Recruiters, suppliers & employment organisations react to the Budget
Matthew Sanders, CEO of Brookfield Rose, parent group to thirteen companies including leading temporary labour procurer de Poeland ethical payroll company Paraplus, said, “The sun is starting to shine and Britain is walking tall again”, declares Chancellor George Osborne. After weeks of political watchers scrutinising media reports surrounding Budget 2015, the final one of this Parliament, and leaks circulating amongst newspapers, blogs and social media, he has finally revealed plans for the country in today’s announcement.
"Whilst some critics went as far to say that the Budget has become a one-stop-shopfor tax and spending announcements, today’s statement has shown that, on some issues, Osborne is willing to think the previously unthinkable.
"However, there were certainly no giveaways in Budget 2015, with the only thing served on the menu a cold dish of frugality. Osborne warned: “There will be no short term giveaways”, continuing “we choose economic security, we choose jobs, we choose the whole nation and we choose the future”.
"So what we do know, following today’s announcement? With the £6bn extra to play with and recent reports indicating strengthening recovery in the economy, employment and wages, George Osborne, clearly immensely boosted by this, made some very interesting announcements."
Conservative plans are to raise the threshold at which people pay inheritance tax on properties to £1 million, meaning that around 20,000 fewer upper middle-class families will have to pay.
I am fully in support of the Government’s promise that millions of workers will get a wage increase, with the minimum wage going up by 20p to £6.70 an hour, the biggest real-terms rise in seven years. This means that more than 1.4 million low paid workers will benefit from the 3% hike in October.
It was also decided that the statutory minimum for younger workers and apprentices will jump up by 57p to £3.30, an increase of 20 per cent – again, the biggest ever rise. Having employed apprentices for a number of years across all of my businesses, I have witnessed first-hand the real value they can add to any organisation, and so am delighted that this decision has been made. Whilst there is still a great deal of work to be done, this minimum wage increase will mean more financial security for all and is another step forward in the right direction.
As a multiple business owner and entrepreneur, I was also interested to hear the announcements surrounding entrepreneur’s relief growth plans in the North West and delighted to hear performance was strong last year. A large proportion of my businesses are based in the North of the UK, and so I welcome Government’s plans to grant new powers and continue to build our Northern powerhouse it is a thriving and profitable economy and great place to do business.
With a fair and ethical umbrella payroll company, Paraplus, as part of my portfolio of businesses, I was also interested in hearing what was decided with regards to travel and subsistence for the self-employed, contractors and agency workers, but not surprised that Osborne declared those operating unethically will be “clamped down on”.
Paraplus was founded under the ethos that the worker’s rights should always be protected, and so I passionately disagree with all umbrella companies being tarred with the same brush, which has happened recently due to the actions of a small minority of umbrella companies who clearly do not share our same values of transparency, honesty and ethical practice. Umbrella companies have been a part of the UK labour market for many years and, when operated responsibly, provide a useful conduit through which payments, including tax, can be made.
Conclusively, the two realities from today are that it was George Osborne’s last red box, and that it came at an opportune time just before an election, so it was always going to be a bold announcement. Following this, I will be very intrigued to see if our current Government is awarded with another term. Whatever happens in the General Election in two months’ time, I for one am very hopeful that this year’s Budget will start to bring forward more positive change.
Following the announcement that the UK government will reduce petroleum revenue tax from 50% to 30%, Andrew Speers, managing director of Petroplan, said, "North Sea oil fields are recognised internationally as a training ground for some of the most skilled oil and gas professionals in the world. Providing businesses involved in this sector with additional support in the form of this significant tax break will support the continued growth of talent for a global industry.
"The North Sea is a mature basin with operators focused on extending the productive life of the existing infrastructure and this change in use of these assets will likely require different skill sets. The required talent may not have been attracted to the region without this supportive fiscal arrangement."
David Spencer-Percival, CEO of energy recruitment firm Spencer Ogden, added, “This is the kick start that the North Sea oil industry needed. George Osborne’s £1.3billion support is the first, vital step in reversing mounting job losses.
