UK legislation: Job boards may commit criminal offence

• UK regulatory review 2013-4 re job boards and online exchanges

• Should they be exempted from UK recruitment regulation?

• What regulations will remain?

• Cabinet Office initiative re „barriers to growth“

• Privacy: US Safe Harbor arrangements will be pulled?

• Data ownership: ICO comments re social media and recruitment

• Tax: false self-employment via online exchanges?

The relevant text from the Chancellor’s statement is as follows:

• 1.306 As the next step, Autumn Statement 2013 announces action to prevent employers and employment intermediaries from [disguising] employment as self-employment and thus avoid employment taxes and deny employment rights to their workforce. The government will legislate to prevent employment intermediaries from being able to use contrived contracts to disguise the employment of workers. This will take effect from April 2014 and raise around £400 million each year. 
• 2.129 Employment intermediaries facilitating false self-employment – The government will amend existing legislation to prevent employment intermediaries being used to avoid employment taxes by disguising employment as self employment. The government will consult on strengthening existing legislation to ensure the correct amount of tax and NICs are paid where the worker is, in effect, employed, with effect from April 2014. (Finance Bill 2014) (35)

Barrow pointed out that all staffing companies (and hirers and MSPs and umbrellas) will in the next few months need to factor the following into their plans :

• Sole trader arrangements probably being too risky going forward in most areas of staffing.
• PSC arrangements possibly becoming unviable in the UK unless there is a genuine SOW approach, as is increasingly the case in the US and Germany. This makes PSC contracting far more complex with the relevant contracts becoming akin to software development agreements/project delivery agreements.
• Umbrella schemes not being safe for anyone unless there is genuine employment by the umbrella (including genuine employment between assignments). Many more sophisticated umbrellas have been working towards this for a time and we think one side effect of this will be that a greater and greater proportion of umbrella supplies will be through just 3 to 5 large umbrellas – i.e. there will be massive consolidation in that market (hence recent M&A in that sector recently).
• None of the above being safe for hirers and MSPs unless they can have complete visibility of how much is paid to the end worker and where. Some larger suppliers in lower paid sectors where “naughtiness” has been rife, may in fact choose to bring umbrella arrangements in house to be sure.
• Not least to minimise VAT, there may be increased adoption of direct engagement/margin only supply arrangements in many sectors.
• In many European countries it is illegal for there to be more than one entity in the contractual chain between hirer and worker. Might we even see UK Government interest in that sort of measure?
• Making sure that any new arrangements don’t just deal with tax and NICs risk, but work alongside whatever measures need to be in place to minimise risk under the Pensions Act and AWR, and minimise VAT. Do not adopt new contract models which solve one problem but create another!

And of course from April 2014 all staffing companies and MSPs will need to have in place anyway new procedures to deal with the Offshore Intermediaries legislation.

In summary, Barrow pointed out that the planned UK legislation is broadly drafted and contains some exemptions for publications of jobs. However, job boards are subject to these legal obligations. Breach of UK recruitment regulation is a criminal offence.

See how Osborne Clarke can help.

Kevin Barrow is a partner in Osborne Clarke’s recruitment and resourcing team.  He advises on national and global flexible workforce projects,  including business process, HR and recruitment process outsourcing, as well as business protection, tax and regulatory advice relating to contingent  workers , SOW workers and contract staff., and the use of online exchanges and jobsites

Kevin has advised on global staffing , VMS and MSP projects involving  Allegis, CDI, Yoh, Advantage, Harvey Nash Group plc, Matchtech Group plc, and many other suppliers and users of recruitment and staffing services.

Kevin is an acknowledged expert in the recruitment sector and  digital recruitment and speaks regularly at industry conferences and seminars.  He regularly contributes to international webinars and conferences  for SIA  and is regularly involved in consultations with the UK Government about employment and tax legislation affecting recruitment.