Crystal Umbrella

Policy makers have decided that contractors who provide services to public authorities should remain outside the Freedom of Information Act. This news will save contractors from the prospect of extra costs associated with requests under the 2005 legislation.

The decision was made following a consultation on extending the freedom of information rules. Officials stated that forcing private sector companies to comply with the act would also increase costs for the state. They also realised that the burden of Freedom of Information compliance might put contractors off working on public service contracts altogether.

The employers’ organisation, CBI commented, “Companies would find it extremely difficult to factor in FoI requests at a fixed cost when contracting with government and could set a price per request instead. This would mean contracts may engender significant additional costs where companies receive a substantial number of FoI requests.”

Information relating to the work carried out by contractors will remain the responsibility of the government.

The Ministry of Justice said, “The government has concluded that no general expansion of FoI in relation to contractors is appropriate at the present time.”

They agreed that the issue of contractors and Freedom of Information requests will be kept under review with specific attention paid to contractors working in prisons, detention centres and care homes. However, contractors are advised to comply with the ethos of the Act by volunteering any information that is requested of them.

The Freedom of Information rules have been extended to include the Association of Police Officers, the Financial Ombudsman Service and UCAS.

According to new research released by Begbies Traynor, over the past year the number of recruiters experiencing financial difficulty more than doubled.

Begbies Traynor, a firm which specialises in business rescue, recovery and restructuring carried out research which found that the number of firms who were experiencing critical financial difficulties in the second quarter of 2008 was 24 and over the past 12 months this number has increased to 55 – an increase of 129 per cent. Their research also concluded that the number of firms experiencing significant financial problems increased by 90 per cent between the second quarter of last year and the same period this year. There has also been an increase of 67 per cent in the number of recruiters experiencing critical financial problems between the first and second quarters of 2009.

These critical problems are defined by Begbies Taylor as companies who have County Court Judgements equating to £5,000 or more and or claims relating to wind-up petitions. Companies with significant problems are those who have insolvent or out of date accounts and/or court actions.

Partner at Begbies Traynor, Nick Hood commented: “Recruitment companies serving all levels of the job market are now starting to feel the severity of the economic downturn and as we approach the seasonally quieter summer period, this may be the tolling bell for severely struggling companies.”

He continued, “Over the medium term, the situation will only worsen as unemployment is a lagging indicator and its full effects are not going to be seen until even later in the recession.”

The final consultation on the Agency Workers Directive (AWD) was held on this week at the Department for Business, Innovation and Skills (BIS) in London. It is now likely the directive will include umbrella company contractors, whereas contractors who provide their services through a limited company will be exempt.

There was an intense debate regarding the definition of a ‘worker’. It is now likely that the definition used in the Working Time Regulations 1998 will also apply to the agency workers covered by the Agency Workers Directive. Umbrella company contractors tend to view themselves as independent contractors but their working arrangements actually make them employees.

BIS has published the consultation document which classifies a worker as, “someone who works under a contract of employment”. It continues, “Any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer or any profession or business undertaking carried on by that individual.”

Union delegates to the consultation did not want any exclusions to the directive, claiming that vulnerable workers would be forced to use those particular working practices to stay outside the AWD. Therefore the BIS are still questioning the apparent exclusion of limited company contractors.

The BIS consultation is open for responses until the end of this month and contractors can use the BIS website to make their views known. They can also write to their MP to request a delay in the implementation of the directive. It does not need to come into force until December 2011 but many groups are calling for the directive to enter the statute books as early as April 2010.

The Professional Contractors’ Group (PCG) has conducted a survey amongst its members on what will influence their vote in the next General Election. IR35 is top of the agenda with 91 per cent of members claiming that they would vote for a party whose manifesto included the abolishment of the contentious tax rule.

Managing Director of PCG, John Brazier said, “This confirms just how damaging IR35 has been. There are an estimated 1.4 million business-to-business freelancers alone in the UK.”

He continued, “As the parties draw up their manifestos, they cannot fail to take notice of this level of discord – nine out of ten of our members have essentially stated it will affect the way they vote. IR35 is a restrictive, unworkable and unfair regulation and it’s high time for a fairer taxation system to be developed for freelancers.”

The survey also examined members’ views on the current economic climate and HMRC. Only 19 per cent expected the economy to improve in the near future and 46 per cent expected their own financial situation to worsen.

