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Top 5 UK recruitment industry issues going into the general election

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With the prospect of a general election later this year, political talk about the frameworks governing independent workers is already hotting up, I believe that it’s critical to recruitment business owners affected by this to explore the hot topics and the need for clear legislation to help recruiters. Hopefully this might get the juices flowing, on what can be pretty dry topics.

Just seven months after the implementation of Onshore and Offshore Intermediaries Legislation, it's the run up to the general election and politicians are again talking tough on zero-hour contracts and discussing radical changes to the legislation that governs independent workers.

Not only does this leave recruitment agencies worried, it also begs the question: if a long line of legislation has already failed to effectively curb "false self-employment" from a political stand point - has the approach been wrong?

And is now the time to change anything - particularly when the National Insurance Contributions Bill, which also aims to tackle false self-employment - is drafted and in consultation?

The groundswell of independent workers

With freelancers, contractors, temps and independent professionals making up more than 15 per cent of the UK work force - this equates to a staggering 4.6million workers.

This number has risen significantly since the 2008 recession and it has to be acknowledged that flexible working is a powerful commodity to UK PLC that has helped us return to growth more confidently and quickly than nearly every other developed economy.

The ability of individuals to take short term contracts and part-time flexible work to keep up with mortgage payments has not only seen our adaptable economy bounce back - it has enabled families to provide and quite literally kept people in homes.

Beyond this, flexible working is giving people real choice. Things like semi-retirement are becoming workable options that enable people of retirement age to keep busy which brings a ream of health and wellbeing benefits. This means they are less of a drain on the NHS and that more money is being earned and spent, thus increasing tax take. It also means they can stay in work and train the next generation of skilled professionals.

The benefits of flexible working are numerous. Indeed, right now other countries such as France are trying to move towards the UK model of flexibility to improve their economic situation - so why are politicians trying to steer us away from it or clamp down on it?

The needs of recruiters

At the moment, it not only costs recruiters and companies in their supply chain a lot of money to comply with legislation in the spirit to which it is intended - it also puts them at a competitive disadvantage.

Companies that seek loopholes to flout legislation will always be able to offer better deals. This is creating a real need for end clients to take responsibility and fully understand their supply chains to ensure they are aware of the risks of non-compliant or dubious practice.

What is needed therefore isn't a new pill to fix every single side-effect that makes itself apparent - we need solutions that tackle the problems of abuse of zero-hours contracts and compliance at their roots.

Speaking as a former recruiter, I know that the costs to the profession of preparing for every new piece of legislation are huge. Indeed, recruiters have been kept in a near perpetual climate of fear since AWR was first introduced in 2010, with ever more responsibility falling to the sector.

Any legislation that is simple and works for the greater good, will consider the need for recruiters to get on, do their job, place candidates and keep fuelling the high employment levels that the UK is currently experiencing.

Right now, the industry has an opportunity to get it right for the huge number of vital independent professionals operating in the UK - and for the recruitment agencies which place them in jobs.

Stop legislating for tax avoidance purposes - start enforcing to stamp out non-compliant practice

At present, I would strongly advise politicians and policy makers that there is some good legislation governing the way contractors work - but it perhaps lacks teeth.

And the reason it lacks teeth is the lack of enforcement. As the ultimate deterrent for any kind of abuse of individuals, non-compliance or tax avoidance - enforcement is the ingredient in the mix that has consistently been missing.

That said, enforcement could be made easier by simpler rules and clearer guidance, if it is decided that change is needed.

If legislators aimed to tackle non-compliance, rather than relentlessly looking at it from the narrower viewpoint of tax avoidance - it would be much easier to create a sensible framework that works for all.

And in order to create a set of rules that work for everybody, the mistakes of the past must be heeded and the current pattern of legislation being conceived, going through committee, getting bolted onto existing legislation, being amended to fit HMRC practices, implemented in a more complex form and then being circumvented, needs breaking or we'll keep having the same conversations again and again.

Murky elements driving the conversation for change

It is unfortunate but true that a lot of innocent workers, who don't understand what is being purposefully miss-sold to them, are being pushed into models that are at best inappropriate putting them at risk. This 'sharp practice' is operated by certain providers that only care about profit.

Some recruiters are also not as clean as they need to be, with many insisting that very significant financial incentives are paid by providers in order for them to make referrals. Some recruiters will feel they have no choice as again, being whiter than white means being less profitable.

Intermediaries in the market who only care about short term profit sometimes also use inappropriate flexible working models for the non-permanent UK workforce.

This is seen particularly acutely in sectors such as construction, driving and security where large numbers of workers operate on a self-employed basis. Many individuals - particularly those who have operated alone for a number of years - are using schemes that they simply aren't eligible for.

Today, the Union of Construction, Allied Trades and Technicians (UCATT) estimates that more than 50 per cent of those working in the industry are falsely self-employed. It also issued a report called The Great Payroll Scandal which estimates that the cost of the resulting avoidance to the exchequer is £1.9 billion per annum.

This kind of headline figure creates political pressure that gains media attention and brings high profile attention to the industry. But it also leads to the risk of knee-jerk policy.

The upcoming election and the likelihood of change

It's early days in the run up to election - but it's certainly safe to say that the game of political football has kicked-off.

The headline topic is always tax avoidance. It just depends how parties position their policies as they may wish to pursue corporation tax, go after high net worth individuals or focus on the broader population.

However they approach tax avoidance, the three main areas we expect politicians to focus on are zero-hours contracts, false self-employment and the minimum wage - or "minimum living wage" as Labour would have it.

Thankfully, it looks like the power of the flexible workforce is gaining political attention.

Initiatives such as the IPSE manifesto are paving the way forwards, highlighting the plight of independent workers and even calling for ministerial representation which would greatly improve political understanding of the frameworks.

Another recommendation within the IPSE manifesto is a proposal to create a special freelancer limited company (FLTD) which could tone down some of the onerous and unachievable requirements of IR35.

What I would therefore say to agencies is that it looks like a corner is being turned. Recognition that the groundswell of flexible and independent workers has grown to the point where they cannot be ignored, need rights, support and simple frameworks - is upon us. This is extremely encouraging evidence of positive steps towards legislative progress.

I am always happy to talk to recruitment business owners, contractors and end clients about compliance, legislation and safe, professional models that protect everybody in the supply chain.

This article originally appeared in the December edition of Global Recruiter www.theglobalrecruiter.com and was also published as a blog on http://www.outsauce.net/blog