Why have IR35 rules changed for the public sector?

Employment lawyer Simon Whitehead explains the reasons behind the new regulations, and the effects that are already being felt by employers

It’s more than a decade since the Inland Revenue merged with Her Majesty’s Customs and Excise to become HMRC, yet the spirit of the IR’s 35th press release of 1999 not only lives on, it’s been reinvigorated. New rules from April 2017 target those working via intermediaries in the public sector. Those engaging contractors through a personal service company (PSC) in, and recruitment agencies supplying such workers to, the public sector will have already felt the pinch.

Why the change?

‘Off-payroll working rules’, or IR35, is designed to combat ‘disguised employment’.

Employers deduct income tax and national insurance contributions (NICs) on behalf of their employees and account to HMRC for this. They pay employer NICs too. In contrast, self-employed contractors are themselves liable to account to HMRC. Many work through their own PSC, which ‘employs’ them to do the work.

A key driver for deciding to work (or for engaging ‘contractors’) via either a PSC or another intermediary is the perceived tax benefit of doing so. The PSC/intermediary model is particularly popular in certain industries.

The Exchequer isn’t fond of this model. The tax saving (for the former-employee-now-contractor and their former-employer-now-engager) is the Exchequer’s loss. As the PSC bandwagon has gathered momentum, the resultant hole in the Exchequer’s money pot has grown.

And, of course, as the government has been at pains to point out, there’s an inherent unfairness to it all, too. The contractor may be working alongside his former co-employees, doing equal work, but for different pay: where’s the level playing field in that? (Not to mention that those shrewd former co-employees may think the same thing, jumping off ‘HMS employed’ to join the merry ‘self-employed’ crew.)

IR35 is designed to combat this. It looks at the bigger picture and asks: is the contractor who is doing the work (via the intermediary), someone who looks and smells like they should be an employee of the person engaging them (the end-user)?

If they do, IR35 decrees that the PSC/intermediary must account to HMRC for income tax and national insurance by making a deemed employment payment.

New rules

That’s all well and good, but IR35 had an inherent weakness – the enforcement problem. The rules may have shifted responsibility on to the contractor’s own PSCs, but ‘what if’ those PSCs did not account as they should? It’s been a big ‘if’: IR35 non-compliance allegedly cost the Exchequer approximately £440m in 2016-17 alone.

So, from April 2017, new rules have shifted the responsibility in the public sector for accounting to HMRC for income tax and national insurance, taking it away from the PSC and giving it instead to the public sector end-user (or where the worker is engaged via a recruitment agency to work in the public sector, the agency).

And now?

This has created some real headaches for public sector engagers, such as public authorities, the NHS, police forces and schools. They now have the unenviable task of deciding whether a worker, supplied to them via an intermediary, should be treated as a ‘deemed employee’. If it’s a ‘yes’, they must account for them to HMRC.

While HMRC has issued an online ‘tool’ to help, public authorities and recruitment agencies are rarely experts in finely balanced questions of tax status. As the buck now stops with them, they have been adopting a cautious approach.

If this continues, we might start to see a move back towards the employee model (in the public sector at least). But the public sector would have to be desirable enough to attract and retain the employees it needs, and the ripples from other butterflies’ wings’ beats (Brexit, pay freezes and court judgments, to name but three) could each create their own waves in the meantime.

Simon Whitehead is an employment lawyer and managing partner of HRC Law. Article on CIPD

Candidate attraction strategy – getting it right

An interesting article by Kallidus. While some of the views and recommendations are focused on larger volume recruitment and related automation, key aspcects are around making life as easy as possible for candidates. Sometimes employers dont realise how hard they make it to apply for their jobs. Candidates want to feel informed with great insights into the job, expectations, the future and if the role could be a good fit. When they do apply, they want slick systems which make the process of applying easy and reliable, followed by personable and accurate updates on what is going on and what comes next. Its not hard nor costly to deliver this experience and it does not rely on paid for technology if administration is efficient and their is a commitment to good communications.

The candidate experience includes everything from a potential candidate’s initial interest in your organisation through to applying, interviewing, hiring and on-boarding. Candidate experience has been directly linked to recruiting performance, making it increasingly important to the success of talent acquisition.