Brazier commented, “These figures serve to underline the serious times we are now in. It is more important than ever for any future government to commit to helping freelancers as, ultimately they will have a key part to play in the UK’s economic recovery. With the specialist, flexible knowledge based skills they provide, freelancers are essential in securing the UK’s financial prosperity.”

On HMRC, only 4 per cent of PCG members described the department as transparent while less than a fifth thought that HMRC provided ‘competent advice’.

John Brazier said, “It is a real shame that we cannot have a tax authority that respects the needs of the UK’s smallest businesses and in turn wins the respect of freelancers throughout the UK. These figures highlight major problems with the way in which freelancers are treated. Legitimate freelancers find it difficult to seek reliable, useful advice from HMRC on how they run their businesses and instead find themselves under suspicion at every turn.”

70,000 HMRC staff are refusing to work overtime as a response to job cuts and deskilling of the workforce. The overtime ban was initiated by the Public and Commercial Services Union who felt that the job cuts were responsible for the backlogs in certain HMRC departments. This spells bad news for taxpayers who are making appeals to the HMRC Investigations Unit as the existing backlogs are increasing, leaving taxpayers waiting longer for a response. Six out of ten taxpayers report having to spend more time and money over the past year to deal with Revenue issues.

The Public and Commercial Services Union said that the situation was likely to “get worse, with less and less staff and not enough hours in the day to get the job done.”

Of course, the HMRC workload is likely to increase following the formal investigation into the MP expenses scandal as a number of unnamed MPs still owe tax on their questionable Commons allowance claims. David Hartnett, permanent secretary for tax said that all 644 had been asked to declare any unpaid tax while the investigations are ongoing.

Speaking to the Daily Telegraph, Mr Hartnett said, “There are a number that we will need to talk to. That will lead to temporary increase in the number of investigations.”

Revenue staff have admitted that staff morale is at an all time low. If morale affects work practices, this could potentially have a serious impact on low income earners who are relying on those staff to accurately assess their situation.

The Low Income Tax Reform Group surveyed HMRC workers and found that only 11% of staff felt that their teams were adequately managed. Less than 20% said that HMRC was a good place to work while around half of all respondents said that they were not given everything that they needed to do their job effectively.

Employment screening firm Powerchex has noted that employment opportunities are finally increasing in the financial services sector.

Financial services recruitment had been badly affected by the recent economic slowdown with 81% fewer jobs for investment bankers in April to June this year in comparison to the same period last year. Employment opportunities within insurance firms fell by 26% over the same period. Employees across the sector, from IT contractors to stockbrokers and managers saw employment opportunities slump by over 40%.

However, when the second quarter of 2009 is compared to the first quarter, signs of a recovery are notable. During this period stockbroker recruitment has increased by 77%. Recruitment by insurance firms and investment managers has increased by 8%. IT contractor hiring has only fallen by 3% this year which is another sign that the sector is starting to recover.

Managing director of Powerchex, Alexandra Kelly says, “Things are certainly improving within financial services. Firms have been recruiting quite aggressively recently as the economic situation stabilises and they attempt to make the most of a very talented pool of people who are desperate for work. Things haven’t returned to last year’s levels but there are plenty of jobs out there.”

HMRC is set to review its debt collector pilot scheme after concerns were raised that many of the agents and revenue staff are following up on tax demands that were issued by mistake. On following up this ‘spurious’ tax debt, it usually transpires that the penalty notices for non filing of tax returns have been issued to companies that are no longer trading or who do not employ any staff.

A source who spoke to the Mail on Sunday suggested that these ‘false’ debts could account for up to 10% of the £21.5 billion of taxes that are currently being chased by HMRC.

President of the Chartered Institute of Taxation, Andrew Hubbard was present at a recent meeting of tax advisors to the government who were advising that improved record keeping was a priority to reduce the level of spurious debts. However, Hubbard declared that he was worried that withdrawing particular repayment allowances would lead to their increase.

He said, “It is clearly necessary that people should pay the tax they owe but given the high levels of uncertainty about the true level of debt and the system problems, these are obvious concerns.”

He continued, “To be fair, the Revenue is aware of the problems and is working to remedy them, but the systems ought to be sorted out before there is any outsourcing of debt collection.”

Minutes from the Administrative Burden Advisory Board states that the HMRC is “aware of the issues with private debt collectors”.

