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  • so welcome to you all On the second of our bite sized webinar Siri's covering I are 35.

  • Over the next 20 minutes, we'll be discussing how it was set your level of risk around.

  • I are 35 rolling into the private sector.

  • However, we will also hired a potential opportunity that this change will create for you.

  • The final 10 minutes off the time allotted will be allocated to Q and A.

  • Please ask questions via the Q and A books now or as we go through the presentation.

  • So start with introductions.

  • My name's Jeff.

  • Force it.

  • I look after corporate engagement for Hayes in UK, an island, and most of my time involves advising clients on contingent workforce solutions on permanent recruitment solutions.

  • As such, given the noise and challenge around I'll 35 I probably spent half my time on this subject area but also like to introduce Chris Dung, Chris's director in our recruitment outsourcing business.

  • Hey, Town Solutions And Chris has gained strong insight into 2017 impact of I R.

  • 35 into our significant public sector client base, and he spent the last six months with private sector customers across the UK assessing their level of risk and starting them with plans for changes.

  • Chris is a 20 year career in recruitment, and prior to that was actually in the Foreign Legion, so I tend to listen to him.

  • So what have we got for you today?

  • We're gonna start with a quick recap on I.

  • R 35 broadly covering where the risk actually sits.

  • And then Chris will take you through the potential level of risk, an impact on what you should consider to address this.

  • And we will then close with Q and A so which will stop overview for those of you have been briefed on the story so far.

  • So the Inland Revenue Act far now Hmm, I see was actually launched in 2000 so it's quite old.

  • Fundamentally, it's legislation designed it Tackling tax avoidance by interposing a limited company, or PSC, or personal service company, to mask what the HMRC regard is.

  • An employee employer relationship to the Iast five has existed for a long time.

  • But the onus was put on the individual, not the organization, to determine if they fall in or out of scope of I 35 so to date or pride to 2017.

  • The HMRC has a very poor track record of challenging those hundreds of thousands of individuals on dhe their subsequent determinations.

  • They see the big change occurred in April 2017 Uh, when the onus, when the onus off these legs off the decision for public sector organization became theirs.

  • HMRC also stated that they would introduce deter forms in the private sector soon after they didn't actually occur in 2018 but our view of that will be that will occur shortly.

  • We can now actually see the HMRC orders in public sector organizations to test how they have addressed higher 35 to assess the accuracy off the determinations.

  • So where were we up to now?

  • Because there was a consultation or has been a consultation ongoing covering the private sector rollout which actually closed on the tent of August of this to this Friday.

  • So the big question now is, when does it go life on?

  • What does it look like on our best assumption currently is that we'll go live into the private sector in April 2019 and is likely to broadly similar to the changes in the public sector.

  • So our key message to our customers to really get onto this now address it now, once you've understood it and try and try and then see see, this is a positive change to get better return from your normal work.

  • So who has the risk?

  • According to the HMRC, I think there's lots of misconceptions under this subject.

  • So this slide tried to simplify the before and after April 2017 in the public sector.

  • What we can see now in the public sector and like you too soon have in the private sector is that the organization need to make the determination with a quote reasonable kay and then passed the responsibility to the feet payer to ensure that the taxes paid full in the appropriate manner.

  • Now have you across to Chris?

  • Thanks Jeff, on delight to be sharing our insight today on understanding your levels of risk around.

  • I are 35.

  • Today's session will definitely help you firstly understand and assess what is the rich around?

  • I are 35.

  • Secondly, give you an idea how you go about gauging the level of risk within your organization and finally wants to restore identified what the next steps to actually deal with mitigate those risks.

  • So it might be useful to look at the I.

  • R 35 risk topic and as three work streams.

  • The first thing, the communications strategy and in particular, who needs to be engaged.

  • What needs to be known on how's it showed internally way certainly recommend See sweet engagement as early as possible to ensure Exco buying from the off.

  • But it's also really important to establish What are the key objectives around dealing with the i.

  • R.

  • 35 risk.

  • It's not just the financial impact that need to be assessed.

  • Brand's reputation and serves delivery also need to be considered as well as the safeguarding of the continued access.