There are two major frustrations for candidates: complexity to apply and lack of communication.

Is complexity to apply impacting your candidate application rates?

Ask yourself – ‘How easy is it for me to apply to my organisation’s roles?’. By reviewing your application process, you can identify areas for improvement.

Questions such as:

  • Is the process mobile optimised?
  • Are there unnecessary questions?
  • Are forms long and complicated?
  • Can CVs be uploaded with ease?
  • Does the job description contain all the information they need?

This will encourage the right talent to apply to the right role. If application forms are unnecessarily complex, candidates may apply elsewhere – such as a competitor company.

Poor communication results in a poor candidate experience

Application confirmations, status updates and general information should be provided to candidates so that they are aware of their progress through their entire recruitment journey – 44% of candidates said that not knowing if they have been successful for a role significantly worsened their candidate experience.

34% of candidates suggest that more frequent communications will improve the application process. This could include an estimation of how long the application will take, informing interviewees of how long it will take to make a hiring decision, proving information regarding the vacancy’s closing date, and detailing the interview process that candidates should expect.

Candidates who are not hired but were treated well are more likely to apply again, to refer others to apply and to remain a customer or an admirer of the company.

Applicant Tracking System

More organisations are realising they can utilise technology to streamline their recruitment process, driving significant cost reductions and dramatically improving candidate experience. The most common software solution used is an Applicant Tracking System or ATS.

An ATS gives you greater control of the entire application process. You can ensure that every stage is mobile optimised and long forms can be broken down making them short and quick to complete. This removes many of the barriers at the application stage.

One of the key areas an ATS can improve candidate experience is that of communication. With automated notifications, your candidates can receive regular updates about their progressions with their application as well as additional information relevant to the next stage.Automated notifications ensure that candidates are kept up-to-date without impacting on HR resource.

Steer clear

  1. Long application forms
  2. Not updating candidates on hiring progress
  3. Minimal job descriptions
  4. Unclear application instructions
  5. No salary information

Top tips for recruiting success

  1. Optimise the application process for mobile devices
  2. Explain how the hiring process works
  3. Provide estimates of timings – from being offered an interview, to their interview outcome
  4. Short application forms
  5. Timely communication

Beware of poor candidate experiences

For a great experience, you need to ensure that your candidates have access to all the information they need from initial application to hire and onboarding. ATS empowers organisations to provide a great level of information and communication through the recruitment process. This helps to reduce time and cost to hire, removing the strain from HR resources whilst improving candidate interaction and experience.

Full article on HR Grapevine

Is unconscious bias blurring recruiter mindsets?

Charles Hipps explains the most common bias traps businesses fall for when hiring

In recruitment, two things to avoid are adverse impact and bias. Employers are not allowed to apply any requirement or condition that disadvantages people or makes them ineligible for a job without a justifiable reason, as this could constitute discrimination.

Bias, simply put, is a person’s inclination or prejudice against another person or group of people. Unconscious biases are the prejudices every human has and acts on without thinking or malicious intent. Instinctively, people tend to like those they align with most. Sometimes that alignment is racial or gendered. Sometimes it is personality-based.

Here are a few of the most common forms of unconscious hiring bias to watch out for:

Conformity bias – Like peer pressure and groupthink, this bias occurs when an individual follows the majority, ignoring their own opinions. In recruiting, conformity bias might surface in a panel interview where individuals hesitate to voice their thoughts for fear of disagreeing with the majority.

Halo/horns effect – This hiring bias occurs when one aspect of a candidate or their resume becomes the foundation of the analysis of the individual. For example, pushing for an unfit candidate because they participated in a specific fellowship or assessing a fit candidate as unfit because they went to a certain college.

Affinity and similarity bias – These are some of the most common forms of unconscious hiring bias. Affinity bias occurs when a recruiter favours a candidate because he has shared traits. This could be attending the same college, growing up in the same city or simply reminding them of someone they like. Similarity bias occurs when the recruiter sees themselves within the candidate and is more open to pursuing their employment because of it.

