|
The 'live debate' at the recent E.Recruitment 2001 exhibition at the London Olympia offered attendees an opportunity to fire questions at an expert panel consisting of:
- Tracy Gale- Policy Adviser from the Inland Revenue
- Ann Swain- Chief Executive of the Association of Technology Staffing Companies (ATSCo)
- Fiona Coombe- Head of the Recruitment and Employment Confederation’s Legal Department
- David Cohen- Freelance IT journalist
- Phillip McMullan- Editor of Professional Recruiter magazine
- John White- Managing Director of Practiva recruitment agency
- The Department of Trade and Industry were also billed to take a seat on the panel, however, according to organisers 'a suitable representative could not be found.'
Contractors, clients and recruitment agencies took full advantage of a rare chance to question the Revenue in the live debate |
Proceedings began when Tracy Gale took a question from Graham Rees, an IT Recruitment consultant, who asked about the necessity of IR35 and the progress of the guidance handed down from the judicial review. When the noise had calmed down following the mere mentioning of 'IR35', Tracy answered:
"IR35 is a Ministerial policy designed to make sure that Personal Service Companies (PSCs) would pay a certain minimum amount of National Insurance Contributions. The Chancellor said for some time that there was a loophole with regard to small businesses using the system of 'pay as you earn NICs.' He wanted to prevent people found doing it. The legislation has so far only been in place for short amount of time- we will monitor it, hope it does what it's supposed to and then we'll work with statisticians, accountants, etc... and report back to Ministers."
Rees then asked Miss Gale, "What feedback have you had so far?"
She replied, "Feedback has been relatively positive, the target population has been affected, others haven't- really it's just too soon to tell. In 6- 12 months we will have a better idea of its impact and we will be able to give better answers."
Phillip McMullan made his views clearly known on IR35, telling the audience: "The Government has said it is supporting a flexible workforce but a key to this is finding a common ground with legislation like this. IR35 affects the ability of small companies to train themselves and goes militarily against the skills shortage as well as hampering innovation."
Gale's response was, "The Government doesn't want to undermine genuine small businesses, just those who appear to be under employee type terms. Conventional employees have limited access to reduced tax, National Insurance Contributions, etc... The Government just want to enforce that and make it the same for everyone. Ministers prefer to take an overview rather than target the individual population."
Swain: IR35 will be a damp squib and hopefully so will the Agencies Act |
Needless to say few of the audience agreed with her. Ann Swain joined the debate at this point saying, "We have been fighting harder than anyone else over the burden of tax- something that should be addressed now to reduce damage in the future. Employees have training included in their jobs, so it should be tax deductible for contractors- there should be more encouragement for contractors to have greater access to training and this is not currently covered by the 5% rule. I hope the Government will have another look at [the legislation]- this is just one thing that could be done to help protect the future of UK Plc."
Addressing the issue of the 5% rule, she continued... "The IT population is less well-educated than it was- they're worried that the 5% expense bag would be affected and so they're not getting any new training at all. About 98% of our members fall under IR35 contracts and currently those are the ones we must train- they need even more money to increase their skills. The concept of 'IR35-proof contracts' is dangerous and silly and will always end in tears- we should abide by the law, even if we don't agree with it and not try to go around the sides which is dangerous."
Fiona Coombe sympathised with the uncertainty surrounding whether someone is hit by the legislation, saying, "Self-employment law is so difficult. Contracts should be based on client's needs rather than what could fall in or out of IR35. With the PCG case, we're still hoping that the Inland Revenue might sharpen up the rules so there is more clarity."
Gale countered this, telling the audience: "The rules are all down to case law- we have no capacity to refine or rewrite, the only way to add clarity is for more cases to pass through the courts and add to the history of case law. Ministers have shown no need to move away from this system as it currently affects employment status. We have even gone so far as to publish our Inspector's Status Manuals to the public- it represents our statement in practice and we will accept your views and feedback on this- we're doing everything we can to make it easier but accept that it is still very difficult."
Contesting the situation the Revenue had created in operating in this manner, and with the audience fully behind her- gauged against the Revenue, Swain told the debate, "Most contractors would put training as their first financial problem. Having a highly skilled workforce is so important, the result is that foreign workers are being brought in now en-masse and the numbers are still not filling the skills shortage. Of course we don't want to see people 'take the mickey' out of the tax system- of course PSCs were fiddling the tax system as lots of other people were, but the key thing is that we must now concentrate on increasing our flexible workforce and make sure that it is skilled- [the Government] needs to specify further and not catch the vast number of people that [IR35] currently does.
