2020, bloody hell! Yet we enter 2021 with a greater understanding of this virus.
A pandemic that stopped the world in its tracks and still remains a global issue. And then there was Brexit too. Whatever side of that debate you were on, Brexit will also have a profound effect on our economy and society for decades to come. It’ll hit home particularly if a large part of your workforce, supply chain or clients come from overseas.
Yet in the face of all this adversity and with our nations resolve we’ve proved that we can get through this.
2020 was also incredibly challenging for the recruitment sector. Regardless of your industry specialism, nobody was immune. Neil Carberry, Chief Executive of the REC, commented that they took more calls from the first six months in 2020 than the whole of 2019. As Neil puts it for 2020,” Necessity was the mother of invention.” The REC had to put a lot of resources online. But every Recruiter was fundamentally challenged to change their business. From shutting down offices and learning to interview on Zoom, to more existential threats if you specialised in hospitality or one of the other hardest hit sectors. It has been a year of tragedy, challenge and reinvention.
At People Group, we have a lot of clients in the education sector and that was hit hard. Teachers were put on furlough back in March but, because of archaic payment clauses in many Umbrella contracts, a lot of teachers couldn’t access “full salary” furlough payments for months. This caused a huge amount of anxiety and worry. Not just for the teachers, but the consultants dealing with them. Considering the risks they take to educate our children, this was tragic.
Appropriately, the People Group contracts allowed us to pay teachers based upon full salary at the outset and we made the decision to pay teachers fully and in advance of receiving reclaims from HMRC. Our industry doesn’t get a lot of the spotlight. But that decision, and the relief it brought to teachers, is something we’re hugely proud of. Terry Hillier of People Group put it like this “We knew there was risk around paying out early, but when it all comes down to it, it was the right thing to do.”
2021 is looking brighter. Yes, we’ve started out on Lockdown and furlough. But with the arrival of vaccines and a realistic target of covering the whole adult population by September, we can just about see light at the end of the tunnel. We can dream of a day where a sneeze isn’t treated as a deadly weapon and we all don’t smell like hand sanitiser. But this is also a crunch year for recruiters. We’ve packed a decade’s worth of change into ten months.
With this report, we’ve spoken to experts, done some research and come up with what we think are going to be the big issues that we’ll all face this year. A big caveat, if you’d asked us this time last year about 2020’s big issues, Pandemic, Joe Wicks or Major Tom wouldn’t have featured. So there are no guarantees here!
But, based on our research and expertise, these are the big issues, challenges and opportunities that we think Recruiters will be tackling in 2021.
A more strict tax regime
When it comes to predicting the future of the economy, nobody has a crystal ball, but consensus seems to be building that it’ll be a long, slow recovery. An FT survey of 90 Economists predicts that the economy won’t get back to pre-pandemic levels until the middle of 2022 with the UK being one of the last major economies to recover. There is a minority that believes that we’ll come roaring back surfing a wave of vaccine fuelled consumer spending. And there is some evidence to support this with a holiday bookings surge, EasyJet have reported that bookings for the summer are up 250% compared to January 2020.
But one thing’s for sure. The Government has a big financial hole to fill. Annual government borrowing will reach levels only previously seen during world wars, while the national debt will be bigger than the economy, reaching 110% of GDP by 2025 (BBC). The Institute for Fiscal Studies states that tax increases totalling £40bn are “almost inevitable”. HMRC are already spooling up for this challenge, they’re on a recruitment drive with the stated intention of hiring a further 3,000 inspectors/auditors. This gives them a previously unknown capacity and focus on enforcement.
There are already rumblings about increases to Capital Gains Tax and Corporation Tax. And these will go some way to plugging the gap.
But the implications for Recruiters could be huge. The Umbrella Company has been the default way to pay contractors for decades. And over the years it has served our industry reasonably well. But it’s fair to say that the Umbrella’s looking a little past it.
The benefits aren’t what they were now that expenses and subsistence have been tightened up and it seems that every year, some unsuspecting group of contractors are caught out by a too-good-to-be-true Umbrella scheme.
Of course last year, it all got very real for thousands of teachers. Because of an old piece of legalese, many teachers weren’t able to access furlough payments. The employment contracts of many intermediaries contained dangerously outdated ‘National Minimum Wage + bonus’ clauses. Because the furlough scheme is calculated on guaranteed earnings (ie. not commissions/bonuses) this slashed the value of furlough payments to thousands of teachers meaning that huge numbers of contractors suffered a long wait for much needed support.