Contrast effect – Common for recruiters sifting through resumes, this bias takes place when the recruiter or interviewer has multiple people or applications to compare. Naturally, instead of considering the individuals on their own merit, the interviewer uses another individual’s skills and attributes to make decisions on the next person.

Beauty bias – As the name suggests, this bias is rooted in external appearance. If the recruiter or interviewer believes the more handsome individual will be most successful, they might suffer from beauty bias. On the other hand, when someone who is more traditionally attractive is hindered by their appearance  – especially in the case of women – this is considered the ‘bimbo effect’.

Conformity bias #2 – When a recruiter or interviewer makes assessments to support their initial beliefs of the candidate, they are falling for conformity bias. For example, if a recruiter has decided that a candidate will fit well within the company, they might overlook warning signs to back up their first impression.

Unless carefully monitored, these biases can lead to a vicious cycle, reproducing already established patterns of under-representation and further ingraining bias against already disadvantaged groups, such as older and disabled workers, women and ethnic minorities.

To avoid hiring biases, an increasing number of organisations are using blind hiring strategies. Used wisely, these can lead to impartial selection, personal bias removal, gender parity, workplace diversity and the development of a skills-based meritocratic organisation.

Charles Hipps is chief executive and founder of WCN

Full article on People Management

Are UK employers attitudes to career gaps outdated?

British workers are more reluctant to take a career break compared to other nations, due to fears that they will reduce their employability. However, by refusing to take sabbaticals or extended leave, they could be increasing their risk of burnout.

According to research commissioned by Opodo.co.uk, UK employees, among other European nationals surveyed, are most likely to be allowed extended leave by their current employer, with one in five (20%) saying their workplace allows them to take this break.

However, more than half (54%) of those questioned believe it would be hard to return to work after a sabbatical. One in five (21%) feel it could make them less employable, while a further one in ten (13%) believe it will harm their career prospects.

On the contrary, almost two-thirds of people (61%) in Spain believe extended leave will help them in the future, in terms of employability, and more than half (60%) of those in Germany agreed.

Despite this, Brits are well aware of the benefits to their wellbeing that leave could bring. The research finding that a main motivator for extended leave is to get away from work-related stress. Over two-thirds (69%) of Brits believe that they currently don’t have a good work-life balance.

Three-quarters added (75%) that they don’t have a generous holiday allowance. However, UK employers were rated among the most generous of the nations polled when it comes to leave.

The research also found the difference between the benefits offered by UK employers, in comparison to other nations polled including France, Germany, Sweden, the US, Italy, Portugal and Spain.

The difference between benefits offered by UK employers, in comparison to other nations (France, Germany, Sweden, the US, Italy, Portugal and Spain).

Benefit UK Worldwide
A generous holiday allowance 25%   22%
Flexibility around working from home i.e. for house maintenance visits 19%   17%
Time off in lieu for days worked over the weekend 16%   16%
Flexibility to leave early to catch a flight/go on holiday 15%   22%
Flexible working hours for parents to juggle childcare 15%   16%
Leave early on Friday 14%   19%
An unpaid sabbatical 13%   10%
A paid sabbatical 7%   9%
Summer Hours’ schedule i.e. 8-3pm shift 4%   11%
None of the above 38%   32%

Induction or Onboarding? Whatever… but it is key for new appointments

As recruiters we are often intrigued by the level and quality of induction and onboarding for new recruits or promoted internals. There are significant costs in firstly recruiting, but also the costs of losing someone because they dont settle or fail to perform to the required standard. So why invest time and cost in getting the right person, only to not fully support them. Some similar views found in this article:

Onboarding: A bespoke approach that reduces costs and increases productivity

Approximately 25% of the working population make a job move every year. Given the rise of the gig economy and the game changing impact of virtual technology, our increasingly automated workplaces can anticipate even higher levels of employee movement.  As the trend takes hold the cost of replacing leavers has the potential to rocket.  In fact, according to a study by Oxford Economics in 2014 it costs the organisation a staggering £30,000 to replace a single job. This includes costly recruitment campaigns, lengthy selection activities, unsatisfactory temporary resources, labour costs, logistical expenses and loss of productivity.

