2017 review of the UK recruitment sector
2017 might not have been quite as eventful as the previous year, where we saw the dramatic world changes of the UK voting for Brexit and the US voting for Donald Trump but it’s still been an extremely busy and ever-shifting period for the UK recruitment sector.
The announcement of Brexit has had an impact on trade in almost all sectors and although some sectors have reported a boost in trade others are still pondering their fate. There is a air of caution and businesses are very much playing a wait and see game where investment is concerned. Indeed, the Governor of the Bank of England, Mark Carney said last week that the “Brexit effect” is restricting business investment in the economy and while the economy was “growing” it really should be “booming”.
The impact of Brexit was always going to influence the recruitment sector and it has in the form of staff shortages particularly in the public, healthcare, hospitality and leisure sectors, who historically rely heavily on foreign workers. This week, The Recruitment and Employment Confederation stated that its monthly survey revealed that starting salaries grew in October at the second quickest rate since November 2015 as employers in Britain are forced to increase their pay offers in order to hire new staff and counter an increasing shortage of workers from the European Union ahead of Brexit. “We already know that EU workers are leaving because of the uncertainties they are facing right now,” said Kevin Green, the REC chief executive. “We therefore need clarity around what future immigration systems will look like. Otherwise, the situation will get worse and employers will face even more staff shortages.”
Falling unemployment has been a recurrent theme throughout the year. Indeed many leading economics believe that the UK is at, or very close to, full employment. This has led to greater fears over a shortage of active job seekers resulting in more competition for talent and more companies pulling out all stops to retain their existing talent.
Brexit has not been the only challenge facing the public sector in their struggle to attract staff this year. The new IR35 rules that came into force on 6th April has seen some contractors turn their backs on working within the public sector or has led to demands for pay increases.
A recent report₁ by leading website ContractorCalculator and the Independent Health Professionals Association highlights that the NHS is failing to replace contract workers who have been forced out of the sector due to IR35, indeed the report showed:
- 25% of respondents have left the NHS following the IR35 reforms
- 60% were deemed ‘inside IR35’ after the NHS applied unlawful blanket assessments
- 72% are considering changing career entirely as a result of IR35 changes
- 87% say the reforms are already drastically impeding patient care.
The changes have also impacted recruiters according to the latest research from The Association of Professional Staffing Companies (APSCo)₂ who surveyed 1,494 professional recruitment firms.
Key findings of the report include:
- 70% of recruiters say contract placements in the public sector have dropped
- 45% report charge rates for contractors working in the public sector are increasing
- 78% believe extending rules to the private sector will impact UK economy’s ability to source flexible labour
Although HMRC has issued an online ‘tool’ to help, recruitment agencies are rarely experts in finely balanced questions of tax status. As the buck now stops with them, many have been adopting a cautious approach and are automatically placing assignments inside the reform changes.
The likes of Hays and Parity have each said that the reforms have adversely affected their financial performance and Harvey Nash has described the reforms as having caused “disruption”.
One thing is for certain the IR35 reforms have permanently changed public sector contracting and recruitment.
April saw the introduction of the Apprenticeship Levy which imposes a 0.5% levy on the pay bills of all businesses with payrolls in excess of £3 million. Although no one can doubt the scheme is well intentioned, many feel that the recruitment sector has been unfairly disadvantaged. As it is worked out on payroll, it leaves agencies who supply temporary staff defined as the employer rather than the end client. Indeed Ann Swain, Chief Executive of The Association of Professional Staffing Companies (APSCo) has gone as far to say “It is in effect a tax on the recruitment business model.”
The changes to how recruitment agencies handle data planned for next year are big and have seen most agencies reviewing and updating their data handling and protection policies this year. The European Union’s General Data Protection Regulation (GDPR) will influence how every agency collects, handles and keeps candidate data in the biggest shake-up of online privacy regulations ever and compulsory obligations for a recruitment agency will be obtaining explicit consent for every single usage of personal data.
2017 has certainly been a busy and challenging year for the recruitment sector and 2018 certainly looks as if it is going to be just the same. No one knows what the next few months will bring, uncertainties due to Brexit are sure to weigh on companies’ investment and hiring decisions. Challenges related to an inadequate supply of skilled labour look to remain as pronounced as ever. One thing, however, we can be certain of is the need for more clarity around trade, immigration and residency before anything can change for the better.