Recruitment Matters - January 2017 by Redactive Media Group

Issue 45 January 2017

RECRUITMENT MATTERS The View and The Intelligence

The BIg Issue

Legal update and the IRP

Events and Training

Looking ahead to 2017 p2-3

REC Membership in 2017 p4

Tax in 2017 p6-7

IRP Awards results p8

ENDING RISK: REC ANNOUNCES “DRAMATIC” MEMBERSHIP CHANGE The trade association has announced an agreement with HR and workplace expert Croner to give REC members access to legal expenses insurance as part of their membership. From 1 January 2017, recruitment firms with a turnover of up to £10m will automatically receive Croner Legal Expenses Insurance as part of membership. This means that 97% of REC members stand to benefit from the partnership. REC members with turnover of more than £10 million will be able to access the insurance with a minimum 25% discount.

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As part of the deal, REC members will receive legal cover for employment disputes, legal defence, tax protection, property protection and personal injury. REC members will also gain access to Croner’s Tax, VAT and Health & Safety Helplines, a business diagnostics tool, and a salary benchmarking tool, plus discounts on a range of other Croner products and services. Large agencies within REC membership will save £18,000 per annum as part of the new deal. Medium-sized businesses can expect a saving of £11,000,

and small agencies will gain £6,000 a year. REC chief executive Kevin Green says the offer “dramatically improves” REC membership. “Even a regulated business can find itself faced with the worry and expense of a tribunal case, tax enquiry or legal dispute. Now, REC members will have a safety net,” he says. “Croner are experts at helping companies reduce risk, save time and control costs, giving you time to focus on the big picture. We’re delighted to offer this to REC members, who will benefit enormously.” Croner Group CEO Alan

Price says the agreement is an exciting step for REC members. “We are delighted to be partnering with such a wellrespected and professional organisation as the REC. The REC has long been a driving force championing the needs of the recruitment industry, whilst Croner has led the way in the field of employment law. The combination of these two organisations makes for an exciting partnership,” he says. “One of the REC’s goals is to ensure that employers reach the best talent and get the right people to help their businesses grow. “At Croner, with more than 70 years of experience in the field of employment law, we know only too well the cost of recruiting and retaining employees. “This partnership is one that will enable the REC’s members to access a range of Croner’s services at a significantly preferential rate. We look forward to developing this relationship for many years to come.” Recruitment Matters takes a closer look at the new Croner offering on pages 4-5.

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Leading the Industry

THE VIEW

We have our eye on social mobility, says Tom Hadley, REC director of policy and professional services

The resilient recruitment industry will be ready for a tough 2017, says Kevin Green

As 2016 ends, we can look back at an eventful year. Who would have predicted Leicester City winning the Premier League, the UK Voting to leave the EU and then Trump winning the US presidential election? These were such long odds that a £5 bet a year ago would have netted you £12 million! This just goes to show we are living in interesting times. For the recruitment industry, it’s been a tough year. The market has continued to grow but at a slower pace and candidate availability has been a huge issue as skills and talent shortages bite in many sectors. The impact of the EU referendum in June certainly slowed permanent hiring as clients got very twitchy and delayed hiring decisions. The good news is that since September the jobs market has responded positively with continued jobs growth and falling unemployment. We’ve also had a lot of government intervention this year: the planned introduction of the apprenticeship levy, changes to IR35 in the public sector, caps in the healthcare sector and introduction of the National Living Wage. As we look forward to 2017, it’s clear that as an industry we need to influence the political environment in which we operate. The Government

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MOVING FORWARD

has asked Matthew Taylor CEO of the Royal Society for the encouragement of Arts, Manufactures and Commerce to lead a review into the employment landscape in light of increasing gig working. This will include a review of employment practices and regulation in our sector. What this means is that the REC is more important than ever before. We will fight hard on behalf of the industry while also making sure we have our own house in order. What we need members to do is make sure they pass the online Compliance Test before the end of the year, promote the Good recruitment campaign to your clients and use the Jobs transforms Lives toolkit to talk up the value of the industry. Recruiters will respond to the challenges ahead. We are resourceful, agile and resilient. So while next year may be the toughest for some time, we will thrive because what we do matters to businesses and individuals. I will be touring the UK again next year so why not follow me on Twitter @ kevingreenrec for news of when I am in your city. I am keen to hear members’ views. My email is Kevin.green@rec.uk. com or via twitter @kevingreenrec