  • The best talent, the second work stream is the risk assessment itself.

  • Really understanding the context of the I R 35?

  • Risk the backdrop where it's coming from, as well as identifying, analyzing and evaluating the risks themselves.

  • And once we have those areas covered off, we can look at what to do to mitigate the risks ahead.

  • Finally, what can we do to manage this challenge?

  • Moving forward?

  • This needs resource.

  • It needs time as well as the commitment to manage this on an ongoing basis, whether that's done by the relevant stakeholders within the organization or outsourced to a trusted third party based on our own experience with hundreds of public sector bodies, it's far too important to get wrong and really should be treated as something to be managed, not managed off the side of the desk.

  • We advise.

  • Get to grips with this as early as possible.

  • Let's establish a context first and foremost, the market itself.

  • Over the last couple of years, there has been an increase in the number of freelancers, temps, contractors, interims and consultants otherwise known as contingent workers for the non perm workforce.

  • The Office of National Statistics Figures signs 4.8 million self employed workers in June 2017 on indicated that with the gig economy growing, this is only set to increase.

  • And why is this?

  • Because organizations are gaining significant business benefit from this model, it allows them to be more flexible, innovative and agile, as well as giving them competitive edge.

  • One of the big ideas behind the use of the external work force.

  • It saves money Cos money given them the flexibility to scale the workforce up and down, dependent on demand and reduce overhead in the process.

  • There are lots of benefits, but how contingent workers are engaged, managed and measured on a day to day basis moving forward might mean the difference between turning a profit or loss.

  • One thing is for certain, it's HMRC stated, intent to continue this approach and increase revenue stream they've created from the public sector.

  • So it's our view at present that the rules will be the same very similar to those introduced the public sector last year.

  • From an organization perspective, managing Managing a contingent workforce has never been more challenging or complicated.

  • But the key objective around mitigating I I r.

  • 35 risk that any stake, all that tasked with this must be to limit any financial reputation or brand or service delivery impact on at the same time, ensure those channels allowing access to the best talent remain open and accessible.

  • Each and every organization is different with diverse ways of engaging the non perp workforce.

  • But what is also okay in terms of managing the risk is happy.

  • The visibility Is there a robust process to engage and manage those workers in a compliant way.

  • Is it part and parcel of the HR policies and procedures?

  • Is there a communication strategy already in place?

  • Outlining what the I.

  • R.

  • 35 strategies in answers to these questions will give you an indication to your organization's readiness to the risk of I.

  • R.

  • I think it's also important to realize that I are 35 is not just another layer of legislation to the already challenging and complex job of managing the non perm workforce.

  • It actually amplified each and every one of the most common risk and challenges that an organization faces when engaging contractors and freelancers.

  • Some of these on this slide will may already resonate with you, but as an example, let's look at the challenge of control when there is no central hiring mechanism in an organization, the outcome is generally a lack of control on visibility over the contingent workforce of state.

  • Typically, there is no overarching management information, so clarity around how many on or off site workers there are.

  • Pay charge 10 years.

  • Who's supplying who, et cetera is uncertain.

  • This leads to inefficiencies, poor compliance, higher workforce costs on poor decision making based on incorrect assumptions as to the true makeup of the organization's workforce and not having this clarity when HMRC come knocking at the door with their I R 35 audit asking how many contingent workers have you engaged last June last year to present day?

  • If you're trying to capture that data reactively, it will only make the job running a contingent.

  • Workers state harder and potentially more cost costly.

  • We are all familiar with the old management average.

  • You can't improve what you can't measure, and the arrival of the I R 35 changes will necessitate a new approach for not only engaging and managing, but also for monitoring and measuring the contingent workforce.

  • The I R 35 changes will be another layer of compliance, that's for sure.

  • But any solution needs to be baked into the organization's processes, insight, systems, its culture and, of course, its people.

  • Hopefully, this has given you a broader insight into the context of the I R 35 risk and how that rich can manifest itself.

  • Now we understand the context of background.

  • We need to start identifying where the risk actually lies.

  • What is the scale of the problem.

