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. ®
The latest monthly Recruitment Trends Snapshot report from the Association of Professional Staffing Companies (APSCo) in conjunction with growth analytics platform cube19, has seen the impact of the roll out of IR35 changes to the private sector. The Snapshot has revealed contract placements dropping a sizeable 10.1 per cent month-on-month, as employers shy away from contingent workers.
Along with growth in permanent placements, the data shows a huge uptick in recruitment sales revenue from permanent placements year-on-year, which increased 24.5 per cent – another possible indication of the impact of IR35, with businesses reducing their reliance on contractors.
The latest KPMG and REC, UK Report on Jobs survey signalled a stronger rise in permanent placements during February, but temp billings continued to fall largely due to upcoming IR35 legislation changes. Nonetheless, total demand for staff expanded at the quickest rate for over a year, which was often linked to a sustained improvement in market confidence since last year’s general election. At the same time, the overall supply of candidates fell at the weakest rate since June 2013, with some recruiters mentioning that people were more willing to seek out new roles.
February data signalled a sharp and accelerated rise in demand for staff, with the rate of vacancy growth the quickest for just over one year. The stronger increase was supported by firmer demand for both permanent and short-term staff, with the former noting the quicker rate of expansion. The overall drop in candidate supply was the weakest recorded since June 2013 in February. Recruiters commented that improved confidence among workers and upcoming changes to IR35 legislation had both contributed to the slower decline in candidate numbers.
New data from the Recruitment & Employment Confederation (REC) shows that businesses have become more confident in their ability to hire new staff.
“Businesses across the country have grown more confident since the election,” said Tom Hadley, director of policy and campaigns at the REC.
UK – HIRING CONFIDENCE REBOUNDS, DEMAND FOR TEMP STAFF RISES OVER THE YEAR: REC
Employers’ confidence in making hiring and investment decisions increased in the period from November 2019 to January 2020, returning to positive territory, according to the latest JobsOutlook survey from the Recruitment and Employment Confederation.
The survey showed that employer confidence in making hiring and investment decisions improved by ten percentage points this quarter, returning to positive territory at net: +7.
However, when asked if they think economic conditions in the country as a whole are getting better or worse, 46% of employers said worse while 19% said better. Despite confidence being in the negative territory, it was still an improvement over the previous rolling quarter.
Meanwhile, demand for permanent staff remains high, both in the short and medium term, at net: +21 and net: +26, respectively. Businesses are looking to expand their workforce after months of uncertainty and delay.
Demand for temporary agency workers fell back into negative territory this quarter when compared to the previous rolling quarter. However, short-term and medium-term levels were higher than in the same period a year earlier.
“Large employers especially have become more negative about hiring temps, perhaps due to the administrative burden of the upcoming IR35 changes,” the REC stated.
The REC also found that more employers highlighted the importance of agency workers for responding to growth (up from 57% to 69%) and for managing organisational change (up from 54% to 68%) compared to a year earlier.
Seven in ten (71%) employers who hire agency workers said that it is important that their recruitment agency partners provide information on how to manage your temporary workforce as a service.
REC’s survey also showed that approximately half, or 49%, of employers of permanent staff are already worried about finding enough candidates to fill their permanent vacancies.
“These worries are especially pronounced in sectors like health and social care and construction, industries where the government’s new immigration policy will have serious negative consequences for allowing labour into those sectors,” the report stated.
Tom Hadley, Director of Policy and Campaigns at the REC, said, “Businesses across the country have grown more confident since the election. With more certainty about what lies ahead in the short term, many have taken the opportunity to start hiring again. Now that demand for staff is on the rise and the majority of employers have little or no spare capacity in their workforce, staff availability is the major challenge.”
“As a result, last week’s immigration policy announcement has worried many employers. Sectors like healthcare, construction and logistics currently rely on workers from overseas, and are already facing labour shortages. Although the government might refer to these roles as ‘low-skilled’, they are highly important – not just for employers but also for patients, consumers and existing staff who are already overworked. We need a temporary work visa that allows businesses to hire the people they need at all skill levels and pay grades.
Bedfordshire Chamber of Commerce reports:
Over half of UK firms attempted to recruit in the last quarter of 2019, but almost three quarters have struggled to find the right talent, the largest survey of UK employers has found.
• Labour market remains stable as over half (55%) of UK businesses attempted to recruit in the final quarter of 2019.
• Skills shortages continue to impact growth as 72% of firms reported recruitment difficulties in Q4 2019.
• With greater political stability, one in four (26%) businesses expect to increase their workforce in Q1 2020.
The latest Quarterly Recruitment Outlook from the British Chambers of Commerce, in partnership with Totaljobs, revealed continued skills shortages in the UK workforce ahead of the government’s first Budget next month.
While over half of UK firms (55%) were looking to hire, the report revealed that 72% of businesses had difficulty finding the right talent.
The figures illustrate a critical skills deficit across the UK workforce, with shortages most apparent in the construction and hospitality sectors, with 79% and 77% respectively struggling to recruit. Two thirds (67%) of construction businesses attempted to recruit in Q4, up from 62% in Q3. In both these sectors – and others – uncertainty over the UK’s future immigration regime continues to be a concern.
