Removal of recruitment consessions to hurt firms

Hundreds of companies across the South West, including banks, insurance firms, healthcare institutions and charities, could be hit by an increased VAT bill if they use temporary staff.

Leading business advisory firm Deloitte has warned that HM Revenue & Customs (HMRC) decision to remove the Staff Hire Concession (SHC) from 1 April next year, will cost businesses in the region millions of pounds in additional VAT.

The SHC currenlty allows employment businesses, specialising in temporary staffing, to supply their employees as temporary workers to clients and only charge VAT on their commission or agency fees. This means that businesses classified as exempt, or non-busines clients such as charities, do not suffer a VAT charge on wage payments.

But Daniel Lyons, partner in the indirect tax team at Deloitte in Bristol, said " This latest change will result in a wide range of businesses in our region facing significant increased costs when using temporary workers.

"It will also have a considerable impact on the flexibility of the labour market as temporary workers will become much more ciostly than permanent employees."

The SHC was introduced in attempt to achieve a level playing field in the emporary worker's market. The Reed case in 1995 established that employement agencies, ie who had no contractual relationship with workers, would need to account for VAT in full, thereby distorting the market.

HMRC's view s that the Conduct Regulations introduced in 2003 required most providers of temporary workers to operate the same business model for the first time, ie contract with workers.

It therefore argues that VAT is legally due on all paymetns collected by these businesses and that there is no distortion in the market. For this reason, the SHC is redundant.

Recruitment Agencies Take the Strain Reveals new REC Research

New research from the Recruitment and Employment Confederation’s (REC) Research Unit has shown agencies are beginning to pick up most of the strain generated by the current uncertainty within the jobs market.

The Key Recruitment Trends 2007 report, which contains the key findings of last year’s monthly tracking research, identified the fact that agencies were acting as “shock absorbers” in providing the labour market with flexibility during the present economic period.

Overall, the review results showed 2007 was another strong year for the recruitment industry with most indicators of satisfaction, performance and efficiency generally ahead of those recorded in 2006.

However, towards the end of the review period, significant changes in some of the data recorded signified a possible slowdown after a sustained period of economic growth.

Roger Tweedy, the REC’s Head of Research, said of the findings: “With the Unit’s tracking surveys in place, commentators and analysts will be able to monitor closely how the ‘agency model’ works to support the economy during a period of uncertainty.

He added that at this crucial time when agencies will be playing a critical role in economic progress, policy-makers and legislators should think very carefully before adding any extra pressures on agencies when they may already be starting to feel the “commercial heat.”

Key trends identified in the 2007 review include:

• Employers continuing to use the same average number of agencies (2.5) as in 2006 although usage increased slightly towards the year’s end
• Employers were less likely to “always use” an agency than they were in 2006, which was the case across most sectors and regions, especially among SMEs. Again there were signs of this trend reversing towards the end of the year
• During 2007, employers across most sectors increased the use of temporary agency workers as a proportion of their overall workforce
• Employers in most sectors were significantly more satisfied with their main agency in 2007 – a 20 point increase - compared to the previous year
• The number of workers registered with agencies increased over the period while the number on assignment per branch remained broadly static
• The number of workers registered with an agency varied considerably by sector and region
• Agency workers generally found it easier to find work except in London
• Agency workers’ satisfaction increased across all sectors and regions

The Key Recruitment Trends 2007 report isn’t out yet but will be published this month. For more information contact Maggie Pattinson or click here to visit their website.

Recruitment Leads the Online Market

In a survey released by the Internet Advertising Bureau the Recruitment sector lead the market in 2007.

The breakdown of industry categories revealed that the Recruitment sector continued to lead the market with 25.7% market share, up 0.9 points on the second half of 2006. Second was Automotive with 11.9%, while Technology (10.4%) overtook Finance (10%) for the first time to take third place.

Other areas of growth were Retail which increased by 1.7 points to 5%, as a result of a healthy e-commerce sector; with Consumer Goods (including FMCG) increasing to 5.3%, while Property climbed the ladder to break into the top five with a market share of 7.9%.

To view the full report from the Internet Advertising Bureau (IAB) click here.