Recruiters react to the Autumn Statement
Below we have published views from the recruitment industry on the impact of the statement.
Peter Burgess, managing director at Retail Human Resources, commented, “There are various reasons why the rise in personal allowance has happened firstly the next election will be fought on the cost of living - Labour’s trump card. By lifting the working poor out of tax the Tories are supporting the lower paid bracket yet at the same time will seem appealing to middle class families. Secondly, I am confident this is welcomed by the Liberal Democrats and Mr Osborne may have even see this an opportunity to steal their thunder.
“We all know this is the correct thing to do economically and socially. It is wrong that a single person on the minimum wage, who gets no benefits is paying tax on what most people think is a pittance. All parties want to reduce unemployment and by making work more attractive than being on benefits then it must encourage more people into work.
“In order to boost employment figures I would go a step further: I would remove National Insurance (NI) from anyone on the minimum wage and I would also work to have no employers’ NI contributions too. For the retail and hospitality industries, who between them employ 20 per cent of the UK workforce most of which at the lower end, this would create many more jobs as wage costs would be reduced. This would be paid for by abandoning the many & lsquo;back to work advisory programmes’ which have cost billions of pounds worth of time and investment and have done little to dent the unemployment queues.”
Nigel Heap, managing director of Hays UK & Ireland, said, “The apprenticeship scheme announced by the Chancellor shows he is serious about reforming Britain’s education system to ensure it delivers the skills businesses need. But government needs to ensure it encourages students to learn the right skills. This means reducing or even scrapping university tuition fees to end the chronic shortage of graduates in STEM subjects in the UK.
“In this country, there are 2.5m people unemployed at the same time as there are 1m unfilled vacancies. This is one of the worst talent mismatches in Europe. It’s essential the government acts decisively to incentivise the study of key subjects to ensure the UK’s workforce has the skills it needs to attract investment for years to come.
“The removal of employer National Insurance contributions for under 21s will allow businesses, particularly SMEs, to invest in growing their workforces. SMEs provide six in ten private sector jobs and are essential to the health of the UK’s labour market. Reducing the financial risks they take when bringing in new staff will create new opportunities for thousands of people currently looking for employment.
“Businesses in the UK have been struggling under a growing regulatory burden in recent years, which for many has made it impossible to create new jobs. Cutting National Insurance will go some way to redressing the balance, but the government must continue to implement changes to employment regulation to make it easier for businesses to hire new people and thus create employment opportunities.”
Samantha Hurley, head of external relations at APSCo, said, "The Chancellor has announced proposed new legislation regarding onshore self-employed models used by intermediaries. The draft changes to Chapter 7 of ITEPA legislation and the consultation document will be published by HMRC on 10th December, 2013. In simple terms the proposal is to remove the obligation for & lsquo;personal service’, which is currently required for a contract to be considered an agency contract. According to Sarah Radford of HMRC they believe a large number of people are being treated as self-employed, when in reality they are being employed. She was clear that where workers are genuinely self-employed then this model will still be appropriate.
"It is HMRC’s intention to tie this onshore legislation in closely with their current proposals on offshore employment intermediaries.
"Regarding the Government’s offshore proposals, due to this new consultation HMRC will be delaying publication of its draft guidance on the offshore employment intermediaries legislation until the week after next. We await with great anticipation HMRC’s draft guidance on this issue, because our members have been concerned for some time about the lack of clarity regarding whether personal services companies will be caught in this proposed legislation. Clearly, there is a time issue and members are going to need time to put in place the necessary processes to protect their businesses.
"On a more general note, APSCo posted more than 20 tweets during the Chancellor’s Autumn Statement this morning to keep its members informed as it happened. Worthy of note during his speech were George Osborne’s comments that “Businesses have already created three jobs for every one lost in the public sector” and that “3.1m new jobs to be created by businesses by 2019.”
"Unfortunately, he didn’t mention that part of this growth in jobs is down to the flexibility provided by the professional recruitment industry, which allows companies to use expertise when necessary to produce growth."
giant group, has welcomed the commitment to tackling national insurance and tax evasion. Matthew Brown, managing director of giant group, explained, “We have long supported initiatives which help to eradicate any potential loopholes – legal or otherwise – and encourage fairer working opportunities. We look forward to hearing more on the government’s crackdown on offshore employment and tax evasion.”