Recent discussions with ministers and shadow ministers confirmed that social mobility, skills and industrial strategy will remain hot topics over the coming year. We will position our industry’s voice at the forefront of these debates in 2017 and work with policy makers to build the best jobs market in the world in the UK in the post-EU era. Speaking at the recent CBI conference, the Prime Minister reiterated the government’s commitment to “developing a modern industrial strategy that will back Britain’s strategic strengths”. Whilst this may well drive growth in sectors such as advanced engineering, life sciences, creative industries and professional services (good news for specialist recruiters), the challenge is to ensure that new initiatives are underpinned by a skills strategy and a progressive immigration policy. Our regular data and feedback from REC members will ensure that we feed into this. On the inclusion agenda, one specific priority for government is to help a million people with disabilities into work. We hosted the launch of the Disability Confident scheme here at REC HQ and it was encouraging to hear the Minister Penny Mordaunt recognise the role REC members can play in making this happen. We will build on this in 2017 by encouraging members to sign up to Disability Confident. Jobs transform lives; nowhere is this more salient than in providing more opportunities to under-represented groups. The recent ‘State of the Nation’ report by the Social Mobility Commission showed that only one in eight children from lowincome backgrounds is likely to become a high-income earner as an adult. Alan Milburn, Chair of the Commission, underlined “the growing sense that we have become an ‘us and them’ society”. Political developments in the UK and the US have shone the light on how this feeling of being left behind can be reflected at the ballot box. With inclusion, progression and aspiration identified as key priorities, there are huge opportunities to showcase the role of our industry in helping people get a job, then get a better job. There are too many operational and external challenges for 2017 to be seen as heavenly for most recruiters. However, we’ll be knocking on the door when it comes to championing our industry’s contribution to the economy, labour market and wider society.

You can follow Tom on Twitterr @hadleyscomment ment

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1.4%

THE INTELLIGENCE

The only thing that we can say with any certainty about 2017 is that it will be an interesting year. By end of March 2017, the Prime Minister is scheduled to trigger Article 50, to kick start the negotiating process for the UK to exit the European Union. How this will impact on economic conditions in the UK and more specifically on the recruitment industry is less certain. Economic forecasters suggest that there will be a slowdown in the economy but not a recession. In November 2016 the Office for Budget Responsibility forecast that the economy will grow by 1.4% in 2017, due to lower investment, weaker consumer demand and higher inflation. Other

STAFF COSTS PEAK AS REVENUES AND NFI CONTINUE TO DECLINE The latest information from the RIB Index, sponsored by Bluestones Group, shows that the median RIB member had, by the end of Q3 2016, experienced four consecutive quarters of negative year-onyear turnover growth (Figure 1). Had legislation governing the use of travel & subsistence costs, which saw many umbrella employees return to agency payrolls, not changed in April 2016, this decline would undoubtedly have

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forecasts include the Bank of England forecast of 1.4%, and the European Commission and the Organisation for Economic Cooperation and Development (OECD) forecast of 1% growth. The forecasts above have been revised downwards to take account of the political and economic uncertainty of the negotiation process next year. Nonetheless, next year is likely to be followed by a period of growth in 2016, with the GDP performance exceeding expectations for the third quarter of 2016. The Bank of England expects that the annual GDP growth rate will come in at 2.2% for 2016. In terms of the recruitment industry, the REC forecasts continued growth, with the expectation that the value of the industry will grow between 3.25% and 7.75% in 2016 and between 2.7 and 6.7% in 2017.

THE OFFICE FOR BUDGET RESPONSIBILITY FORECAST THAT THE ECONOMY WILL GROW BY 1.4% IN 2017, DUE TO LOWER INVESTMENT, WEAKER CONSUMER DEMAND AND HIGHER INFLATION.

THE REC FORECASTS CONTINUED GROWTH, WITH THE EXPECTATION THAT THE VALUE OF THE INDUSTRY WILL GROW BETWEEN

A number of assumptions inform our forecast for the industry. Much like the wider economy, forecasts for 2017 suggest a slowing of the labour market. The PWC forecast that employment growth will fall from 0.9% in 2016 to 0.5% in 2017. Independent forecasters in the Treasury report, published in November 2016, on average, predict that the unemployment rate will edge up to 5.3% in November 2017 from 5% in November this year. There are some downside risks that are a result of muted wage growth, which, in part, stems from stalling productivity and business investment.

