UK labour market takes off in May
The KPMG/REC Jobs Report for May shows the UK labour market really taking off. The gradual reopening of the UK economy and improved market confidence sparked the sharpest increase in permanent placements in over 23-and-a-half years of data collection in May. Temp billings also rose rapidly, expanding at the quickest rate for more than six years.
Demand for staff rose at near-record pace in May and survey data also highlighted a sharp and accelerated rise in vacancies, with the latest upturn the most marked since January 1998. Substantial increases in demand were signalled for both permanent and temporary staff, with the former seeing the slightly steeper rate of growth.
Staff availability deteriorated rapidly with the decline in total candidate availability gathering pace midway through the second quarter. The latest reduction in overall staff supply was the most severe for four years and rapid, with both permanent and short-term candidates falling at substantial rates. Lower worker availability was frequently linked to lingering pandemic uncertainty and a subsequent reluctance to seek out new roles, fewer EU candidates and furloughed staff.
Greater demand for workers and a generally low supply of candidates pushed up rates of starting pay again in May. Starting salaries for permanent staff rose to the greatest extent since September 2018, while temp wage inflation hit a near two-year high.
Kate Shoesmith, Deputy CEO of the REC, said: “We now have a consistent picture over the past few months to show that confidence is growing and hiring plans are in motion. The data is mirroring exactly what recruiters tell us daily. Permanent placements are growing at the fastest pace we’ve ever seen, and temp billings at the quickest for six years.”
UK job vacancies have hit their highest level since the start of the pandemic as the easing of lockdown measures has led employers to start recruiting.
In the February-to-April period there were 657,000 vacancies, up about 48,400 on the previous quarter.
The unemployment rate fell slightly to 4.8% in the three months to March, down from 4.9% in February, the Office for National Statistics (ONS) said.
The ONS said there were “early signs of recovery” in the jobs market. However, despite the rise in job vacancies over the past 12 months, the level remains almost 128,000 below its pre-pandemic level in the January-to-March quarter of 2020.
The official figures confirm several reports in recent weeks by recruitment companies that they are seeing a rise in job advertisements, leading to concern among some employers that they could face staff shortages.
The ONS said the number of workers on payrolls had risen by 97,000 between March and April, but was still 772,000 lower than before the pandemic struck.
Darren Morgan, ONS director of economic statistics, said the number of employees on payroll “rose strongly in April” as the economy began to reopen, continuing an improvement from its November trough.
But he said: “There remains, however, three-quarters of a million people fewer on the payroll compared with the pre-pandemic peak. “With many businesses reopening, the recent recovery in job vacancies continued into April, especially in sectors such as hospitality and entertainment.”
Companies offer incentives to overcome staff shortages
Restaurant group Hawksmoor is offering bonuses of up to £2,000 to workers who recommend friends for jobs in a bid to fill staffing shortages, a report on the BBC states.
Another chain has emailed customers with a promise of gift vouchers if they introduce candidates who go on to be hired by the firm. It comes as the hospitality sector faces a jobs crisis that threatens to hold back its recovery.
Hawksmoor co-founder Will Beckett told the BBC there “aren’t enough people”. The firm’s problems underline the wider staffing crunch facing hospitality with indoor dining in Britain having resumed last week.
Pub chains Marston’s and Mitchells and Butlers both warned last week that they were finding it hard to recruit workers, blaming overseas staff returning home and the stop-start nature of lockdown forcing people to give up on the sector.
Mr Beckett said: “Hospitality is struggling with recruitment at the moment. It’s a little hard to tell whether this is because there aren’t enough people due to them leaving the country or leaving the sector, or because everyone is recruiting at the same time.” Whatever the reason, he said, Hawksmoor needed to “turbo-charge” its recruitment efforts.
For each person recommended and who is hired after passing a one-month trial they will get a bonus – £200 for a first friend, £300 for the next one, and up to £2,000 for five friends.
Another restaurant chain, Caravan, said it was offering £100 gift vouchers to customers if they successfully recommend someone for a job. “We have emailed our lovely customers to help us find superstars to work with us,” the firm said in an email to the BBC.
Hiring activity picks up in August – REC/KPMG
The latest REC/KPMG Jobs Report for August shows a renewed increase in hiring activity following the relaxation of public health measures and the reopening of the UK economy after the coronavirus disease 2019 (COVID-19) outbreak. Permanent placements rose only marginally overall, but temp billings expanded at the steepest rate since December 2018.