Looking ahead, 26% of UK firms say they plan to increase their workforce in the first quarter of 2020. The construction industry reports the highest proportion of firms looking to grow their headcount (34%).
The report’s findings highlight the need to address critical skills shortages in the upcoming Budget, including commitments to long-term funding for vocational education and for apprenticeships in small and medium-sized businesses – both of which are crucial to the government’s ambition to ‘level up’ opportunities across the UK.
BCC and Totaljobs are also calling on the government to review the Apprenticeship Levy, which hits every firm with a payroll of over £3m, to ensure companies can use the funds to train their staff. Greater flexibility for employers on how funds can be used towards vital non-apprenticeship or accredited training could help to make better use of this budget and upskill the UK workforce.
Adam Marshall, Director General of BCC, said:
“Although it is encouraging that businesses are looking to take on people, the prolonged skills shortages they’re facing are not sustainable as they try to shake off years of political uncertainty and pursue growth.
“Training has got to be at the heart of the upcoming Budget if the government wishes to demonstrate that it is serious about ‘levelling up’ opportunity all across the UK. Funding boosts are needed for vocational and technical education, for apprenticeships, and for incentives to help more employers provide high-quality job-related training.
“As the UK forms new economic relationships with the EU and partners across the world, businesses also need clarity on who they can recruit. As things stand, businesses don’t know who they can hire, and under what conditions, from New Year’s Day 2021. That’s unacceptable. The Government needs to act swiftly to deliver a fast, flexible new immigration system that allows firms to access staff at all skill levels, and limits upfront fees, delays and costly red tape.”
Jon Wilson, General Manager of Totaljobs, said:
“The market is very much active and hiring intentions remain strong, with Totaljobs seeing 640,000 jobs advertised alongside over 12 million job applications in Q4 2019. Yet, skills shortages continue to impact many UK businesses, as one factor contributing to the UK’s low productivity rate.
“UK businesses need to ensure they have robust training opportunities to keep the people they need. Totaljobs research shows that two thirds of UK workers have left a job due to a lack of learning and development. Clearly, learning new skills is very much tied up in job satisfaction. For SMEs particularly, training budgets can be an issue, which is why dedication and support from the government is essential in order to help the UK workforce upskill.”
The number of temporary employees in the UK fell by 8.2% on a seasonally adjusted basis to a total of approximately 1.42 million for the three-month period from October through December 2019 when compared to the same period a year ago, according to the Office for National Statistics.
Temporary workers are self-identified when surveyed by the ONS, and they include those who are on fixed-period contracts, temporary agency workers, casual workers, seasonal workers and others in temporary work.
The number of temporary employees as a percentage of total employment was 5.1%, down from 5.6% compared to the same period a year ago.
Compared to the previous period ended in November 2019, the number of temporary employees decreased by 2.5%.
Of the 1.42 million temporary employees during the period ended December 2019, approximately 361,000 were temporary because they could not find a permanent job; 396,000 did not want a permanent job; 112,600 had a contract with a period of training; and 551,900 cited other reasons.
Of the 1.42 million temporary workers, approximately 672,000 were men while approximately 749,800 were women.
ONS also published labour market figures for the three-months ended December 2019.
The UK employment rate was estimated at a record high of 76.5%, 0.6% higher than a year earlier and 0.4% up on the previous quarter. The highest employment rate estimate in the UK was in the South West (80.1%) and the lowest was in the North East (71.1%).
Estimates for October to December 2019 showed a record 32.93 million people aged 16 years and over in employment, 336,000 more than a year earlier. This annual increase was mainly driven by full-time workers (up 381,000 on the year to a record high of 24.42 million), women (up 298,000 to a record high of 15.61 million), and people aged 50 to 64 years (up 226,000 to a record high of 9.31 million).
The UK unemployment rate was estimated at 3.8%, 0.2% lower than a year earlier and 0.1% lower than the previous quarter. The highest unemployment rate estimate in the UK was in the North East (6.1%) and the lowest was in Northern Ireland (2.4%).
The UK economic inactivity rate was estimated at a record low of 20.5%, 0.4% lower than the previous year and 0.3% lower than the previous quarter.
Meanwhile, estimated annual growth in average weekly earnings for employees slowed to 2.9% from 3.2% last month for total pay (including bonuses) and to 3.2% from 3.4% for regular pay (excluding bonuses).
In real terms (after adjusting for inflation), annual growth in total pay is estimated to be 1.4% and annual growth in regular pay is estimated to be 1.8%.
Job vacancy data showed there were an estimated 810,000 vacancies in the UK for November 2019 to January 2020; this is 50,000 fewer than a year earlier and 7,000 more than the previous quarter.
ONS deputy head of labour market statistics Myrto Miltiadou said, “Employment has continued its upward trend, with the rate nudging up to another record high. In particular, the number of women working full-time grew strongly over the past year. The number of job vacancies has also increased on the quarter, after falling for most of last year.”