IN 2017

Figure 1: Recruiter turnover versus last year (%) – quarterly average 40

3.25% 7.75% 2.7% 6.7% AND IN 2016 AND BETWEEN AND

■ Upper Qtile ■ Median ■ Low Qtile

30 20 10

WITH REC SENIOR RESEARCHER, NINA MGUNI-JONES

7.3%

In November, the Office for Budget Responsibility forecast average earnings growth at 2.4% for 2017, which is marginally higher than the 2016 earnings growth of 2.2%. However, with inflation forecast to hit 2.3%, real wage growth will be nominal. Our data suggests that hiring intentions for the next 4 to 12 months remains steady. In JobsOutlook, 26% of employers plan to increase the number of permanent staff. Therefore, as we head towards 2017, the only thing we can forecast with some certainty is uncertainty. spiked in Q3, to a level that was 9.1 percentage points higher than in the same period last year. For the lower RIB quartile, they have now been making an operating loss for four consecutive quarters.

-2.79% -2.9%

-10

-5%

-5.9% -14%

-20 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016

been more severe. Of greater importance was the performance of the underlying net fee income (NFI). For the median RIB recruiter, NFI moved into negative territory (versus last year) in February 2016 and has remained there since. As a consequence, it had experienced three consecutive quarters of

lower NFI than prior year by the end of Q3 2016. With all bar the lower quartile of RIB recruiters increasing headcount in 2015, the pace slowed in H1 2016 and finally, in Q3 2016 reached -0.2% against prior year numbers. There appears to be more work to do, however, as total employee costs, as a percentage of NFI,

Belinda Johnson runs employment research consultancy, Worklab, and is associate knowledge & insight director of Recruitment Industry Benchmarking (RIB) - part of the Bluestones Group. The RIB Index provides bespoke confidential reports on industry benchmarks and trends. See www.ribindex.com; info@ribindex.com: 020 8544 9807. The RIB is a strategic partner of the REC.

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THE BIG ISSUE

MEMBERSHIP 2017 Being a member of the REC means knowing your business needs are being met every day. The REC’s 2017 membership offering is the most exciting and comprehensive ever produced, thanks to its new strategic alliance with leading business provider Croner. REC members will have access to Croner’s world-class suite of business tools and services, including Croner Legal Expenses Insurance. It meets the cost of expensive disputes giving you time and energy to focus on the big picture.

NEW FOR 2017: INCLUDED IN YOUR MEMBERSHIP LEGAL EXPENSES INSURANCE Even a regulated business can face the worry and potential expense of a tribunal case, tax enquiry or legal dispute. Croner Legal Expenses Insurance is the ultimate safety net. It saves your business money by managing your risk, giving you peace of mind. What does legal expenses insurance cover? Disputes The cost of dealing with employment disputes can paralyse any business. Croner Legal Expenses Insurance ensures your interests are protected when facing: • Employment disputes, both costs and expenses • Employee civil legal defence costs • Compensation awards • Investigation and disciplinary hearings • Representation costs and expenses

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ENDING YOUR RISK REC membership will be the most comprehensive ever offered. Recruitment Matters editor Michael Oliver takes a look at the new offering and finds out what REC members will enjoy as part of membership in 2017 Legal defence Your business and employees can rest easy knowing they will benefit from Croner legal cover, including: • Criminal pre-proceedings • Criminal prosecution defence • Data protection and information • Commissioner requests • Wrongful arrest • Statutory notice appeals • Jury service and court attendance

• Property protection • Personal injury All REC members with turnover up to £10 million will receive Croner’s Legal Expenses Insurance offering. Members with turnovers of £10 million-£100 million+ can access Legal Expenses Insurance at preferential rates.

Tax protection Tax investigations can be lengthy and cumbersome. Croner Legal Expenses Insurance protects you by covering: • Tax enquiries • Employer compliance disputes • VAT disputes

I-PORTALS – BUSINESS ESSENTIALS, HR & HEALTH & SAFETY Croner’s i-portals offer access to a vast resource of materials and advice on every aspect of managing a business, including every aspect of health & safety, HR and employment law not covered via the existing REC legal services. REC members can access Croner’s i-portals through their Membership Hub.

