A Taxing State
Leigh Anderson, Bis Henderson Recruitment managing director, believes misconceptions about off-payroll working and HMRC IR35 rules in the UK are exacerbating difficulties recruiting top managerial talent into the supply chain sector.
For some years now a wave of misunderstanding and misinformation has swept the temporary employment market. Companies large and small have convinced themselves that HMRC’s revised IR35 rules on self-employment mean that hiring short-term or interim staff on a self-employed basis is at best very complicated and at worst, effectively illegal, and that the only option is to appoint staff as employees on fixed term contracts (FTC).
This is rarely true, but Bis Henderson Recruitment is seeing increasing evidence that this emphasis on FTCs is actively damaging the supply chain and distribution operations of UK businesses across the board, and especially in firms that are, or should be, exporters.
It’s no secret that supply chains are undergoing a massive, once in a generation change. A combination of factors include: a growing political concern about over-reliance on sources and markets in foreign, and not necessarily well-disposed, countries – not just China; the Covid pandemic continues to disrupt manufacturing, sales and logistics operations, especially at global scale; the Russian invasion of the Ukraine has had an immediate effect on price and availability of commodities and products as diverse as grain and wiring harnesses, and of course energy. And overlaying all of this are increasingly complex rules and regulations, and social pressures that, at least ostensibly, seek to mitigate the environmental impacts of global trade.
More locally, continuing friction around post-Brexit arrangements has significantly changed the playing field for companies trading with the EU. The happy assumption that exporting to the Single Market was just like selling at home is no longer valid.
Worryingly, the Institute of Export and International Trade reports that over the year to June 2022 the number of UK companies engaged in exporting has fallen by nearly 5 per cent. That isn’t a short-term response to the war – the trend line is consistently downward, over the year, even at periods when things appeared to be getting better. One is forced to the conclusion that many companies are simply ill equipped in their skills and their thinking to run an export business in the new environment. The skills and thinking are out there, but how can businesses access them?
Supply and distribution is becoming more complex and less global; companies are having to build in greater levels of resilience and redundancy while struggling to control costs. These are not short-term issues – they demand strategic, not just tactical, responses. Exporters need the benefits of new perspectives and fresh thinking (perhaps, the residual experience of working in a pre-global and high inflation environment) to revisit how they transport, store and distribute their goods in ways that are cost effective but meet the demands of export markets. As we approach what for many companies is the ‘golden quarter’ for sales, logistics arrangements are going to be stress-tested as never before.
These circumstances – the need to plan and execute fundamental change – cry out for the individual and often unique skill sets offered by experienced managers and executives who have chosen interim self-employment as their career path. That includes many of the best minds in the business. But if companies insist on hiring through FTCs, they cannot access this talent.
In fairness, interim management may come at a higher top-line cost. In practice, though, that premium is payable not just for greater breadth and depth of knowledge and experience with a proven and verifiable track record, but for reliability and commitment.
The career of a professional interim lives or dies on the success of their latest assignment. Walking off the job for a more attractive position is not an option, nor is the short-term fix that will fall apart some time after they have moved on.
The FTC hire, by contrast, almost certainly hasn’t chosen to be short-term – it is all they can get in their current situation. If something better, particularly a permanent position, comes up they will be off – and who can really blame them? Often, too, their attractiveness to the hiring company is their pay expectations and their availability, rather than the skills and insights they can bring.
Only recently we have been helping a client that has fallen into just this trap. The firm has a large export business: aware of a backlog of problems and issues, they appointed someone on an FTC, but this hire left after only a few weeks into the role. The problems remained unaddressed, while the firm continued to lose orders and money (not to mention wasted money in recruitment effort) while they sought a replacement. They have now appointed an interim.
The IR35 rules that many are interpreting as ‘banning’ self-employed interims do nothing of the sort. Indeed, the only real change from the previous system is that the onus is now generally on the company, rather than the contractor, to determine whether the appointment can legitimately be classed as self-employment – the change was designed to tackle a small and well-defined area of abuse, particularly in the IT field. Yes, there are procedures and documentation but nothing particularly onerous, and a competent specialist such as Bis Henderson Recruitment can help the company through this, as well as other aspects such as professional indemnity insurance and Right To Work documentation.
Locating and introducing suitable interims, and providing support, doesn’t come free, of course. Across sectors, agencies and locations fees average around 17.5 per cent of remuneration.
The more savvy companies are coming back to the interim model – the market is expected to grow by around 6.7 per cent next year. And no surprise, how else can a business securely and reliably access the skills, knowledge and experience they need to plan and execute their supply and distribution strategies, at home or abroad?
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