UK recruitment consultancies signalled the first increase in permanent staff appointments for six months in August. Though only slight, the upturn was a marked improvement on the severe drops seen in prior months when the COVID-19 outbreak led many firms to cancel or delay staff hiring.
Regional data highlighted divergent trends, with permanent staff appointments rising in the South of England and the Midlands but declining in the North of England and London.
Latest data signalled that billings received from the employment of temporary workers increased during August, thereby ending a seven-month period of decline. Furthermore, the rate of growth was the sharpest recorded since December 2018.
The overall availability of workers continued to expand at a historically sharp rate in August. Notably, the rate of growth was the second sharpest on record (after December 2008). Recruiters frequently mentioned that company lay-offs had raised candidate numbers, with both permanent and temporary worker supply rising markedly.
Recruiters indicated that increased worker availability and muted demand for staff continued to weigh on starting pay in August. However, both starting salaries and temporary wages declined at weaker rates compared with those seen in the previous four months.
Overall vacancies fell for the sixth month running in August, with the rate of decrease quickening slightly since July. Underlying data highlighted divergent trends, with permanent staff demand deteriorating sharply, while short-term vacancies stabilised. The Total Vacancies Index slipped from 43.4 in July to 42.8 in August, to signal a further drop in overall demand for staff. The rate of reduction was sharp overall but remained much weaker than those recorded throughout the second quarter at the peak of the pandemic.
Commenting on the latest survey results, James Stewart, Vice Chair at KPMG, said:
“It’s positive to see an uptick in hiring activity, particularly for temporary staff, which could mark a turning point with businesses appearing more willing and able to hire as more parts of the UK economy reopen.
But with total candidate availability rising at a near-record pace, strong and sustained rises are needed to move the UK jobs market back to levels seen pre-COVID – and with concerns around a possible second wave of infections, the winding down of the furlough scheme and a Brexit deal outcome, there are still many challenges ahead.
This paves the way for government to not only provide short-term support but also to offer jobseekers the means to retrain and upskill, helping the recovery in jobs and reviving the UK’s productivity growth.”
The analysis found that there were 1.10 million active job postings in the week starting 3 August, up from 1.04 million in the previous week. However, this remains below the 1.35 million job postings active before lockdown in the first week of March.
Last week also saw the highest number of new job postings since lockdown began, with almost 126,000 adverts posted between 3-9 August. The previous high was the first week of June, with 112,000 new postings.
REC’s data found that the growth in job adverts spanned almost the entire country. While the largest weekly increase was in Redbridge & Waltham Forest (23.7%), four of the top ten hiring hotspots were in Northern Ireland: Derry City & Strabane (11.5%), Ards & North Down (11.0%), Fermanagh & Omagh (9.2%) and Causeway Coast & Glens (8.7%). Overall, Northern Ireland saw a weekly rise in job postings of 6.3%.
According to the REC, there were only five counties/unitary authorities where the number of job postings fell compared to the previous week with the biggest falls in Swindon (-11.5%) and North Ayrshire (-15.6%).
The data also showed there was a notable rise in job adverts for gardeners (24.8%). There have also been further increases in postings for construction workers (15.8%), painters and decorators (14.1%), bricklayers (13.3%) and LGV (large good vehicle) drivers (+14.0%). Demand has also increased for childminders (12.1%) and play workers (16.9%).
The REC added that with many people falling on hard times because of the pandemic, there has also been a rise in adverts for debt collectors (20.9%).
Neil Carberry, Chief Executive of the REC, said, “The latest economic data tell a stark story of the scale of the lockdown recession, but now it is all about how quickly we recover. Many firms will face cash struggles in September and October, so redundancies will be with us for months to come and unemployment will rise. But a recovery is underway, as today’s tracker data shows. Construction sites have re-opened, logistics companies are dealing with high demand, and with people spending more time at home, many have been looking to spruce up their house and gardens. The increase in adverts for childminders and playworkers is interesting and perhaps linked to more people returning to offices and workplaces in the near future.”
“It’s important to remember that we are not just passengers in all of this – we have tools available that can minimise the unemployment increase that is coming,” Carberry added. “Absent a major second wave of the virus, the government needs to make sure all its actions boost the recovery rather than put the brakes on. Supporting retention and hiring by lowering employers’ National Insurance would be a good start. There should also be a greater sense of urgency on things like the private sector job search support scheme announced by the Chancellor in July. And of course we need skills reform and a Brexit deal that helps firms to trade freely with Europe.”