“The situation was becoming dire. We had gone from a skills shortage to an influx of jobless top talent. This is now being addressed. With 40% of the North Sea’s production expected to come from new, currently untapped sources by 2018, a tax cut incentivizes the essential exploration needed to secure a long term future for North Sea workers.
“The fact is, without exploration now, North Sea oil jobs will dry up long before the oil sources do.”
John Cridland, CBI Director-General, said, “Stability and consistency are what businesses need to grow and prosper. This Budget sets the tone, providing a clear plan for fiscal health and growth.
“This Budget has some encouraging measures to help businesses create jobs for the benefit of all.
“The brighter fiscal picture has allowed the Chancellor to recalibrate his deficit reduction plans. In the next Parliament this fiscal breathing space should be used to achieve intelligent reductions in public spending, together with much-needed infrastructure and innovation.
"With business investment a crucial driver of growth, the Chancellor has signalled his intention to continue the Annual Investment Allowance. We want it to be made permanent in the Autumn Statement at £250,000 - this will fire the UK's economic kiln by spurring smaller firms to invest in plant and machinery.
“The reduction of the headline rate of Corporation Tax to 20% next month, is a meaningful step in making the UK the most competitive tax regime in the G20 and will help to attract investment.
“The oil and gas industry, which supports 450,000 UK jobs and is a major contributor to GDP, has been given a much-needed boost with the reduction to the supplementary charge and other incentives. This will help address concerns over job losses and investment freezes, but pressures remain due to low oil prices.
“Giving savers greater freedom over their pensions, including creating a secondary annuities market, boosts choice but after a period of flux what's needed now is breathing space for the industry and consumers to get to grips with all the changes.”
Tom Hadley, director of policy and professional services at the Recruitment and Employment Confederation says, “It was good to hear George Osborne open his speech by acknowledging the continued success of the UK’s robust and flexible labour market.
“The Chancellor's focus on tax avoidance by employment intermediaries will be critical to ensuring a level playing field for recruiters who play by the rules. Progress here is long overdue and such a public commitment to clamp down on agencies and umbrella companies that exploit travel and subsistence schemes is very welcome news. It’s something we called for in our Manifesto for Jobs last Autumn and we’re glad to see the government take action.
“The review of business rates was announced before the Budget, this an issue on which we joined forces with the British Retail Consortium to seek change. The fact that Manchester and Cambridge will be able to retain 100 per cent of their business rates sets an important precedent for further local and regional devolution.
“Given the current skill shortages in the UK, we’re concerned that it may be difficult for the infrastructure initiatives and investments to succeed. Recruiters are already struggling to find suitably skilled candidates in key industries like IT, science, engineering and construction and it is in these sectors where we will need even more people now investment has been confirmed. The next government must co-ordinate industrial, regional and educational policies to meet these needs by bringing together the relevant parts of BIS, DWP and DfE potentially under a new government structure.”
APSCo stated, “Chancellor George Osborne used his last Budget before the General Election to announce that “Britain is walking tall again” after five years of coalition prudence. Although he has promised that there would be no giveaways he announced tax relief for savers and said a squeeze on public spending would end a year earlier than planned, if the Tories are re-elected in May.
“These announcements came on the back of better than expected growth figures, which suggest that the economy will expand by 2.5 percent in 2015, rather than the 2.4 percent previously predicted. He said that the Government had met its 2010 target to end this Parliament with national debt as a share of GDP in decline and suggested that “the hard work and sacrifice of the British people has paid off.” And while the figures still need to be analysed in detail, a number of key issues for APSCo members have emerged.