On 10^th July, 310 banking and debt management staff from HMRC participated in a half day walkout as a protest against de-skilling and downgrading of their work.

Oil giant Royal Dutch Shell has issued a pay ultimatum to its IT contractors. An internal memo sent last month advises contractors that they will face termination unless they accept a pay reduction of 12 per cent. The policy of reducing contractor rates was first introduced across the financial services sector thirteen months ago at the start of the economic downturn.

Leading recruitment agency Jenrick CPI stated that over the past three months the majority of clients are telling IT contractors to take a pay cut of between 10 and 20 per cent or leave.

Managing director, Philip Fanthom commented, “In most cases there has been a period of consultation with the contractors which had lead to some interesting and sometimes heated debates.”

He said that permanent and contract IT staff felt that they were placed in a no-win situation.

IT analyst, Richard Holway said that ultimatums were ‘widespread’ as British IT contracting staff battled against the discounts being offered by their offshore rivals. IT contractors will now worry that other companies in the energy, oil and gas sectors will follow the precedent set by Shell as this is what has happened across the financial services sector.

IT agency, SQ Computer Personnel said, “Clients with significant numbers of IT contractors are taking advantage of the downturn in the number of IT contractor vacancies. [Clients are] imposing ‘take it or leave it’ pay cuts on contractors, usually mid-term during the contract, often despite the success and recession-proof aspect of their industry sectors.”

Founder of SQ, Bernie Potton said, “Agencies obviously pass this pay cut on to the contractor, taking a 10% hit in their own profit in pound note terms, but maintaining the same percentage margin. Some contractors have got upset with this approach, claiming that the mid-term pay cut is unfair and unethical, which it is, but unfortunately it is contractually valid.”

Recruitment firm, Hays has carried out its second survey since the start of the current economic downturn. Their findings show that recruiters consider leadership skills as one of the most important attributes when hiring for their IT departments. This research is likely to encourage jobless contractors to talk up their experience of management processes and team leadership when applying for positions.

Hays commented that managerial techies are still one of the hardest groups to recruit within the IT sector. This has remained the case despite a wider pool of candidates who are less likely to negotiate about low pay rates.

Managing directors of Hays IT, James Lloyd Townshend said that pay has been “driven down because candidates are more readily available and generally have less negotiating power.”

The survey also showed that one of the main issues for employers is the ‘cultural fit’ of the candidate into their organisation. Many employers are now spending more time and money on developing the communication skills and leadership qualities of their IT management staff. This has led to 80% of the firms surveyed responding that they had confidence in their IT managers to do the job required of them. Hays reported that the 122 IT bosses that they surveyed said they were looking for business intelligence consultants and enterprise architects.

However, the latest REC Report on Jobs reported no shortage of any particular contract IT skill. This report said, “Although temporary/contract staff billings decreased for an eleventh successive month in June, the latest fall was the least marked since last September. The slower reduction in short-term appointments reflected a weaker drop in demand for temp staff.”

The British Chambers of Commerce (BCC) has carried out their annual Economic Study, which shows that the worst of the recession could be behind us.

According to their findings, manufacturers have coped better with the economic downturn than services based on Q2, however; overall the manufacturing sector is in a worse condition. Based on a comparison of this years and last year’s Q3, turnover confidence has risen 40 points for manufacturing firms, from -38 in Q1 to +2 in Q2.

Despite both sectors aiming to hire again, the BCC is predicting that by the mid-2010 unemployment rates will be at 3.2 million.

Speaking about their findings, Director at the British Chambers of Commerce, David Frost said, “These results are sending Gordon Brown and Alistair Darling a strong message from the business community. It is absolutely vital that the improvement in business confidence is nurtured.”

He continued, “Our economy is based on confidence, and wealth creating businesses need to know they will be given the freedom and flexibility to drive the UK out of recession and into a sustainable recovery.”

Chief economist at the BCC, David Kern added, “The pace of decline in the UK economy is clearly moderating. The worst phase of the recession is over, but serious downward pressures persist across all sectors and regions. Most key balances are still in negative territory and remain weak by historical standards. Recovery is now possible but it is not yet secure. Further corrective measures are still needed to support the economy. The marked improvement in confidence, albeit from exceptionally low levels, is welcome. However, these recent gains can only be sustained if the economy continues to stabilise and the recession ends.”