  • And, of course, it's down to the number one question.

  • How many contingent workers are in your organization?

  • How are they getting paid?

  • How much are they engaged contractually as a sole trader, a limited company or viral consultancy?

  • Are you paying workers invoices directly?

  • What processes do you have in place to capture this information being captured?

  • How accurate is it?

  • It's also very important to remember what the workers on hiring managers are doing from a behavioral perspective.

  • Remember, it's the behavior.

  • Expect that aspect that HMRC is focusing on as much as the contractual relationship worker has with the engaging organization again.

  • Answering these questions will give you an idea of your state of readiness.

  • And, of course, we can assist with this discovery phase.

  • We have done already with money public, high profile public sector bodies talking of the public sector.

  • It might be useful at this point to share some of the insight to the public sector reaction to the I R.

  • 35 changes brought in last year.

  • A survey was conducted by contract the calculator to assess the impact six months after the introduction of the changes.

  • It reveals the scale of the impact, but it also gives us some very useful valuable inside.

  • It's important to remember that the public sector had a very short window of time to plan for this, It was announced in November 2016 and implemented in April 2017 was typically a lack of inhouse expertise on a shortage of results to deal with the problem.

  • I, like many organizations who was a typical apathy resistance to change a new ways of working which this type of reform brings in.

  • The introduction has significant impact on the contingent workforce in every organization.

  • It delayed on council projects, increased costs from a statutory employment and rate increases.

  • The contractors were common.

  • Some of the key metrics to pull out include over 3/4 of public sector client Department's lost highly skilled contractors.

  • Over 70% of projects with delayed or cancelled.

  • Nearly 50% of contractors would only work back in the public fact that it's the hiring organization effective, he paid.

  • The extra time from this is not from this insight.

  • We suggest that these consequences can be mitigated number one by engaging the problem.

  • Early number start Building in House knowledge on the subject of I 35 managed this finally manage this project as it ongoing uh, ongoing issue.

  • That survey, an insight, was useful as we can start to analyze and evaluate the commercial impact, poorly managed, the state and the consequences of it not being ready when I are 35 comes in.

  • We know that the people of the heart and the most important asset to our organization, also one of the largest overhead any variances in that people costs can have a real impact on bottom line profitability.

  • People costs typically make up 50% of the organization's overhead contingent.

  • Workers make up anything from 15 to 44% of workforce spends.

  • But it's also important to remember that that cost actually sits on top of any permanent employment costs and is rarely included in in the balance sheet.

  • As a contingent work cost line.

  • Finally, contingent workers typically more expensive than the permanent staff, So let's run through the figures.

  • Let's run through the figures on given example of an organization we recently worked with.

  • This youth organization has £150 million around 750 employees and the letters around £30 million with profit.

  • 15% of the workforce is contingent, so around 100 or so workers on £15 million a year is spent on those workers.

  • Increased costs of engaging contingent workers placed on the public sector experience resulted in between 20 to 40% rise.

  • That's a potential three in this case, a potential 3 to 6 million increased costs.

  • These increases are based on elevating Stat ST Cross as well as the increased day rate to offset the tax liability of those indispensable business critical contractors.

  • The organization couldn't afford to lose.

  • The net.

  • Result is it could effectively a road annual UK profits by anything from 10 to 20%.

  • So that's a financial impact.

  • What about other Impact Way?

  • We're talking to a group and a group HRD about nine months ago, and he had the misfortune to walk into his ex co board and announced that they were going to have a 25% up lift on costs because of the I R 35 changes.

  • After science ended, the first questions you got back was, how long have you known about this?

  • And why didn't you tell us sooner.

  • Thankfully, we helped him and managed to get the organization back to a better place.

  • Other impacts might include potential HMRC penalties going back seven years.

  • More and more organizations are using contingent workers to perform business as usual and service delivery functions.

  • Eso no having access to this resort resource could impact day to day operations.

  • The offer old payroll community are some of the most networks around.

  • The public fact that I are 35 Aftermath organizations were being ranked around whether they knew what they were talking about and what was their plan to deal with this.