“Responding to George Osborne’s announcement that the Government would be “clamping down on the agencies and umbrella companies who abuse tax reliefs on travel and subsistence”, Samantha Hurley, Head of External Relations & Compliance at APSCo, comments:
“The Chancellor’s mention of “agencies” with regard to this issue actually relates overwhelmingly to umbrella companies and PSCs. Unfortunately, it is not entirely clear from the Budget report exactly what action the Government intends to take, although it talks about restricting tax and subsidy relief for workers engaged through an employment intermediary where the worker is under the supervision, direction, and control of the client. In light of this, it’s possible that they may apply a similar test as already exists to determine the workers employment status for tax purposes. This seems to suggest that the Government has abandoned its original plan to abolish tax and subsidy relief for such workers, and listened to the over-whelming response from the industry to tighten the rules instead. This appears to be a more positive outcome for the recruitment sector as a whole, but we will reserve judgement while we await an official consultation.”
In response to the Chancellor’s comment that the Government wants, “employment intermediaries to provide workers with greater transparency on how they are employed, and what they are being paid”, Hurley added, “APSCo has previously confirmed to the Government that it does not believe that this is an issue within the professional sector, and we would not want to see our members burdened with more unnecessary red tape to comply with regulation aimed at protecting potentially vulnerable workers. I would imagine that a consultation from BIS on this may well form part of its proposed changes to the Conduct Regulations.”
Summarising other key points raised during Osborne’s speech, Hurley concluded, “APSCo welcomes & lsquo;Northern Powerhouse’ initiatives – including a Greater Manchester devolution deal, investment in local industry and the green light for HS3. We believe that APSCo members, particularly those based in the North of England, will be able to positively contribute to this proposed growth by providing resourcing partners to encourage highly skilled workers to support these projects. APSCo also welcomes the support being provided to the Oil and Gas sector, one which has been under great pressure in recent months.”
New expenses rules will push workers from “umbrella companies” into setting up limited companies, NoPalaver Group claim. It stated, "In today’s Budget, the Chancellor announced plans to change rules to restrict travel and subsistence relief for workers engaged through an employment intermediary or “umbrella company”.
"(We) note that the Government expects to raise £635 million in revenue through this policy change over four years."
Graham Jenner, director at NoPalaver, added, “Today’s announcement may lead to greater interest in setting up limited companies from those workers who previously used umbrella companies.”
“In the past, some workers have been reluctant to set up their own limited company and prefer operating through an umbrella company in order to avoid the albeit limited paperwork involved in running their own business.”
“Setting up their own limited company has always been a more tax efficient model than using an umbrella company, but now it may be more attractive than ever.”
“There will be an added burden on the Government when they receive additional paperwork of workers setting up their limited company rather than an umbrella company collecting and paying over tax on behalf of large numbers of workers – hopefully this has been taken into account.”
“The rules will dissuade workers from taking assignments where they have to travel long distances – therefore reducing labour market flexibility.”
The budget announcement, “effectively signals the end for umbrella schemes as they stand” says Howard Hughes, CEO of payroll specialist, Ship Shape Pay.
“The budget wording itself promised to “restrict” travel and subsistence relief. Yet intermediaries, including Ship Shape, that were involved in the consultation, today received communications from HMRC that confirmed relief would be “removed” for anyone under supervision, direction or control – so basically every worker that umbrella was designed to service.
“The bottom line is that in April next year all current umbrella workers will require a new payment solution, or they will seek a new employer. If HMRC has its way, direct employment in industries where umbrella is common will experience an increase in the cost of labour approaching 20% through increased National Insurance and paid absence. That will need to be absorbed in higher charges to end hirers, reduced agency margins and lower pay rates to workers currently paid through umbrella.
Howard Hughes proposes that “agencies and their clients should instead properly analyse their contract workforce in order to identify if umbrella workers should transition to PAYE (direct, through the agency or a payroll bureau), or allow limited company status or self-employment where supervision, direction and control in the workplace can be proved absent. This analysis should be supplied to recruitment agencies right now by their existing payroll companies.”
