The new financial year has kicked off with a busy week in the recruitment industry. Making the headlines were changes to tax and employment laws, significant gains for those campaigning to close the gender pay gap, and mixed fortunes for Britain’s migrant workers.
An overhaul of IR35 came into effect on Thursday (April 6th), repositioning a large number of public sector contractors within the scope of the new legislation.
Introduced as a method to prevent tax avoidance, the IR35 intermediaries legislation has been a source of controversy since its inception. Now, many of those affected by this week’s changes have expressed concerns that many end-clients in the public sector are ill-prepared for the changing tax status of key workers – and that government support has been inadequate throughout the process.
Of the public sector contractors who were contacted by Recruitment Grapevine website, 80% believed that their own clients did not have the in-house expertise needed to address the changes; 95% of respondents believed that the public sector would suffer as a direct result of the changes to legislation.
A lack of clarity in the run-up to the new system had left recruitment firms and agencies believing they could be liable for the outstanding tax bills of contractors. Instead, clients in the public sector find themselves among those most exposed, with many suggesting that public bodies have been unable to access the necessary information and guidance to make effective decisions. HMRC hopes to generate £400 million in lost revenue through the changes.
Companies whose complete wage bill amounts to more than £3million will be expected to pay a new apprenticeship levy, amounting to 0.5 per cent of their total salary spend.
HMRC expects to raise nearly £3bn per year under the new project, which will provide funding for approved apprenticeship courses. However a survey conducted by Recruiters Manpower found that 63 per cent of employers were unclear as to how the scheme would function, or if they were even liable to pay. Less than one third of firms had calculated how much the levy would cost them.
Gender pay parity
Businesses with more than 250 members of staff will now be required to publish an annual report detailing the pay differences between male and female workers in similar roles. Each report covers hourly pay as well as bonus averages, and will be available to current employees, potential recruits, and the general public via each company’s website, and from a central government database.
The move has been welcomed by politicians of all parties, and is seen as an important step forward by advocates of equality in the workplace.
Rules for migrant workers
Companies employing non-EU migrant workers on tier-2 visas will be required to pay a new immigration skills charge. Currently, the charge is set at £1,000 per employee, with a lower fee set for smaller businesses and nonprofit organisations. PhD level recruits are exempt, as are EU nationals – although there is no clarification on how this could change, post Brexit.
Elsewhere, The British Prime Minister Theresa May confirmed that Britain’s exit from the European Union would require gradual implementation in order to prevent a potential skills gap opening up in the nation’s employment market.
Recruitment experts have identified a number of key areas of the economy – including hospitality and construction – which could face serious labour shortages, should a swift conclusion of negotiations remove migrant workers’ rights with immediate effect. Speaking on behalf of recruitment specialists DR Newitt, managing director Stephanie Newitt said that recruiters within specialist industries would require a transitional period “of five years” to neutralise the potential disruptions to the UK jobs market.
Speaking ahead of a meeting with European council president Donald Tusk, Mrs May expressed the need for an “implementation period” following Britain’s formal exit in 2019. While some supporters of a fast exit were critical of Mrs May’s stance, many within the recruitment sector will welcome the compromise approach.