"What they should be looking at first is: 'Is the business in question looking to expand?' Those that genuinely are should be given concessions to help them- the Government must take care not to throw the baby out with the bath water," she warned.
Phillip McMullan added his own opinion to Swain's telling Gale- "Small businesses working towards growth should be looked after properly."
A member of the audience then asked the panel, "Why not revise the tax burden on Ltd. companies? Should we make the PSCs pay more- not as seriously as say Belgium- but if we did it would be better for training. No-one's going to willingly volunteer their contract as being 'against IR35.'"
Tracy Gale was first to reply. "An 'IR35-proof' contract will only exist if the company acts within the terms and conditions of that contract. You must be working on a self-employed basis or you will be caught," she said.
Agreeing with Philip McMullan's belief that those looking to grow should be better looked after, David Cohen suggested that, "There should be a timeframe for this type of work."
Ann Swain commented: "Most contractors would try to jump IR35 via contracts but clients do not want to get dragged in and they don't want to get involved. Give it 1 year and IR35 will be a damp squib." The audience overwhelmingly agreed with her. She continued, "They said IR35 would mean that 50% of contractors would leave the country, but most of them appear to still be here- they don't like it but they'll get used to it. Anyone running a business must understand the legalities of running a business. However, the Government must play fair too- they cannot hold back the benefits of being an employee if they are going to treat the contractor as such for tax purposes- they've now opened the floodgates in this respect and it looks like its going to be a problem for agencies too. Should we adopt the US model system by making bigger margins and taking more risks or should we let them all go permanent? We seem to currently have the worst of both worlds!"
After a brief mention by Phillip McMullan of Computer People's previous incident of providing 'bad advice' and getting 'a slap on the wrist'- Christine Little, the Chair of the debate suggested in no uncertain terms that the room move away from the subject of IR35, which had dominated the debate. She suggested the issue of the Employment Agencies Act.
First in was Ann Swain who told the debate, "If ever there was a poorly written piece of legislation then this is it. In the face of tremendous success by agencies in the UK, the Government have set this up on funny anecdotal evidence and it's all come off the back of that. In short it is ridiculous, unusable and unworkable."
A member of the audience then raised the issue of the subject of 'generic' and misleading advertising on jobs boards and the relevance of the Act to the practice. They also broached the subject of adverts specifying that a person must come from a specific geographical location.
In first again was Ann Swain. "ATSCo are not daft enough to take illegal adverts but others are. There was no-one else out there to rap Computer People's knuckles apart from us over misleading advertising- who else is there? I also think generic advertising is wrong," she said.
Speaking of the legality of misleading advertising John White said, "A jobs board v. agency action, and vice-versa, being successful depends on which country you action it in as to who gets sued by who and whether it is possible in the first place. The case of Yahoo last year where they were taken to court in France over automated content by French people and lost shows how one can get caught legally for this whilst similar cases in the UK show how sites can get away with denying responsibility for their content. The new 'Burden of Proof' directive is changing this- it also means that if you advertised for people 'in the Northampton area' then you WILL get into legal trouble."
David Cohen added that the practice was 'deceptive', saying that, "unethical advertising should be punished by law."
A member of the audience then stated that they would like to see 'a cross-site treaty to rid the web of advertising falseness on jobs boards.'
Fiona Coombe provided REC's stance on the issue to the debate saying, "There are existing guidelines outlined in REC guidelines as well as the Advertising Standards Code."
Speaking of the picture the debate was drawing of the proposed regulations Phillip McMullan told the room: "This is only a small aspect of the EAA and it really goes to show what a debacle the whole thing really is. The Government has got to learn that it can't attack things with which there is nothing wrong- they should leave temp-to-perm fees and go after unscrupulous agencies that don't pay properly. At the risk of making myself unpopular, I believe that agencies do need some sort of regulation, but this is the wrong way to go about it."
John White warned fellow representatives from the recruitment industry: "There'll be a bigger increase in Employment tribunals over adverts in the future especially with the relatively new European Human Rights Act."
Just as time was being called on the already heated debate, Ann Swain rounded-off proceedings much to the approval of both the rest of the panel and the audience saying, "Let's hope the Employment Agencies Act will be another damp squib!"
--
Richard Powell, Shout99
|