  • So, consequently, this had a huge impact as to whether people want to be engaged at that organization Or was it an organization to avoid?

  • That is a potential impact on Brandon reputation.

  • And, of course, the cumulative effect of these impact might mean an organization could struggle to attract the best talent or only pay elevated rates for that best talent.

  • So how do we go about dealing with the risk steps I have to start quantifying and qualifying the scale of challenge?

  • It's important to get visibility to understand the basic metrics.

  • How many contingent workers on site.

  • What are there 10 years?

  • How many likely to be imposed first of April next year?

  • These are the ones to prioritize on.

  • Do your current agencies have an understanding of the I R 35 challenge contingent workers, of course, and not the easiest to identify, so ways to identify them quickly includes 18 years of profiles, financial systems, reports, invoices, supply chain reports as well a security data.

  • The second step is to make sure you're fully aware of what the determinants AII those markets that hmrc using to determine where an individual sits on the i.

  • R.

  • 35 scale and is there any fucking, for example, is there any financial risk to that particular worker, or is there any writer substitution?

  • And is that a reality rather than just written on paper on paper?

  • Step three.

  • His review.

  • Existing contingent Worker engagement using the Free I are 35.

  • Health Check Until this will give you clarity on the topics and criteria that HMRC have historically focused on and before review the behaviors of the existing contingent workers on the line managers to ensure that any inside I are 35 behaviors are eliminated finally review each and every contract to ensure the individual is engaged by best practice on the Best Value Channel with at the time and Materials Statement Work.

  • P A y.

  • As you can see, there's a significant word load to get the house in order, and this needs to be viewed as a stand alone project that needs managing monitoring on order, sitting on an ongoing basis.

  • It does require resource time until elements of expertise, but it will significantly increase your organizer readiness to the i R 35 risk.

  • So what do we need next?

  • I are 35 will be now front and center pretty well.

  • Every contingent work in the private sector, her contingent workers working on site.

  • They're going to want to know what strategy will be.

  • Consequently, hiring managers also need to be aware of the plan.

  • We can help you with this taste, of course, but it's vital that your stakeholders understand what is the risk challenge as well as the messaging and approach.

  • Perhaps run it as a project with a sea level sponsor once the planet in place, then work the plan and then it's straight forward to managing monitoring review.

  • Because this has already come into play in the public sector, there will be an expectation that the private sector will get to grips with this far more efficiently and effectively due to the longer lead time on the lessons learned already from the public sector, it's no longer something that's new.

  • There is no off the shelf approach that will work for everyone.

  • It has to be tailored.

  • Everyone will have different levels of risk based around what they're engaging, how they're engaging on their existing internal processes.

  • If there is a lack of results in House, do this and it's definitely worth worth approaching 1/3 party who has the expertise on a veritable verifiable track record in this arena.

  • So finally, would Rocky takeaways for today number one?

  • We absolutely see this as an opportunity rather than the risk it approached and managed effectively.

  • Unless your approach to engage in continue contingent workers moving forward is filtered through the I R 35 lens, then there is a significant risk of being exposed to I 35.

  • Number three hiring managers need to adopt new ways of working around engaging, managing on measuring their contingent workers and training for this needs to be implemented.

  • And then before, don't delay start soon because the question to be asking is not whether this is coming in or not, but rather how you and your organization can take advantage of the I.

  • R 35 opportunity.

  • And on the flip side, if you and the organization don't do something, what could it cost over the next 12 or three years like Thank you for listening.

  • I hope you enjoyed the insight on Please feel three sent through any questions and will endeavor to answer them quickly.

  • Thanks, Chris.

  • Just wait for a couple of questions to come through.

  • So please gotten through on the Q and A books as you see fit.

  • I've got one here.

  • Um, does when it reduced the private sector Well, it's level the playing field between the private and public sector.

  • Um, that fool with the impact, the less of the contracts have no place to turn to.

  • We'll kind of move move elsewhere.

  • Christian.

  • Yeah, that that's the point of being raised in the past.

  • But when you look at the data over the last 12 months, um, half of those that did work in the public sector don't work anywhere else.