“Great progress has been made by agencies that outsource worker registrations, timesheets, pay, bill and compliance management onto the more advanced umbrella companies. Taking this administration burden and cost back in-house would be a backward step. Agencies confused about the worker contract options available to minimise cost of labour and concerned about meeting pay, compliance or other administration requirements should seek out a dependable payroll services partner with a clean bill of health to find peace of mind.”
giant group have responded to the declarations for travel and subsistence consultation, "It said, "As part of his budget announcement The Chancellor, George Osborne has today announced an HMRC consultation around possible restrictions on travel and subsistence expenses for umbrella and PSC workers who are under the supervision direction and control of the hirer.
"A separate BIS (Department of Business, Skill and Innovation) consultation was also announced to ensure that employment intermediaries provide workers with greater transparency on how they are employed and how and what they are being paid."
Matthew Brown, managing director of giant group commented on the consultation. “We welcome HMRC’s consultation which ultimately levels the playing field for employment providers stopping the abuse by a small minority of suppliers of low paid workers where tax relief is used to lower their employment costs. As a fully compliant umbrella organisation we recognise the need for this type of legislation whilst also understanding that the Government must not adversely affect the UK’s professional flexible workforce which chooses to operate through an umbrella. The UK flexible workforce is extremely important to a range of industries and contributes directly to UK annual GDP growth.”
“We also welcome the BIS consultation which ensures that there is full clarity and transparency for workers who are engaged via intermediaries in terms of how their pay is made up. As a fully compliant FCSA member we abide by a strict code of conduct which already includes being fully transparent in terms of workers’ engagement and pay.
Tara Sinclair, Chief Economist at jobsite Indeed & Associate Professor of Economics and International Affairs at the George Washington University, said, "The continued economic recovery is breathing new life into the UK labour market. We are seeing a notable increase in the number of available job listings across the UK. The power is shifting away from the employer and into the hands of the employee for the first time in several years.
"Higher levels of employment and higher levels of vacancies should also flow through to wage growth in the coming months. Despite the strong growth in employment opportunities workers still need to regain the confidence to push for higher wages before we will see a significant shift in wage levels. We also need to be wary that any eventual wage rise is reflected in actual spending power, rather than simply rising in line with inflation.
"There is also fear that increased wages will simply result in businesses raising product prices – thus sending inflation up and limiting purchasing power gains for workers. This is why it’s crucial for the government and employers to focus on productivity – which is an issue the UK has been battling with since the recession. For the UK to see more economic benefit from the energetic labour market, investments in infrastructure, training and flexible working must keep pace with the job opportunities.
"Tax breaks for low-paid workers and boosting the minimum wage are a great way to incentivise job seekers into the workplace, but there is a risk of encouraging workers into jobs with a flat career trajectory – further exaggerating the UK’s productivity problem. With job vacancies rising, the real focus for the economy needs to be on encouraging employers to consider candidates from alternative backgrounds and invest in their training and growth to develop the right skills. The 20% rise in apprenticeship wages could be a step in the right direction for encouraging people not just to get into work, but to build an ongoing career.
"Initiatives such as the Northern Powerhouse are a step in the right direction. Developing better infrastructure outside of London would open up immediate job opportunities in the Northern regions and develop regional employment hubs.
"Businesses would also benefit from harnessing the potential for remote working. Investing in technology and tools that enable remote working for employees in weaker labour markets than London would give national productivity a boost across the board. Flexible work is the most searched-for category in the UK on job site Indeed, demonstrating a strong appetite for alternative working arrangements.
"In the years since the recession we have seen an increase in the number of people breaking away from traditional employment into freelance and self-employed roles. Historically, this leads to the creation of small businesses, who become employers in their own right – thus continuing the healthy economic cycle. However, it remains to be seen whether this will be the case this time around. Government-backed apprenticeship schemes could provide a positive boost to self-employed workers looking to expand from a one-man-band into a small business."
The managing director of professional umbrella employer Parasol and contractor accountant ClearSky has welcomed the Budget 2015 announcement on travel and subsistence expenses.
In the Budget document, the government stated its intention to restrict travel and subsistence relief for workers engaged through an employment intermediary, such as an umbrella company or a personal service company, and under the & lsquo;supervision, direction and control’ of the end user. This, according to the document, will take effect from April 2016 following a consultation on the detail of the changes.