Other coverage Croner Legal Expenses Insurance manages risk, ensuring your business never misses a beat: • Statutory licence appeals • Contract disputes

Additional advice helplines The REC’s legal helpline is your first point of call for any employment law issue. It will be made more robust in 2017 with the addition of three new helplines from Croner.

Croner’s team of tax, HR and employment experts will be able to provide specialist advice, free for all REC members. Settlements & forecast All recruitment businesses need a complete understanding of pay settlements and forecasts to plan ahead. REC members will be able to access Croner’s monthly settlements & forecasts report through the new Croner i-portal. It provides updates on pay trends across a number of sectors and regions. SalarySearch Salaries and benefits are the heart of any recruitment conversation. Croner SalarySearch has up-to-date data on thousands of different job roles nationwide. REC members can access Croner SalarySearch for free through the Croner i-portal. Business health and strategy tool The REC’s free online business diagnostic is a simple, online tool, which allows REC

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members to assess where their business might need support. PAID-FOR PRODUCTS REC members will receive discounts on the following Croner paid-for products:

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Croner OnSite One of Cronerâ&#x20AC;&#x2122;s legal experts will visit your business and help resolve any conflicts and disputes. Croner SafeCheck Get peace of mind that your business is fully compliant with

the latest health and safety requirements. Online job evaluation tool The perfect tool for clients looking to build the right job specifications, benchmarked across a variety of industries. Market rate report

An independent review of roles, provides information on quartile pay ranges and typical benefits packages. To renew your REC membership for 2017, visit

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Legal update

2017 Status for employment and tax purposes - what can we expect for 2017? By Lewina Farrell, solicitor and head of professional services For a couple of years there has been a lot of media attention on the changing nature of work – including the use of zero hours contracts and how temporary workers are treated, both by agencies and their end user clients. This has really ramped up in recent weeks and months. The BEIS Select Committee has looked at Sports Direct’s operations both in its stores and warehouses and may now look also at Amazon and others. The Government has also announced a review by Matthew Taylor into employment status. Meanwhile, in October 2016, three Uber drivers won their employment tribunal claim to be recognised as workers for the purposes of national minimum wage, holiday pay and whistleblowing protection – Uber has said it will appeal the decision. Deliveroo faces similar claims as does Addision Lee. Separately HMRC is looking into Hermes and how it engages its drivers – the result

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will determine whether they are workers for tax purposes. If they are, then Hermes (or any employment businesses they use) could face huge retrospective bills for employers’ national insurance contributions whilst the individuals themselves could face bills for PAYE tax and employee national insurance contributions. At the time of writing there are calls for HMRC to look into alleged tax avoidance by employment businesses when supplying temps. In some instances it can be clear whether someone is a worker for tax and employment rights purposes. It may also be equally clear when they are not and are genuinely self-employed. However, for other temporary workers it can be less clear cut and requires weighing up a range of factors – such as whether they take a financial risk in running their own business, number of clients, whether they work

under supervision, direction or control. Employment and tax status is relevant for recruitment businesses because it determines: • What employment rights those individuals are entitled to (or not) – workers are entitled to national minimum wage, holiday pay and rest periods, and statutory pay such as sick pay, maternity pay and pensions auto-enrolment (subject to meeting the relevant criteria). “Agency workers” are entitled to equal treatment under the Agency Workers Regulations 2010. Employees have additional rights such as to maternity leave, protection from unfair dismissal and redundancy pay (subject to a 2-year service requirement) and protection under TUPE. Genuinely self-employed persons are not entitled to any of these; • Whether the employment business should be deducting PAYE tax and NICs, and

paying employers’ NICs (or whether an intermediary the employment business has engaged with should make these deductions/ payments); • What contracts should they engage temps on, particularly if engaging them through an intermediary such as an umbrella company or a personal services company. Recruitment businesses will have to give these issues even more thought from April 2017 when supplying to the public sector, when changes to IR35 are expected to come into effect. In brief, these changes will require employment businesses to assess IR35 status for temps working through personal service companies (it is currently the responsibility of the PSC). If inside IR35, the employment business will have to deduct PAYE and NICs, and pay employers NICs. REC Legal will keep members updated on all of these developments.

