How many external workers are currently operating inside your business?
If you work in automotive or aviation, that question is harder to answer than it should be. Both sectors rely on multi-tier supply chains, specialist engineering contractors, and purchased services arrangements that sit outside the line of sight of finance, HR, and tax teams. The actual number of individuals delivering work for your organisation is almost certainly higher than your systems can account for.
This matters because HMRC has been running targeted sector enforcement programmes with intensive on-site audits. When the Revenue arrives, the first thing they ask for is a complete picture of your external workforce. For most automotive and aviation businesses, producing that picture takes weeks or months of manual effort.
Where the Hidden Workforce Sits
The visibility gap follows predictable patterns in these sectors. Three are particularly common.
The SOW workaround. Engineering and specialist services are often engaged through purchased services agreements that describe a deliverable but actually supply named individuals on a time-and-materials basis. This is common in automotive product development, where a "design services" contract might involve the same three engineers sitting at your desks for two years. It is equally common in aviation MRO, where specialist maintenance work is contracted as a service but delivered by individuals under your operational control. These arrangements bypass IR35 governance because they do not look like contractor engagements. They look like supplier invoices.
The shutdown blind spot. In manufacturing and aviation, planned shutdowns for retooling, seasonal maintenance, or production changeovers should be an opportunity to pause discretionary spend. But if your time-and-materials contractors are buried inside service contracts, you cannot stand them down because nobody knows they are there. Several of the organisations we have worked with discovered they were paying millions for external resource during periods when that resource was not needed, simply because they lacked the data to act.
Tenure creep. Specialist engineers in safety-critical environments develop deep institutional knowledge quickly. A composites specialist brought in for a six-month project gets extended, then extended again, then moves to a different supplier but stays on the same site doing the same work. After two or three years, they are functionally part of your permanent workforce with the IR35 risk that implies, but they do not appear on any headcount report. In sectors competing for scarce skills in EV engineering, avionics, and advanced materials, this pattern is acute.
Why This Matters Now
HMRC's sector-specific enforcement programmes have shifted the conversation from theoretical risk to practical consequence.
The data scramble. When HMRC requests a complete external workforce picture, most organisations cannot produce one quickly. Internal teams report spending up to two months on manual data-gathering and cleansing across AP ledgers, procurement systems, and departmental spreadsheets. That delay matters. Regulators are treating it as evidence of immature internal controls, a governance problem rather than an administrative one.
SAO sign-off risk. For CFOs and Heads of Tax, the Senior Accounting Officer regime requires certification that appropriate tax accounting arrangements are in place. When off-payroll data is fragmented across manual trackers that fall out of date as staff change roles, that certification becomes a personal liability. You are signing off on arrangements you cannot fully see.
The cost of caution. Organisations without a clear view of their external workforce often default to blanket "inside IR35" policies as a risk-avoidance measure. Research from recruitment firms operating in manufacturing and logistics found that inside IR35 classifications increase engagement costs by 36% on average, with some roles seeing increases of 60-70% (Corvin Fox, 2024). In sectors where 66% of contractors will not consider inside IR35 roles (IPSE), that policy inflates costs and locks out the niche engineering talent that better-governed competitors retain off-payroll. For businesses competing for EV engineers, avionics specialists, and composite materials experts, this is a competitive disadvantage that compounds over time.
Five Questions to Test Your Visibility
These are not trick questions. They are the same questions HMRC will ask, framed as a self-assessment.
- Can you produce a complete list of every external worker, including those inside service contracts, within 24 hours?
- Do you know which of your "service contracts" are actually supplying named individuals on a time-and-materials basis?
- Can you identify contractors who have been engaged for two or more years across multiple suppliers?
- Could you stand down all discretionary external resource during a production shutdown tomorrow?
- Is there single ownership of external workforce data across finance, HR, and procurement?
Score yourself honestly. 0-1 yes answers: you have no meaningful visibility. 2-3: significant gaps that would cause problems under scrutiny. 4-5: you have foundational visibility, enough to build on.
From Spreadsheets to a Single Source of Truth
The organisations making progress on this tend to follow a similar sequence.
Consolidate. Aggregate data from AP ledgers, procurement systems, and departmental spreadsheets to identify where external workers actually sit. Most organisations discover 40-60% more external resource than they thought they had.
Classify. Distinguish genuine service delivery from embedded labour supply at the point of purchase, not after the fact. If a service engagement involves a named individual working under your direction, it needs to be treated as a contingent worker arrangement regardless of what the contract calls it.
Monitor. Move from point-in-time audits to persistent visibility. Track tenure, flag engagements approaching risk thresholds, and ensure that changes in working practice trigger a review rather than slipping through unnoticed.
Key Takeaways
- Automotive and aviation companies are disproportionately exposed to hidden headcount risk because of their reliance on multi-tier supply chains and purchased services arrangements
- HMRC's sector-specific enforcement programmes are treating slow data production as a governance failure, not an inconvenience
- Blanket inside IR35 policies inflate costs by 36-70% and restrict access to the specialist engineering talent these sectors depend on
- Visibility starts with consolidation. Most organisations discover significantly more external workers than their systems currently show
What This Means for Your Organisation
For a deeper look at the hidden headcount challenge and a practical framework for moving from fragmented oversight to auditable control, download our CFO Insights guide: From Shadow Workforce to Single Source of Truth.
If you would like to understand your specific external workforce exposure, we offer a short discovery session to help you identify where your biggest gaps sit. No sales pitch, just a structured conversation about your data and where the risks are most likely to be.