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The Catch-22 of recruitment decisions

By Industry News

When changes to Travel & Subsistence (T&S) came into force, recruiters were forced to make the ultimate of business decisions:
Do you pay your workers more money and accept smaller margins, or do you charge your clients more and boost your profits but risk losing clients at the same time?
Not much of a choice, is it really? But that’s the dilemma recruiters who operate a contingency desk will be asking themselves from this April. The answer to the dilemma comes down to what your priorities are.
The new reforms will have a significant impact on those contractors working via an umbrella company, and over the coming weeks we will invariably see a plethora of opportunistic umbrella providers claiming to have the magic answer to effectively deal with the government’s new legislation. Which is unfortunate, but to be expected.

Your focus needs to be on protecting your clients - after all it is they who will help your business move from where it is now to where you want it to be. Keep an open dialogue with them and make them aware of precisely what the new reforms mean to them because like most recruitment business owners, they too are somewhat in the dark when it comes to the implications of these changes.

Only last week the results of research carried out by the REC, FCSA, CBI and CIPD found that just 1 in 3 (35%) employers state that they understand the changes that will come into effect on April 6th.
At the same time, only 8% of employers are considering increasing pay to compensate for lost income, which means that in the majority of human capital transactions that will take place, the loses will need to be picked up from elsewhere – either you take a hit or your workers take home less in their monthly pay packet.

The onus is on you as the recruiter to work with your clients and identify if there is a mutually beneficial solution that is commercially satisfactory to both parties, whilst ensuring that every party within the supply chain is protected and fully compliant.

This is a time for greater due diligence when it comes to selecting the umbrella provider that you partner with. Get the choice wrong by opting to work with an umbrella that is non-compliant – whether intentional on your part or not – it is you, the recruitment agency owner, who may be held liable and slammed with a hefty fine once HMRC get wind of it.
Indeed, third party debt transfer means that if you refer a worker to an umbrella company and that company or the worker fails to pay the correct tax for an assignment, HMRC may – depending on the circumstances - pursue payment from those within the supply chain under the new travel and subsistence laws; thereby, making the recruitment agency responsible if fraudulent documentation can be shown to have been produced. 
Ultimately caution needs to prevail. The legislative landscape can be a complicated one, but just as your workers depend on you to help them make sense of how the new reforms will affect them and their take-home pay, so too do your clients.

You are in the business of recruitment and that carries with it a pre-determined responsibility – one that doesn’t gamble its future on a bunch of snake oil solutions, highly questionable insurances and so-called under-the-radar ideas that will do little other than see you land in very hot water with the powers that be.

The long-term security of your recruitment business will be safeguarded by adopting a cautious approach in the here and now. To find out more about how the upcoming reforms will affect your agency, get in touch with our industry experts who will be happy to address any concerns you may have.

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