Dan Langford, group marketing director of recruitment and training company Acorn, said, “From a recruitment point of view there are certainly some aspects of the Chancellor’s statement that once in place should help growth in employment. The boost in the start-up loans scheme aimed at helping 50,000 more people to start their own businesses will help sustain and develop new job opportunities within those new start-ups.
“The capping of business rates at 2% will support companies to grow over the medium and long-term, helping to divert investment into growing productivity and increasing jobs, while the Chancellor’s forecast on the fall in unemployment levels and a rise in job numbers is certainly to be welcomed.
“He is also taking steps to tackle the ongoing issue of youth unemployment by abolishing the payment of National Insurance by employers who take on young people under the age of 21. This will be one of the most expensive measures announced in the Autumn Statement, costing an estimated £465m in 2015-16, but could have a marked effect on the employment of young people, which is sorely needed.”
Osborne Clarke, said, "If it were easy to draft legislation dealing effectively with false self-employment or contrived contracts involving employment intermediaries it would have been done decades ago here and everywhere else in the world. The only thing that seems to work (eg in the US, Netherlands and Germany) is just to make the hirer police its supply chain by making the hirer liable for tax/social security “omissions” in that supply chain.
"Taking the above into account we imagine that the Government may be considering some sort of tax debt transfer mechanism in relation to users of:
· intermediaries who engage individuals as self-employed sole traders - there has been a growth in this practice with some “umbrellas” not actually deducting PAYE and NICs and instead treating their workers as self-employed sole traders
· defective umbrella T&S arrangements and/or
· Personal Service Companies who fail to pay IR35 liabilities under ss 48-61 ITEPA.
"We believe any such measures would need a substantial amount of consultation because they could apply in relation to anyone who seconds staff (there is no legal definition of “umbrella” e.g. what is a law firm when it sends a partner on secondment?) and could apply to anyone who uses apparently self-employed personnel (like builders or gardeners) who use PSCs, and Daily Mail readers would hate that.
"However the Government wants to press ahead with legislation by April, which seems unlikely to allow for any serious consultation.
"&hellipand that means that the legislation will either be ineffective or too far-reaching (with unintended victims, and complaints to the Government from “big business”).
"Either way hirers and major staffing companies may start getting worried if there is an expansion in the theoretical risk of tax debt transfer to them. This may mean that even badly drawn legislation has the effect the Government wants (because some hirers will start wanting evidence of “full” tax payment within the contract chain and prohibit certain models)? And Government may just decide to draft something based on the Offshore Intermediaries legislation (making MSPs and staffing companies liable, as “Intermediary 1”, for everything that goes on below them in the contract chain whether or not they could reasonably be expected to have known about it) and damn the consequences.
"One comfort is that for many types of tax debt transfer HMRC will need to establish first that tax is due which is logistically difficult for them, but maybe hirers/intermediary 1’s won’t rely on that “logistical difficulty” comfort and just run for the hills merely because of the technical risk of debt transfer?
"As ever we’ll need to see what is in the detail of the proposals. In the meantime everyone involved in the supply or use of contract staff should start thinking about what alternatives to their current supply models would “work” for them taking into account the types of worker/types of industry in which they are involved, and the possibility that swingeing legislation will be introduced.
"Our view is that all staffing companies (and hirers and MSPs and umbrellas) will in the next few months need to factor the following into their plans :
· Sole trader arrangements probably being too risky going forward in most areas of staffing.
· PSC arrangements possibly becoming unviable in the UK unless there is a genuine SOW approach, as is increasingly the case in the US and Germany. This makes PSC contracting far more complex with the relevant contracts becoming akin to software development agreements/project delivery agreements.
· Umbrella schemes not being safe for anyone unless there is genuine employment by the umbrella (including genuine employment between assignments). Many more sophisticated umbrellas have been working towards this for a time and we think one side effect of this will be that a greater and greater proportion of umbrella supplies will be through just 3 to 5 large umbrellas – i.e. there will be massive consolidation in that market (hence recent M&A in that sector recently).
· None of the above being safe for hirers and MSPs unless they can have complete visibility of how much is paid to the end worker and where. Some larger suppliers in lower paid sectors where “naughtiness” has been rife, may in fact choose to bring umbrella arrangements in house to be sure.
