George Osborne Warned That Rushed Plans Could Damage Labour Market Flexibility

New proposed restrictions on self-employment from HMRC risk damaging job creation and economic growth, according to the Recruitment and Employment Confederation (REC) and PCG, the membership organisation for freelancers. In a letter to George Osborne ahead of next week’s Budget the REC and PCG warn the chancellor that the plans will remove self-employment as an option for anybody sourcing work via an employment agency from 6th April. The business bodies also caution that the changes will:

• Create rigidity in the labour market
• Increase the cost to employers of accessing flexible labour by as much as 25%
• Have a particularly negative impact on key growth sectors such as construction, oil and gas, engineering and IT.

The two organisations, who between them represent over 3,500 recruitment businesses and 22,000 contractors, are calling on the government to delay implementation of the proposals laid out in the recent Onshore Employment Intermediaries consultation to give businesses time to renegotiate contracts and adjust project budgets to accommodate the changes.

Commenting, the REC’s chief executive Kevin Green says:

“This draft legislation was sprung on businesses at very short notice. There is now less than a month to go before the new rules would come into effect and the government still hasn’t published its final guidance for employers. This scramble to implement shows a lack of understanding about how business works and the complexity of contracts for long-term projects. If these changes are rushed through they risk having a negative impact on job creation and growth in sectors that are vital for the recovery of the British economy.”

Director of policy and public affairs for PCG Simon McVicker says:

“Throughout the consultation process, HMRC have gone to great lengths to assure us that limited company freelance businesses are not the intended target of the Onshore Employment Intermediaries legislation.

“However PCG believes that HMRC guidance on this does not offer freelancers the guarantees they seek. It needs to be clearly stated in the proposed legislation or the danger is that it will create confusion amongst business, leading to the legislation being wrongly applied to genuine freelancers using limited companies.

“Delaying its implementation will ensure that the legislation is well understood, well drafted and clear.”

Ends

Notes to editors:

1. For an agency looking to fully comply with these legislative changes, they would need to take a typical self-employed worker onto their direct payroll. Factor in 13.8% employer NICs, along with increased employee NICs and income tax liabilities and other statutory payments, and VAT, and a compliant agency is looking at a minimum 25% cost increase for the supply of labour.

2. For more information, contact the REC Press Office on 0207 009 2157/2192 or pressoffice@rec.uk.com. An ISDN line is available for interviews on 0207 021 0584 or the PCG press office on 0203 053 0606.

3. The Recruitment & Employment Confederation (REC) is the professional body for the recruitment industry. The REC represents 3,506 corporate members who have branches across all regions of the UK. In addition, the REC represents 4,744 individual members within the Institute of Recruitment Professionals (IRP). All members must abide by a code of professional practice. Above all, the REC is committed to raising standards and highlighting excellence throughout the industry. Find out more on www.rec.uk.com.

4. PCG is the membership association for the UK’s freelancers, contractors and independent professionals. It represents 23,000 self-employed professionals operating across every industry sector in the UK. Independent research shows that in 2013 freelancers numbered 1.72million strong Britain and freelancing is now the fastest growing sector of the European Labour Market.