2018, a year of change?
Recruitment has always been about matching a person to a role and then making it happen in the most efficient and productive way. In the early days the only issue to consider, apart from getting the right person for the job, was securing fees. Whilst that will always remain the primary objective, obtaining fees now has to be placed into context with compliance, which may carry greater importance in 2018 than ever before.
GDPR
In May 2018, the General Data Protection Regulations will apply. Penalties for non-compliance are potentially severe, being in some instances a multiplier of turnover. The more fees you earn the greater the potential fine. In other words, there is a direct correlation. Whilst the likelihood of an investigation is likely to be very low due to massive understaffing at the ICO (Information Commissioner’s Office), all the same, complaints by individuals whose data has been inappropriately dealt with, may impact more upon a client’s willingness to deal with you, as governance by clients in this area increasingly addresses GDPR compliance. This is therefore best taken seriously, with a focus on addressing historical data correctly and creating processes for demonstrating compliance.
Focus on IR35
Also in 2018, there is the possibility of an extension of the IR35 public sector rules to the private sector. A consultation has been promised, and this may well be in full throw by the time this article goes to print. The public sector rules are onerous because the means of identifying the status of a contractor is onerous. Although technically lying with the hirer, we question who is going to go after a PS hirer who has provided incorrect information. Consequently compliance in practice falls almost exclusively on the agency paying the contractor.
Status Test
Identifying status is hard because of the unclear nature of employment status tests. HMRC has attempted to distil them into a usable online tool (called CEST) that relies upon the concept of artificial intelligence. ‘Artificial’ is the word, because in our view as specialist lawyers in this area, this is the result. In practice, the law requires a decision before any engagement starts (contrary to normal status testing which tests ‘during’ or ‘after’ the assignment). The tool does not check clauses in contracts, and it follows the type of check list approach that the courts have regularly rejected. To be fair to HMRC, there is little else they can do to make life easier for decision makers given the way this works, and there lies the real issue.
Employment status is reliant upon checking ‘direction’ ‘supervision’ and ‘control’ as well as the existence or otherwise of personal service. Some, including us, would argue that these rules are out of date. Without any doubt understanding them is the domain of lawyers rather than busy procurement and agency personnel, hardly adding to efficiency.
Gig economy
On this very issue of status, we will probably see in 2018 some kind of consultation on new ‘worker’ definitions, rules for certain types of contract including zero hours contracts, and some possible changes to the agency workers regulations. Blame it on the emergence of the gig economy!
Zero hour contracts
Another critical area for recruitment supply businesses. Whilst it is arguable that the era of the PSC is coming to a close because everyone should be paying the same taxes, a difficult concept to argue against, it is fair to say that there has always been a good reason for businesses to get tax breaks. After all, operating a business involves risk, investment and unpaid responsibility; that is an argument which agencies and contractors may want to follow up. However, of greater concern is the proposal in a recent Select Committee report to ban zero hours contracts by requiring minimum guaranteed paid hours. Zero hours contracts are widely used in the agency world, and any requirement for pay in between assignments, for any length of time, would likely interfere with the current recruitment supply model significantly.
The apprenticeship levy
The apprenticeship levy is also now under attack and again we may see some change. In the interest of transparency, agencies should be able to charge their agency worker levy on to clients, so could we see a result in 2018?
This industry has historically grown on flexibility, initiative, and productivity. I hope that Lawspeed and the Association of Recruitment Consultancies (ARC) which campaigns on these issues with our help can help achieve the success you all deserve in 2018.
Author Adrian Marlowe.
Adrian, a highly experienced lawyer, founded Lawspeed in 1997. He is responsible for developing our extensive portfolio of products and services, including the widely used Lawspeed contract templates. Adrian is an expert on “recruitment law” and specialises in contracts, regulatory compliance, employment status and dispute handling. He is chair of the trade body the Association of Recruitment Consultancies, the only lawyer lead recruitment trade body in the UK. Adrian and his co-director Ravi devised Standards in Recruitment as a vehicle for helping drive up standards and compliance in the industry.
Adrian is our lead in discussions with the government over regulatory evolution. Apart from assisting with client support, Adrian’s primary role is research and development into methods of business delivery, our latest service Proterms being his most recent project. Adrian heads our IR35 lawyers team.