REC’s vacancy data compares to Broadbean Technology’s job vacancy data which showed a 14% week on week increase at the beginning of August.
Jobs market shows signs of stabilising in July – KPMG/REC
The latest KPMG REC Jobs Report shows that recruitment activity moved closer to stabilisation in July, with both permanent placements and temporary billings declining at much softer rates than in the prior four months. Nonetheless, reductions remained marked overall amid reports that the coronavirus disease 2019 (COVID-19) pandemic continued to weigh on clients’ hiring decisions.
Recruitment consultancies signalled a steeper increase in overall candidate availability at the start of the third quarter, driven largely by redundancies stemming from the pandemic. Furthermore, the supply of temporary workers rose at the fastest rate in over two decades of data collection, while the upturn in permanent labour supply was the second sharpest on record.
A combination of rising staff supply and subdued demand for workers added further downward pressure on starting pay in July. Starting salaries and temp pay both fell markedly in the latest survey period, despite rates of decline easing since June.
Overall vacancies fell for the fifth month running in July, with marked falls signalled for both permanent and temporary positions. That said, the rates of contraction were notably slower than those recorded in the prior three months.
Neil Carberry, Chief Executive of the REC, said: “While permanent placements and temp billings still decreased last month across most areas of the country, the pace of decline has slowed hugely as the tide turned on lockdown. With the economy opening up through June and July, we would expect an improving trend in the coming months as firms recover from the worst of the crisis. The fact that demand is now increasing for temporary blue collar and construction workers is also a good sign.
“There are far fewer vacancies in the market than before March, and more people looking for jobs. Recruiters will be key to helping people build confidence and find work – but the reality is that Government needs to help kickstart hiring. Reducing employers’ National Insurance rates would cut the cost of hiring, and a good Brexit trade deal will also support stronger business confidence and investment.”
KPMG AND REC, UK REPORT ON JOBS
Downturn in recruitment activity eases in June
Commenting on the latest survey results, James Stewart, Vice Chair at KPMG, said:
“Despite an inevitable further drop in hiring activity for permanent and temporary staff, it is encouraging to see they both fell at softer rates than seen in April and May.
“However, the air of uncertainty around the COVID-19 pandemic will linger – and rebuilding confidence in the UK jobs market will take time.
“All eyes will be on the Chancellor’s fiscal statement today, with job seekers hoping to see a focus on skills and retraining. While UK business will welcome further support packages so they can start to ramp up as lockdown eases, and recovery gets underway.”
Neil Carberry, Chief Executive of the REC, said:
“While there are signs that the worst declines are behind us, today’s figures show that it will be a while yet before we see job placements growing month on month. That’s no surprise, as businesses are focusing on bringing furloughed staff back to work, or making redundancies where they cannot be avoided. Recruiters will be key to helping those who lose their roles find new work – there are always vacancies out there for jobseekers, though they are at a lower level than normal right now.
“This is now a jobs crisis. Rishi Sunak should use today’s Summer Statement to boost job creation, with a cut in National Insurance designed to retain jobs and boost hiring. Action on skills will also be vital to getting people into growing sectors – including a more flexible approach to levy-funded training.”
Softer decline in permanent placements
UK recruitment consultancies signalled a fourth successive monthly drop in the number of people placed into permanent jobs in June. The rate of decline eased notably from the records seen in April and May, but remained sharp overall. According to survey respondents, the coronavirus pandemic continued to weigh heavily on recruitment activity at the end of the second quarter, with clients implementing recruitment freezes or cancelling hires until the outlook brightened. In cases where placements had risen, recruiters linked this to an easing of lockdown measures, but many also stated that placements had risen only modestly.
On a regional basis, permanent staff appointments fell markedly across each of the four monitored English regions. The steepest reduction was seen in London, while the softest was in the Midlands.
Temp billings fall further, but downturn eases since May
Adjusted for seasonal factors, the Temporary Billings Index signalled a decline in temp billings in June, as has been the case in each of the past four months. The rate of contraction eased further from April’s record pace but remained severe overall. When explaining the drop in temp billings, panel members frequently mentioned that the COVID-19 outbreak had sharply reduced demand for short term workers. Panellists that noted higher temp billings generally linked this to the slow reopening of the economy and some clients preferring to hire contract staff as opposed to permanent
The steepest decline in temp billings was seen in London, while the Midlands saw the slowest reduction. Nonetheless, rates of decrease remained sharp across all four monitored English regions.