That’s the risk with using a solution that works most of the time, but not all of the time. The regular refrain is always ‘Yes, but our Umbrella is completely safe.’ and we get that. At People Group, we have our own Umbrella solutions that are compliant and safe. But is that where we see the industry going? Absolutely not. Steve Jobs was very fond of a Wayne Gretzky quote ‘Skate where the puck’s going.’ It’s an approach Apple baked into its products. Don’t wait to be made obsolete, get ahead of it. Long-term, we believe the Umbrella will die out. It is possible the Government just does away with them. But either way, where’s the benefit in waiting? We believe the PEO model is the way forward and have heavily invested in People PEO, which has been reviewed and recognised by HMRC. To us, that’s where the puck’s going.
But the danger could be more immediate. Going after tax avoiding corporations and schemes is an easy win for the Government. Nobody’s going to shed many tears for them. So expect a far more aggressive regime when it comes to dodgy Umbrellas and non-compliance.
Payroll is key to understanding if you’ve a problem. Recruiters are optimistic entrepreneurs and many don’t want to get into the weeds of their payroll system. But now’s the time to make sure that your house is in order. Some Umbrellas sail close to the wind when it comes to tax loopholes. 2021 will be a dangerous game of chicken to play with HMRC.
Make sure that your payroll provider conforms to the highest professional standard and that none of the payroll options you offer could be a problem.
To help Recruiters, we offer a free Payroll Compliance Analysis. Our experts will look at your current payroll arrangements through both an efficiency and legal lens. We’ll then give you an impartial opinion of the potential level of risk you could be exposing your business to. It’s a completely free, no-obligation, consultation session. Click here to request your Payroll & Compliance review.
Remember this time last year when all the recruitment sector had to worry about was IR35? How innocent we were! Well, IR35 got put back on the back burner a month before it was meant to come into force.
First, a little reminder. IR35 has been about since 2000. It was created to take away the tax advantages people get by providing services through a limited company who don’t really operate like a business. So, if you’re a limited company, but you provide your services exclusively to one client over a long period of time, you’re a ‘disguised employee’. So you should be treated, and taxed, as an employee. In recent years, the government has really clamped down on this. Firstly in the Public Sector in 2017, and now this year it’s the private sector’s turn.
From April, if you are a business that engages with PSC (Personal Service Company) contractors, you’ll need to be sure you are engaging them in the correct way. The end client, or their recruitment agency, will be responsible for determining a worker’s tax status. Businesses found to be engaging contractors incorrectly will become liable for any unpaid tax. Sounds expensive.
Anyone engaging long-term contractors will need to get on top of IR35. They could be classified as ‘hidden employees’ and subject to a different tax regime. When it comes to IR35, get informed (Our guide’s here). You should have a clear understanding of the risks around contractors.
People Group offers one of the few payroll solutions that has been reviewed and recognised by HMRC. That means they’ve been in, looked under the hood and are comfortable with how it works. We’re proud that our products are the gold standard for payroll solutions.
Innovation driving performance
This crisis has accelerated digital adoption by ten years. Recruitment can be a little conservative when it comes to adopting digital innovation. In some areas at least. We still hear stories of nurses taking pictures of handwritten timesheets and emailing them! Not to mention wet ink signatures on timesheets and fax machines.
It’s useful to think about the commercial drivers in your business as levers that you can push and pull to influence performance. Because we’re such an entrepreneurial, positive industry, we often focus on sales. But by achieving incremental efficiencies in admin, cashflow, how quickly you can get workers to work and how your consultants are using their time, you can positively impact the overall commercial performance of your business.
In 2015, the average number of applicants per opening was 59, this went down to 30 in 2019 (Harver: Digital Transformation in Recruitment). According to the International Labour Organisation, nearly 200 million people around the world will lose their jobs. So we can expect the average number of applicants to significantly increase in 2021. The sheer amount of candidates into the marketplace will put pressure on Recruiters. Interviewing and filtering candidates, compliance, payroll. Of course, Jason Medcalf points out there is a flipside to this, “This rich supply of enthusiastic, highly qualified and fit for purpose applicants into the marketplace will put extra pressure on recruiters to work efficiently.”
Automation of candidate filtering processes, upskilling recruiters and investing in solutions that take ‘busy work’ off their hands can all help. It’s about looking at every process and thinking about whether there’s a tech solution that makes that quicker, easier and more efficient.
