Trick or Treat? Autumn Budget Round-up
• Why the government’s apprenticeship scheme has led to more internal upskilling, and fewer hires.
• Australia’s Fair Work Commission demonstrates why it is never a good idea to lie on your CV.
Autumn Budget Round-Up
This week the Chancellor Phillip Hammond announced his autumn budget – the last before Brexit. As pundits assess the announcement, we look at the handful of ways that the chancellor’s speech could impact recruiters in all areas of the industry.
Private Sector IR35 Confirmed
The chancellor’s autumn budget contained some key announcements for recruiters. Of these, perhaps the most significant was confirmation that IR35 tax changes would be making their way to the private sector. However, this confirmation came with some important caveats.
First of all, the changes would not now come into affect until April 2020. This is, in effect, a one-year extension, as many commentators believed the government had been working to a timetable that would have introduced the changes within the next six months.
Secondly, the rules will initially only apply to medium and larger sized enterprises. It means that a lot of enterprises will be exempt from the confusing – and potentially costly – tax liabilities of off-payroll talent.
Experts urge immediate auditing
The limits of IR35’s reach will be welcomed by many small business owners. It does not mean, however, that the threat of changes has gone for good. Nor is it clear who will be exempt. The chancellor did not outline criteria for determining the size of a business during his budget speech. It means that many companies will be left in limbo, unsure whether they qualify as an exempt “small”, or a liable “medium” sized business.
The tax changes have been a looming shadow for many entrepreneurs, who feared either a costly tax bill or a lengthy auditing process when the changes arrived.
While the chancellor handed small businesses an IR35 reprieve, experts have urged companies to start their auditing immediately.
Speaking to the Recruiter website, Jacqueline McDermott of Keystone Law said that businesses now needed to “do an audit of what contracts and consultancy agreements they have got in place, what might be affected and who it might affect.”
Recruiters must also acknowledge the levels of uncertainty surrounding the issue. There is a lack of clarity as to who will be affected in 2020. The government’s own CEST online assessment tool has been proven to provide misleading verdicts. And the entire budget may be re-written to reflect the as-yet undecided outcome of Brexit negotiations. As such, the only short-term advice available seems to be “plan for the unexpected”.
Autumn Budget: changes to apprenticeships
Smaller enterprises were handed a second helping hand by the chancellor in his budget speech, with reduced apprenticeship rates. Small businesses will see their apprenticeship costs halved, with changes coming into affect before the end of 2019.
The change affects businesses that make use of the apprenticeship levy scheme to pay for in-work training of new recruits.
Smaller companies that make use of co-contributor schemes to fund the training of apprentices will begin paying just five per cent of the outstanding balance. The government will meet the remaining 95 per cent. The current charge for other businesses remains the same: at ten per cent of outstanding costs.
The way apprenticeship funding is structured has come under heavy criticism since its re-launch in April 2017. Until now, the government has not made changes to the system that it has in place. Recently, however, the government has indicated that it would alter fees to reduce the burden on smaller businesses. In June of this year, Apprenticeships Minister Anne Milton told the AELP (the Association of Employment and Learning Providers) conference that their complaints “had been noted”.
During his budget speech, chancellor Philip Hammond said the system “has to work for employers”.
The chancellor’s full comments on the apprenticeship levy were as follows:
“As well as backing businesses to invest and grow, we will also make sure British workers are equipped with the skills they need to thrive and prosper.
“We’ve introduced a new system of T-level vocational training, introduced the first £100 million into the new national retraining scheme and through the apprenticeship levy we are delivering three million new high-quality apprenticeships in this parliament.
“That system is paid for by employers and it has to work for employers.
“Today, in addition to the flexibilities I announced earlier this month, I can announce that for smaller firms taking on apprentices we will halve the amount they have to contribute from 10 per cent to 5 per cent.
“In total this is a £695 million package to support apprenticeships.”
More businesses upskilling; fewer hiring
Meanwhile, new data suggests that businesses are increasingly looking inwards to find new skills, rather than recruiting new workers.
Since the apprenticeship levy began, employers with a wage bill of more than £3 million a year must pay 0.5% of their payroll to the public pot. If that fee remains unspent after two years, the company loses the cash, which is then used to fund apprenticeships in other organisations.
The system has encouraged enterprises that are liable for fees to spend their money on internal upskilling; not hires. It is often impossible for larger firms to make a sufficient number of hires to account for their entire contribution. In these cases, businesses are looking internally and using the funds to re-train managers. Similarly, graduate schemes are increasingly re-branded as apprenticeships in order to utilise funding – although the outcomes remain the same.
Honesty is the best policy for Australian candidates
Australia’s Fair Work Commission has ruled that a business was right to dismiss an employee who lied during their recruitment process. The judgement reinforces the fact that honesty and transparency are the responsibilities of the candidate.
The case centres on the dismissal of a new recruit for car hire firm Hertz Australia. Mr Tham, a vehicle service attendant, began working for the company in December 2016. He was dismissed in August 2017, after the company found misleading information on his job application.
In his employment details, Mr Tham had listed five years’ work with a previous employer, though he had remained with the company for less than a year.
Having signed an agreement stating the veracity of information supplied during the application, Hertz removed Mr Tham from his position on the grounds of dishonesty.
The situation came to light after Mr Tham filed a workers compensation claim against his new employer, just two months after joining the firm. An HR manager for Hertz began investigating Mr Tham’s past employment, where the discrepancy was discovered.
The internal investigation also found that Mr Tham had lodged a previous claim for unfair dismissal against a prior employer, in 2011.
The Fair Work Commission ruled that Hertz had a substantive reason for dismissing Mr Tham from his position. The commission decided that the errors made during the application were both “misleading” and “intentional”. They judged that his conduct was sufficient that Hertz would lose confidence in his ability to carry out duties to the required standard.
However, the commission also criticised Hertz’ handling of the matter. Mr Tham had not been provided with sufficient opportunity to respond to or address his errors. This amounted to “notable procedural deficiencies” in his dismissal.
In summary, the FWC stated that Hertz should have improved its process for removing a dishonest worker. However, it also found that Mr Tham’s actions were of a serious enough nature to warrant dismissal. Had due process been conducted, the outcome would have remained the same. FWC recommendations included: weighing the actions of an applicant, the nature of errors, and whether errors were inadvertent or deliberate.
The case once again highlights the value that recruiters bring to the hiring process. We have previously looked at what a trustless recruitment system could look like in the future. Until then, the case demonstrates the genuine value of top recruiters who conduct thorough candidate screening prior to shortlisting.