Accessing the best contractors at a competitive cost increasingly depends on offering “Outside IR35” engagements.
Yet many businesses still default to “Inside IR35” or umbrella-only models, assuming this reduces risk. In practice, this approach often increases cost, limits access to talent, and since April 2026, introduces additional supply chain tax exposure.
The results from the latest ContractorCalculator survey provide insight into how contractors really want to work, and what this means for businesses that want to attract and retain them.
Contractors are unwilling to use umbrellas
The survey shows that:
- Only 5% of contractors are happy to use an umbrella
- 25% will never use one
- 39% will only do so if forced
At the same time:
- 40% of contractors will only work outside IR35
The tribunal described the outcome as not a borderline case, reinforcing that employment status cannot be determined by ticking off a few basic preconditions. The FTT is an example of how to apply the principles in a real-world case correctly. For firms, that means even greater certainty.
Mutuality goes beyond payment
If your business insists on "Inside IR35" or umbrella-only roles, you are significantly shrinking your contractor pool.
Most contractors view umbrella companies as a dealbreaker, not a preference. By sticking to these strict hiring models, you are effectively locking yourself out of the top 40% of the market. This is particularly risky when searching for senior, highly experienced specialists who have the leverage to decline restrictive contracts in favor of "Outside IR35" opportunities elsewhere.
The takeaway: To land the best contingent talent, your hiring strategy needs to be as flexible as the experts you’re trying to attract.
Default "Inside IR35" roles cost business more
Respondents to the survey indicated that when hired via agencies many engagements are being classified as Inside IR35 and requiring umbrella engagement:
- 85% of contractors are told they must use an umbrella
- 71% report roles conditional on this
- 88% say umbrella was the only option
This is a business policy decision, not a reflection of actual working practices, as the data from the same reports suggests:
- 82% of contractors have secured Outside IR35 work
- 78% of determinations are outside IR35
If many engagements can be assessed as Outside IR35, why are so many being pushed Inside IR35? That approach comes at a cost:
- 81% of contractors increase their rates for Inside IR35 work
So if your current model bans contractors operating Outside IR35, that may mean higher day rates, lower contractor engagement, and reduced talent choice. You are paying more but getting less, which makes your business less competitive.
Umbrella companies are no longer the safe harbour they were
The survey highlights a major issue:
- 69% of contractors cannot tell if an umbrella is compliant
- 50% report unexpected deductions
- 39% report late payment
- 34% of contractors choose the option (agency payroll or umbrella) that pays the most
This creates risk for you under the new Joint and Several Liability (JSL) tax avoidance rules introduced from 06 April 2026.
JSL rules state that if a non-compliant umbrella enters your supply chain, liability can move up the chain and sit with you, the hiring client. Leaving you with an unexpected, and considerable tax bill.
All the statistics point to a behavioural risk. If contractors cannot assess compliance, they may choose higher-paying, non-compliant models. Since April 2026, that risk has not stayed with them. It can land with you.
What should you do to access the best contractors?
Firms that get their hiring strategy right take a different approach. What should you be doing to access the best talent?
- Assess roles properly: Do not default to Inside IR35. Most roles can be assessed individually.
- Offer Outside IR35 where appropriate: This is how you access the full contractor market and reduce Umbrella liability.
- Control your supply chain: If you use umbrellas, ensure that tax payments are controlled by you or the agency.
- Get accurate status results: Ensure every IR35 status assessment is robust and defensible.
What is the key takeaway?
The market has considerably changed since 2021, and experienced contractors understand IR35.
Contractors make decisions based on how they are engaged. To keep up with the market and attract the best talent your business needs to adopt a solid process for determining IR35 status. You need to be able to determine “Outside IR35” roles where appropriate to hire the best contractors at the most competitive rates.
The survey shows that the best contractors are not choosing umbrella roles, and many will only work Outside IR35.
If your hiring model does not reflect that reality, you will overpay and/or restrict your access to talent.
What should you do next?
Review your current approach. Ask yourself:
- Are we defaulting to Inside IR35?
- Are we forcing “on-payroll” only engagement?
- Are we losing access to talent?
If the answer is yes to any of these, it is time to change. Because the firms that adapt fastest will hire better, reduce risk and stay competitive.
If you want to understand more about the results of this survey, and what they might mean to your business, book a free consultation with an expert.
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