As we approach the Autumn Statement, the whole UK recruitment industry and supply chain will be watching like hawks.
Why? Well if you’ve been living on Mars, you may have missed the fact that George Osborne will be announcing the government’s decision as to the future regulation around Personal Service Companies (PCSs). It's not just the Recruiters who should be watching, as individual contractors using these should rightly be on edge and also the clients who engage those contractors.
A recent article in The Guardian focused on the crackdown on PSC's, and the BBC approach to use of PSCs and has also had a very negative “loophole” feel about it. If the reporters are right, then the government is examining ways of tightening the rules to ensure that as many as 90 per cent of beneficiaries from PSC's follow the example of the BBC presenters who were forced to be paid in more conventional ways after a backlash.
So we await 25th November with more than just a little interest, and the one line that caught my eye (that was watering when I read this) was: “a consultant using a personal service company would be obliged to move on to the payroll if they work for a business for more than a month.” There is a real sledge hammer to crack a nut approach if this becomes law, and huge swathes of legitimate contractors will be heavily penalised, with the administrative burden passing to industry to make appropriate changes and soak up the cost in pounds and time.
Let’s face it IR35 was well-intentioned legislation but poorly implemented and HMRC have failed to police it. Estimates from some quarters quote “Only between 0.01 and 0.1 per cent of users of PSCs have ever been challenged by HMRC”.
There was a slightly better take, and one that a little less alarmist in The Mail, that read: “A contractor who uses an agency to find work with a range of IT firms for short periods will still be able to classify themselves as a personal service company. But a middle-manager brought in to do maternity leave cover at a firm will in future have to go on the firm’s payroll.” Now, personally this does start to make a little more sense as I would look at that scenario as more ‘interim’ than ‘contract’.
It's clear something will change, it has to, to stop the abuse. However, it’s going to come down to the timeframe of the contract, and clearly legislating around this on the basis of anyone engaged for more than one month would be madness.
The new rules will apply to both private firms and the public sector, where there have been numerous examples of senior staff paid ‘off the books’ in recent years. As taxpayers, we should welcome positive change and good legislation should stop that maddening scenario of the public sector making people redundant and reengaging that same person on a contract/PSC basis.
Let’s hope that the government can find the right way to stop abuse whilst allowing genuine freelancer/contractors the ability to operate and continue to add huge value to Ukplc. So make sure you have 25/11/2015 in the diary and tune in to George to see if he becomes a Angel or Devil. He won't be able to please all the people, but lets hope he's had good counsel from REC, APSCo, IPSE, et al.