Derek Kelly said, “We haven’t learnt a great deal from today’s announcement, but we take encouragement from it nevertheless.
“The government’s stated aim of levelling the playing field for providers is laudable, and indeed this is something we have spent years campaigning for.
“As a compliant contractor services provider, we do not seek to & lsquo;lower’ our & lsquo;costs’ by using travel and subsistence expenses arrangements. Rather, we simply seek to ensure that our contractor employees and clients are not left out of pocket through their work.
“As skilled professionals who maintain a high degree of autonomy during an assignment, the vast majority of contractors we support do not operate under supervision, direction and control of the end user. As such, they would not be affected by the new rules.
“The document talks about restricting rather abolishing tax relief. Detail is needed but is sorely lacking here.
“Overall, we see this as a huge opportunity for compliant and ethical providers, such as ourselves, to grow as a result of pressure on the low-end supply chain where most of the abuse occurs.
“The devil will be in the detail but I believe this could be very positive in the long run. We look forward to learning more about the government’s plans in due course.”
IPSE, the Association of Independent Professionals and the Self Employed, has welcomed the Chancellor’s & lsquo;pro-small business’ Budget with announcements specifically designed to support the self-employed.
In the last Budget before the General Election, the Chancellor announced a number of positive measures specifically for the self-employed, such as the abolition of Class 2 NICs and annual tax returns, and a package of tax breaks for the North Sea Oil and Gas industry. The chancellor also announced a consultation on changes to travel and subsistence expenses, which could have an impact on independent professionals if not implemented carefully.
Simon McVicker, Director of Policy and External Affairs at IPSE, said:
“The Chancellor said his Budget backs the self-employed and announced a series of measures specifically designed to help independent professionals across the country. His pro-small business announcements like tax breaks for North Sea oil and gas producers will hugely benefit the large number of contractors working in this important sector.
“The removal of Class 2 NICs will be a big boost to those working as self-employed. It represents a major simplification of the tax system which will save them around £143 year.
“The abolition of the annual tax return is an attempt to reduce red tape and drag the tax system into the digital age. However, we would urge George Osborne to carefully consider the delivery of this and ensure business groups are consulted. The UK has an army of 1.8 million highly skilled independent professionals who the Government can draw on to implement this project without delay.
“George Osborne also insisted that genuinely self-employed people would be protected in his crackdown on employment intermediaries claiming travel and subsistence. However IPSE is concerned that if not handled carefully by the Government this could be very damaging for the UK’s smallest businesses. We will be working closely with Government to ensure this is not the case and we have already spoken to a senior HMRC official on this matter.”
The FCSA has welcomed the announcement by the Chancellor that it aims to continue supporting the UK’s flexible workforce by abolishing class 2 national insurance contributions as well as annual tax returns. Moreover, the trade body is pleased that it will have the opportunity to continue to consult with the Government on travel and subsistence expenses.
Julia Kermode, CEO of the Freelancer and Contractor Services Association (FCSA) said: “Overall, today’s Budget was positive and on behalf of our members I am pleased that the Government is receptive to continuing our consultation with them on expenses and has not simply bulldozed ahead and legislated before the end of this Parliament. Removing the right to claim legitimate travel and subsistence expenses for all contractors, freelancers and the self-employed would have a negative impact on the flexible workforce and the UK economy as a whole. We have been working hard to communicate the wider economic value of our sector to policymakers, and the Chancellor seems to have listened by stating a desire to protect the genuinely self-employed. Last week, the FCSA and a collaboration of 38 leading umbrella companies, employing some 90,000 contingent workers, met a number of MPs at the House of Commons to showcase and inform them about the benefits of umbrella employment to parliamentarians and our efforts did not fall on deaf ears.
“I am also pleased to see that the Chancellor has abolished class 2 national insurance contributions for the self-employed and has also got rid of the annual tax returns, all good practical moves to support the flexible workforce and minimise its administrative burdens.”