Look for quick wins that don’t break the bank. At People Group, we deliver value by optimising your payroll and recruitment process to unleash those efficiencies. One simple way we do this is through the VAT mitigating features of PEO. When the worker is jointly employed by People Group and the agency, as defined in our HMRC recognised model – only 1% of our invoice value attracts VAT. This delivers predictable, reliable and sustainable cash flow efficiencies.
Then there’s our award-winning Compliance product which can reduce the time it takes to get a contractor to work by up to 50%. That’s an easy money-saving and revenue generating tactic that over the course of a year is worth a decent sized client.
There are many quick digital wins hidden in those processes that underpin how you manage contractors. It can all be optimised to deliver serious bottom line commercial results.
The consensus from experts is that you can’t look at tech as a replacement for people or vice versa. The hard thinking has to be done to understand how technology can make your people more effective. And it’s about much more than installing a magical tech solution and waiting for it to deliver. Everyone in the organisation needs to be bought into it, skilled up in it and be ready to make the most of it. They should understand how it’ll make them more effective at their jobs and drive revenue through these efficiencies.
The question, and the challenge, for Recruiters is to use their deep understanding of what makes their organisation special to help them choose technology that’ll enhance that.
People Group offers a free Digital Efficiency Audit. Our efficiency consultants will examine your process from attraction to payroll to identify how digitising the process can help you become more efficient. Based on this analysis, we’ll also estimate your year one savings in terms of time and money. It’s completely free with no obligation. Contact our team for a consultation at any time: email@example.com.
Think different. Work different.
2020 squeezed ten years of trends into a few months. Before January 2020 had anyone even heard of Zoom? Now it’s worth more than every US airline. Combined. We’ve had to get used to remote working. Which is tough for an industry that thrives on positive, collaborative energy. There have been pros and cons.
We’ve all been touched by COVID in some way. And some of us have suffered deep losses. But even for those who haven’t, the forced isolation, the collapse of some industries and the impact of constant fire fighting has left its toll. We’re still positive, we’re still resilient. But we’re now focussing on our wellbeing and mental health.
The impact of 200 million job losses internationally will be profound. Some industry sectors will take years to recover. Millions of workers will retrain into the sectors that have survived and thrived while many will be experimenting with new ways of working like freelance. Recruiters need to have their finger on the pulse of how the market’s changing and the effect it’ll have on their business.
Fundamentally look at the real value you deliver. Not the value you’d like to deliver, but the value you do deliver. For example, in many industries, attraction isn’t really an issue for hirers. They have their own talent pools and employer brands. But they don’t want to manage the process of work – compliance, payroll, engagement etc… For some recruitment agencies, that’s where they’re valued. In some sectors it is about finding that perfect, highly sought after, contractor. And then the experience that you deliver to contractors is hugely important.
2020 may have changed the value that you deliver to clients, contractors and people. What was important 12 months ago may be different now. It’s worth taking the time to examine this and gain a deep understanding of the value you need to deliver in 2021.
Bev White talked about their focus on Wellbeing has evolved from yoga and mindfulness sessions to engaging with organisations who help with mental health and anxiety. Not just for staff, but also for contractors.
Dealing with the implications of Brexit and Britain’s place in the world also played big on some people’s minds. Albert Ellis made the point that many contractors are immigrants and the additional checks and red tape will be challenging.
Plus, Bev White mentioned that increasingly, companies are seeing talent acquisition strategies as a global challenge. It’s important to build relationships with European and global partners to deliver on this.
We’re in Mystic Meg territory here. We all think we know what’s going to happen. The only thing that’s certain is that a year from now, some of us will be right and some wrong. But if we’ve learned anything from 2020 it’s that you have to move fast and get in front of change. It’s up to Recruiters to build a new world where they can deliver for their people, contractors and hirers.
Although 2020 was tragic and hugely challenging for everyone, we can be optimistic. Our industry has shown the resilience and agility for which it is famous.
At People Group, we believe in the power of new thinking and technology to make work easier and more rewarding for Recruiters, employers and consultants. Let’s be having you 2021!
How we help
At People Group we’re in the business of making work easy and more rewarding for recruiters, contractors and hirers. We use technology and expertise to create products and solutions that optimise the processes that underpin work. Like payroll, compliance and engagement. We make these processes safe, efficient and rewarding.