Over time, faced with a new reality, organisations will be forced to take steps to reign in the direct costs of recruitment finding innovative, faster and more cost effective ways to attract and select employees.  However, indirect costs such as loss of productivity are more evasive and more complex to address.  For example, there is a period of time when the departing employee starts a process of ‘letting go’.  As they disassociate the impact of their diminishing productivity will be felt keenly by the people who rely on their know-how and contribution.  To further compound the dilemma, it also takes some time for the incoming employee to reach an optimal level of productivity.

So, is loss of productivity inevitable and can it be minimised?

Full article on HRGrapevine

AI or not?

Would you trust your future to machines?

Ok, I’ve calmed down now, but I had a bit of a rant last week.  What provoked this you might wonder?

I’m in the people business – recruitment, coaching, developing talent, leadership spotting, career courses.  I like people, I find them interesting on an intellectual and emotional level.  Everyone is different, everyone has a story and everyone has something to offer.  My job, and my passion, is to identify this.

I don’t have all the answers.  I’m lucky, I can learn from the people I meet.  Because I’m blessed with a good memory, each new meeting or insight helps build my knowledge, my experience, my insight into what makes good (and bad) leadership, management and impact.  I use my insights to inform my judgement when talking and listening to people.

So why the rant?

An allegedly leading headhunter wrote an article promoting artificial intelligence as a legitimate replacement for effective search and selection.  The article was a bit confused, but essentially the proposition was that technology could be used to attract the best candidates to a role and that online selection was a critical part of this offer.

Yes, responsive websites with embedded media and comprehensive links are vital for recruitment.  But these have been around for nearly a decade and are hardly innovative.  We’ve built these for clients for more than 7 years.  I wholeheartedly endorse this.

However, online selection is a crude tool that should not feature strongly as an attraction tool in executive search and should not play a part in early stage sifting of candidates for senior, executive roles.  It is only necessary or useful for high volume recruitment – the completely opposite end of the market to executive recruitment.

I don’t accept that an online assessment tool can replace experienced people exercising judgement based on years of experience.

Yes, artificial intelligence has its place – that’s why high street retailers (like M & S) or grad recruitment programmes use online assessment as part of an initial sift.  They’re dealing with a high volume of candidates and must find an automatic way of cutting down numbers.  But this is not appropriate for executive recruitment.

This has no place in a quality service.

It might be appropriate where the emphasis is on cutting costs or moving a product down-market to increase margins.  But this does not make it a quality offer.  It is not what local government needs at senior levels and it’s certainly is not what the public sector buys when it chooses an executive search partner.

People would rather talk to other people about a job – someone who knows a client, their dynamics, foibles, preferences and challenges.  We want to talk to people as it gives us an insight into character, experience, motivation, communication style and fit.  No technology can be an effective substitute for people connecting with people.

On top of this, such use of AI as an initial selection tool raises serious questions about unconscious bias and therefore indirect discrimination. When local government has serious problems with the glass ceiling, I think this is also sloppy intellectually and borders on unethical.

As a psychologist I learnt the need for real caution when designing psychometric tests.  The norm group must be clearly referenced and relevant, the test must be both valid and reliable.  It’s not just about designing online tools, it’s about designing online tools that do not unfairly or unlawfully discriminate.  Where’s the scientific data to show this is not the case?

I remember when joining local government in 1990 I went to an assessment day for a frontline Housing Advice Officer role. The initial sift including verbal ability and critical reasoning tests from a leading international supplier.  The core of these tests are still used.  There were 30 ish people in a room, for 6 jobs.  After the tests HR came into the room and read out a list.  All but 2 of the black candidates in the room got up and left, as did a small number of the white candidates.  We went from about 30 to 12 people.  I was in the 12.  We’d passed and I got the job.  When I started I spoke to the manager about the norm group used to reference the test.  It had been designed and tested on graduates in the US, UK, Western Europe and South Africa.  I said it was discriminated, he didn’t accept this.  He went on using the tests.  Four years later I’d replaced him as manager.  The first thing I did was stop using these discriminatory tests.  We made all future recruitment skills based, properly administered and then discussed. Suddenly we had a much more diverse and talented workforce.  This lesson stuck with me.