· Not least to minimise VAT, there may be increased adoption of direct engagement/margin only supply arrangements in many sectors.
· In many European countries it is illegal for there to be more than one entity in the contractual chain between hirer and worker. Might we even see UK Government interest in that sort of measure?
· Making sure that any new arrangements don’t just deal with tax and NICs risk, but work alongside whatever measures need to be in place to minimise risk under the Pensions Act and AWR, and minimise VAT. Do not adopt new contract models which solve one problem but create another!
"And of course from April all staffing companies and MSPs will need to have in place anyway new procedures to deal with the Offshore Intermediaries legislation."
FCSA chairman Stuart Davis commented: “We welcome any enforcement activity which addresses abuses in the market place. Schemes which falsely treat low paid temps as self employed workers, take away their employment rights and pocket savings in national insurance, should be addressed.
“Further, the transparent nature of the way FCSA members operate in alignment with the industry leading code of practice means that workers, employment businesses and end-clients can be assured of the highest levels of compliance in this space. It is critical that the legislation needs to be drafted carefully so it doesn't cause unintended damage to other 'non vulnerable' workers in the flexible workforce.”
"Although unlikely to result in changes for the professional sector, when the legislation is published, FCSA will review its current code to ensure any required amendments are included."
Jason Atkinson, managing director, Russam Interim and chair of the Interim Management Association, said, “The news that employment is at a high and the private sector has created a million and a half jobs is welcome news. However, in reality many of the jobs being created are part time and low skilled – Britain is still experiencing a skills shortage, particularly in core sectors such as engineering and manufacturing. We need more people in good jobs not just in work.
"Whilst the Chancellor is addressing this shortage with investment in apprenticeships and training initiatives – it will take time to close the skills gaps. We are seeing this skills shortage reflected in our business - almost half of all interim managers are being hired to deliver skills absent in businesses – with IT, change and project management and general management skills most in demand. Wages for interims are also increasing. Our latest snapshot survey shows an overall rise in daily rates for interim managers from £619 to £628 from June 2012 to June 2013, bucking the national trend of a 5.5% fall in real wages that British workers have suffered since 2010[i]. We hope that some of the measures introduced for business including the reduction in national insurance and a freeze on business rates will help increase business confidence and lead to higher employment in 2014."
David Thornhill, MD of Simplicity, said, "Whilst the boost in start-up loans scheme that aims to help 50,000 young people to start their own businesses is a great idea in principle, the main issue they need to address is how they get these loans into the market? This could have an impact on the loans sector, which forces a price war and pushes everything else out from the market. We could see more retail businesses disappearing from the high street and the appearance of more coffee shop, or & lsquo;social environment', establishments setting up shop. Certain markets need to grow that have been damaged from past problems - such as the impact that Foot and Mouth Disease had on the food industry a few years ago, both at home and abroad. We should shout about the many products and services that come from this country, so we need more start-ups businesses who export to help boost the business in this area.
"The increase in the number of apprenticeship places over the next two years (20,000) is positive news, however this links in with the benefits and training programme. It simply needs shaking up, so more training like apprenticeships will put more young people into training, which will create more than 20,000 places and affect the benefit system. Job centres need to work more closely with recruitment agencies to help more people find work.
"Construction plays a huge part in the recruitment sector, so I'm pleased to see that more money is being invested to boost housing developments, as this will provide more jobs for job-seekers and more work for recruitment agencies. However, I question whether the schools and other local services will be able to keep up with the demand? With more houses available, at cheaper prices, couples can purchase a property and then decide to have a family these children then fill up the local schools, which were initially built to teach a certain number of pupils. It'll be interesting to see how this develops in the future. A good example of this is in Gloucestershire, where there are plans in place to build 6,000 new houses on greenbelt land in Churchdown, so the schools and other local amenities will have to accommodate this somehow. Many other areas will have the same concerns and is a situation that will be ever present in our fast growing society.
"The increase in personal tax allowance is positive news, as it gives those lesser paid workers more money to take home. We manage payroll systems for SMEs across the country, so are aware about what this means to certain employees and taxing those who have to claim back tax credits doesn't make sense."