The Off-Payroll tax reforms, also known as IR35, were initially set to be rolled out to the private sector in April this year, but were delayed until April 2021 due to Covid-19. MP David Davis had called and campaigned for changes to the IR35 reform in the private sector to be delayed until 2023/2024.
The Finance Bill had passed through the Report Stage yesterdayThe Report Stage represented the last realistic opportunity for MPs to prevent a 2021 implementation of the rules in their current format. The Bill is now heading towards its Third Reading and then through the Lords, a process which is largely ceremonial.
The proposal for a further two-year delay of IR35 fell short of a majority vote in the House of Commons, losing by 317 votes to 254.
While the IR35 rules are already in place in the public sector, the legislation for extending them into the private sector will take effect from 6 April 2021. The legislation means businesses will be responsible for determining whether the contractors they hire are liable to pay income tax and national insurance contributions, and if so, for paying those sums.
The reforms are aimed at stopping tax avoidance by disguising employment through so-called personal service companies, which has been used by many independent contractors and was estimated to cost the exchequer £1.3 billion a year by 2023-24, according to HM Revenue and Customs figures published in 2018. Nevertheless, the reforms have been characterised as flawed and the subject of long-running opposition.
Dave Chaplin, Director of The Stop The Off-Payroll Tax Campaign and CEO of ContractorCalculator said, “It is very disappointing that after four years of campaigning we have not achieved the primary aim of stopping this legislation. We, and our 4,000 campaigners, did everything we could, and the Lords Report, from their inquiry into the so-called reforms, accurately detailed the damaging effect these changes will have on the UK’s flexible workforce. We are delighted that MPs tabled amendments to the Finance Bill, to prevent the damage, but sadly our MPs chose not to back them in sufficient numbers.”
“Moving forward, the market now needs to prepare and, with careful planning, firms have nothing to fear and can hire freelancers compliantly,” Chaplin said. “We have already had a dress rehearsal, and many firms and contractors saw what would happen if they did not prepare properly. We now need to work together to avoid a cliff edge scenario.
“Over the next year we will be seeing more clarity from the courts, as binding authorities are released – and these are likely to favour the self-employed and provide a legal bedrock upon which firms can compliantly hire contractors, without fear of later repercussions,” Chaplin said. “Provided firms work with specialists in this field, they should have nothing to fear.”
Seb Maley, CEO of IR35 specialist Qdos, said, “IR35 reform in the private sector has effectively now been signed off and will arrive in April 2021. Despite concerns raised by a number of MPs, who rightly exposed the flaws of this legislation and made it clear they do not believe changes are necessary, it seems there’s no turning back now.”
“The reform is short-sighted and if mismanaged poses a risk not just to contractors but to hiring organisations and recruiters. It’s therefore up to private sector firms to prepare for the changes, which can be managed with the right approach,” Maley said. “For companies to compliantly engage genuine contractors beyond April 2021, they must avoid risk-averse policy decisions and instead prioritise fair and considered IR35 status assessments. Whilst our work alone shows that thousands of businesses will be ready for the changes, many other companies – from banks to oil firms and pharmaceutical giants – should rethink how they plan to manage this reform.”
John Bell, Founder and senior partner at insolvency practitioner Clarke Bell, said, “The news that Off-Payroll is going ahead in 2021 is very disappointing and contractors and the firms that hire them will be bracing themselves for a challenging time ahead. The pending legislation is already having a huge impact on the lives and livelihoods of contractors and we have a seen a surge in the number of enquiries from contractors seeking to close down their limited companies as a direct result of the IR35 changes. Covid-19, Brexit and Off-Payroll combined means that the UK economy is set to suffer immeasurably in the years to come.”
The House of Lords Economic Affairs Finance Bill Sub-Committee published its report on Off-payroll working rules, also known as IR35. The Committee concluded that the framework of the IR35 rules are flawed.
On 17 March 2020, in response to the economic effects of the Covid-19 pandemic, the government announced that it was postponing the introduction of reforms to off-payroll working by 12 months. These reforms would have made large- and medium-sized organisations in the private and third sectors responsible for determining the employment status of contractors for tax purposes and for ensuring that, where relevant, employment taxes were paid.
In February, the Committee announced that it would investigate the IR35 rules and issued a call for written evidence as part of the inquiry.
The report, ‘Off-payroll working: treating people fairly’, showed that many witnesses told the Committee that the rules have made them “zero-rights employees” with none of the rights of being an employee, or the tax advantages of being self-employed.