Using an online selection tool as an initial sift will often build in the conscious or unconscious bias of the person who designs the tool – whether this is an IT programmer or a psychologist.  These tools are often not properly norm-referenced, samples for testing or development won’t be representative and tests can lack both validity and reliability. Are they reliable?  I’d like to see the evidence.

I think recruiters need to be more honest.

Technology offers the opportunity to cut costs and increase margins.  The cost of executive recruitment is the time spent by people crafting a bespoke, tailored service to each client. Cut out the people, you cut the cost.  But you also massively increase the risk – of indirect discrimination, of poor appointments or of non-appointment.

We have seen an increasing number of jobs being abandoned because of a lack of candidates – stopped at shortlist or beforehand.  This has never happened to us.  I think now we’re starting to understand why.

Recruiters need to be honest.  We regularly make decisions that have major ramifications for people’s lives.  Can we responsibly trust AI with those decisions just to save money?  The prospect makes me uncomfortable. Actually, it scares me and makes me angry. We owe our clients and candidates more than this.

Steve Cooley

cyrcla – new relationship management app launched

Proventure is delighted to have launched the new app “cyrcla” on the App Store this week. A personal networking/basic CRM designed to support individuals in developing better relationships, cyrcla provides measures and analysis of the ever so important quality aspect of relationships and influence. Here’s a link to it – www.cyrcla.com. It’s free.  Feel free to share with anyone you think might want to use it who has lots of work related relationships and are always juggling time and effort to manage them effectively, plus gain some analysis of their relationships. We think the analysis will help people decide how they best invest in their circles of influence and get best return.

cyrcla is Apple only for now, android is next. The next version will be an organisational one that will aggregate data confidentially, to enable a detailed analysis of relationships internally and externally. The current free one has some good analysis though with more features to come for the individual user. All data is private and confidential. We have no access to it. Other users cannot see what you are doing, your private notes or who you are linked to unlike LinkedIn.

So go ahead and download it. It’s really simple, intuitive and essentially enables visualisation of our networks more easily.

cyrcla is on Twitter for news and updates.

Childrens services roles appointed

We are pleased to have appointed to two senior Childrens services roles during July at Bolton and Leeds councils. Both authorities were attractive propositions to candidates, with excellent recent track record in developing high quality, innovative and consistent services. However these authorities are ambitious, wishing to keep enhancing and developing their provision so not resting on their laurels at a time of change and budgetary restrictions. Candidates considering a move viewed the roles as ones where they could make a difference and personally flourish. This compared favourably to roles at authorities where services are less developed or even in trouble – very different prospects and rewards.

The Director of Children and Families at Leeds and Assistant Director at Bolton, were appointed to first time from competitive and high quality fields.

If you are a Head of Service, AD or Director considering a move we would be pleased to hear from you at a time where other roles at local authorities are emerging.

Demystifying Strategy – keep it simple

“Strategy” is often over-complicated, misused and misunderstood. It doesn’t have to be this way. Nearly everyone can understand and describe strategy, it’s just about removing the management speak and relating it to your personal perspective. Our White Paper, “Demystifying Strategy” gives a different take on strategy, to help get to grips with what it really means. Read or down load here: Demystifying Strategy PDF

Childrens services roles

We are pleased to have appointed to two senior Childrens services roles during July at Bolton and Leeds councils. Both authorities were attractive propositions to candidates, with excellent recent track record in developing high quality, innovative and consistent services. However these authorities are ambitious, wishing to keep enhancing and developing their provision so not resting on their laurels at a time of change and budgetary restrictions. Candidates considering a move viewed the roles as ones where they could make a difference and personally flourish. This compared favourably to roles at authorities where services are less developed or even in trouble – very different prospects and rewards.

The Director of Children and Families at Leeds and Assistant Director at Bolton, were appointed to first time from competitive and high quality fields.

If you are a Head of Service, AD or Director considering a move we would be pleased to hear from you at a time where other roles at local authorities are emerging.