors from reducing taxes through a limited company while holding a permanent post with an employer.
The technology can also help contractors to stay on top of their bookkeeping and accounts. Its adoption has been accelerated by schemes such as the HMRC’s introduction of Making Tax Digital, which requires tax and VAT returns to be submitted by workers online using compatible software.
Fintech also allows freelancers to request and accept payments in different currencies. As contractors can now work anywhere and provide a service in a completely different location, that provides a real upside.
Sourcing the best talent
In the meantime, due to the economic downturn, employers have had to make redundancies. As a result, they have been hiring more freelancers to fill the gaps. Technology has enabled them to improve the onboarding process and management of contractors.
Rather than spending a vast amount of resources and time, and hiring people to conduct manual document checks on new employees, companies can use the technology to do the work much quicker. Also, they can do so in a compliant fashion.
Fintech also allows firms to look further afield for talent. As the technology becomes more widespread, so they can use a freelancer working in a completely different location and pay them using a global cross-border transaction.
Scaling up support
Fintech undoubtedly brings many benefits. But for businesses and their freelancers to remain compliant, the technology has to be set up properly from the beginning. That requires embedding current legislation compliance into the product, as well as allowing for any necessary changes or updates to infrastructure to be made later.
The technology must also enable scaling up. But that presents many challenges too; for example providing services in another country.
That requires the firm to register and then adapt to multiple tax and legislation and cultural changes in that country, prior to understanding all the business processes. Before, the solution was to hire locals, but technology now ensures that the process is far more reliable and efficient.
Both the contractor and employer clearly stand to benefit from fintech. As more people move into contracting, so demand for faster and more effective technology is only going to increase – something we’re proud to be leading the way on at Cool Company.
About the author
Kris Simpson, Country Manager UK at Cool Company, the fastest-growing umbrella company working to simplify and streamline administration for recruitment agencies and contractors. Providing freedom for contractors without the bureaucracy. While allowing businesses to benefit from access to niche talent without the need to take on new hires, or handle the admin associated with contract recruitment.