The Committee therefore calls on the government to keep its promise on implementing the recommendations of the Taylor Review: that the taxation of labour should be made more consistent across different forms of employment, and that there should be a fair balance between tax, rights and risk.
During the passage of the Finance Bill the Government intends to legislate to carry out external research on the impact of the reforms six months after they come into effect. The Committee consider this is too soon to give a full and accurate picture and calls on the Government to carry out this research 18 months after the rules have been in operation.
Lord Forsyth of Drumlean, Chair of the House of Lords Economic Affairs Finance Bill Sub-Committee, said, “The Committee welcomed the Government’s decision to defer these off-payroll working rules in the wake of the Covid-19 pandemic. However, our inquiry found these rules to be riddled with problems, unfairnesses, and unintended consequences. The potential impact of the rules on the wider labour market, particularly the gig economy, has been overlooked by the government. It must devote time to analysing all of this. A wholesale reform of IR35 is required.”
“We call on the Government to announce in six months’ time whether it will go ahead with reintroducing these proposals,” Forysth continued. “Contractors already concerned by these uncertain times now have the added worries of paying more employment taxes and having their fees cut by clients making additional National Insurance Contributions. Also concerning is the number of companies getting rid of contractors in anticipation of the implementation of these new rules.”
Dave Chaplin, Director of The Stop The Off-Payroll Tax Campaign and CEO of ContractorCalculator said: “I applaud the Lords findings as they have clearly seen the Off-Payroll Tax for what it is – ill-thought through, ideologically led, unevidenced, cruel, misguided and ultimately un-fit for purpose. A holistic approach now needs to be taken to treating the self-employed fairly in the tax system.”
Seb Maley, CEO of IR35 specialist Qdos, said, “The Lords have made the right call, urging the government to reassess things further down the line when contractors, businesses and the UK economy can see a way through this crisis.”
UK government puts IR35 tax reforms on hold for a year in wake of coronavirus crisis
‘This is a deferral, not a cancellation’ official insists
Heads up, IT contractors: the implementation of Britain’s IR35 controversial tax reforms have been delayed by a year due to the coronavirus pandemic.
The decision was announced among a £330bn financial package for the UK economy that includes a business rate holiday, emergency loans for companies, and financial assistance to airlines.
Speaking in Parliament on Tuesday evening, Chief Secretary to the Treasury Steve Barclay said: “The government is postponing the reforms to the off-payroll working rules, IR35, from 6 April 2020 to 6 April 2021.”
He said the suspension is in “response to the ongoing spread of COVID-19 to help businesses and individuals,” but insisted it will still go ahead as planned the following year.
“This is a deferral, not a cancellation, and the government remains committed to reintroducing this policy to ensure people working like employees but through their own limited company, pay broadly the same tax as those employed directly,” he added.
Many corporations decided to institute a blanket ban of personal service companies (PSCs) rather than risk being financially liable for a tax bill should their contractors be deemed in scope of IR35. That list includes big banks such as Barclays, Lloyds, RBS, Deutsche Bank, and HSBC, as well as pharma giant GSK and defence titan BAE Systems.
A much-anticipated government review, initiated earlier this year, offered contractors a number of concessions, but nonetheless allowed officials to forge ahead with the planned changes. The chancellor’s omission of any mention of the reforms from his budget speech last week had done little to quell contractors’ concerns. The results of a separate review by the House of Lords were expected over the next few weeks. Now it matters not, for the time being at least.
James Poyser, CEO of inniAccounts and founder of the offpayroll.org.uk campaign group, welcomed the pause as it “means that contractors can now switch gears and put all of their energy into the wider challenges we’re all going to face.
“We’re going to have to keep a watching brief on the market in the coming months. Whilst the wider economy is due to enter a turbulent period, it’s clear by the scale of the £330bn financial measures made available by the Treasury today that the government wishes to keep the economic engine running as much as they can. We hope these two factors combined have an impact on the contracting market.”
Over at the Association of Independent Professionals and the Self-Employed (IPSE), director of policy Andy Chamberlain said the British government’s decision on IR35 was “sensible.”
“These changes have already undermined the incomes of many self-employed businesses across the UK. However, they would have done even more serious damage if they had gone ahead as planned. It is right and responsible to delay the changes to IR35 for at least a year during the Coronavirus crisis, to reduce the strain and income loss for self-employed businesses,” he added. ®