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Inspiration

BEHIND THE SCENES AT THE INSTITUTE OF RECRUITMENT PROFESSIONALS

The View

Lisa Starkey is a principal consultant at MVP Supply Chain n Recruitment

Q&A How did you get into recruitment? By accident! I registered with People First, a specialist agency in the City in London, after relocating from the Midlands. They asked me in for a registration interview and, at the end of that, asked if I’d be interested in working for them. Two further meetings later, they offered me a position, and I accepted. What do you love about the job? Every day is different, plus you’re in charge of your own destiny, to a large extent. There’s also the very real bonus of helping people find a new role and make a huge difference to their life. This is especially satisfying when you place someone into a role they love and in which they thrive, despite it being one they wouldn’t have considered themselves. Would you recommend that job seekers consider recruitment a career of choice? Definitely. It’s not a career that was highlighted or promoted when I was at school, and most of my colleagues and other people I know in recruitment got there by accident. I think more should be done to promote what is a rewarding and challenging career option. There are more and more recruitment apprentice schemes being developed now so, hopefully, this will make the sector more appealing as a career choice for young people at the start of their working life. Given your time again would you do anything differently from when you started out? I’ve given this question a lot of thought and, genuinely, I don’t think I would. I was really lucky to start my career with People First, who provided me with great training and the opportunity to get qualified via the REC. All of this gave me confidence in my ability to recruit, through the combination of practical work and best practice standards and processes.

Adrian McGennis s is the CEO of Ireland’s Sigmar Recruitment Group up

WHAT I KNOW Your team needs to believe in what you’re doing People talk about purpose and purpose within an initiative. It even gives the individual some deal of satisfaction. You’ve got to do it in a very real way. Overseas can be tricky, but being at home helps We’ve had a lot of sojourns overseas, including opening in Prague, Warsaw, Sofia and Singapore with mixed experiences. We were really conscious of the cultural transition and know that’s important for getting there. We’re servicing clients from Ireland. Even though it’s more expensive, we have that visibility, we have that control and that culture. Have the right people If the temp side of your business is substantial, your back office needs to be rock solid. You’ve got to over anticipate to grow and know it’s going to be squeaky. Getting in a good financial director is important too, depending on your scale. Know your tech Our SEO is really good, our utilisation of technology is really good. The training we give people to use social media provides them with the tools they need to do a good job. I think the first two hours in a new business is vital. It’s vital for you to get them into your mentality in the early stages. I think we’re the only company in the world with the stated goal of getting 100% in being social media black belts. If the training culture is there, it’s not too difficult to maintain, because we know we’re going to make the investment over time. You can listen to the full podcast with Adrian at www. rec.uk.com/scaleuppodcast

To keep up to date with everything the Institute of Recruitment Professionals is doing, please visit www.rec-irp.uk.com

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Events and training

AWARDS

IRP AWARDS RESULTS 2016

JOBS TRANSFORM LIVES: FINDING LOVE AND CAREER SUCCESS THANKS TO WOODLAND

It was another great IRP Awards ceremony. Congratulations to all winners and those shortlisted.

Woodland Consultancy Services uses the REC’s client and candidate attraction toolkit to talk about how they transformed a candidate’s life. Scottish national Lewis Wilson’s salary went up stratospherically since Woodland began working with him in early 2002, having found him positions matching his requirements over a period of 7 years. Woodland has more than 30 years of experience in placing quality candidates in their perfect role and transforming their lives. We got in touch with Lewis shortly after he visited our website to explore the new opportunities available to him. After some bespoke career advice on what direction Lewis’ career should go according to his experience and needs, namely fast career progression, we got him the jobs he deserved. The last salary we negotiated for him was substantially higher than what he was earning initially as a result of a string of promotions. Lewis says: “The wonderful staff at Woodland looked at my previous experience and catered it towards positions that were the perfect fit for me. One of the roles was in Paris, where I met my wife. I am now living in Paris permanently and I can say working with Woodland was my best career decision to date!” At Woodland we understood how guiding Lewis towards the right jobs would have a positive impact on his life. We last worked with Lewis in 2009, where he left us to become self-employed, for even further financial gain to him. • This case study originally appeared on Woodland Consultancy Services’ website (www.woodland.co.uk/ blog/jobs-transform-lives-71.htm).