Crystal Umbrella

The Department for Business, Innovation and Skills has announced that government contracts will now be advertised for free on the government’s supply2 website. Previously businesses would have to pay an annual subscription fee of £180 before they could access these lower-value public sector contracts, which can be worth up to £100,000. The government has said that the decision to remove the subscription fee is part of a plan to advertise all of its contracting opportunities on one free website by the end of 2010.

Shriti Vadera, business minister said of this decision, “Small businesses are facing significant pressure in this downturn and new contracts are essential for their return to growth. “We want to support small businesses by making it easier to access the thousands of government procurement opportunities that are directly relevant to them.”

Ian Pearson, economic secretary to the Treasury, also commented on this new development “Small and medium sized businesses are a crucial part of the UK economy and in these challenging times it is essential that we support them in as many ways as possible. By introducing a free to use national search service we are helping to create a level playing field on which small to medium enterprises (SMEs) can compete with their larger counterparts. This will realise benefits for SMEs, the economy as a whole, and help drive further innovation in public services.”

HMRC have announced that they will be investigating a number of issues surrounding umbrella companies. They will be scrutinising umbrella companies who flout the rules as indicated in their recent brief (50/09).

The issues of concern detailed in this brief are:

• Potentially ineffective overarching employment contracts
• Dispensations which are invalid, or which have been wrongly applied
• Not complying with the terms of the dispensation
• ‘Expense payments’ made tax-free without that level of expense, or in many cases any expense, having been incurred
• Potential illegal deductions from workers’ pay
• Ineffective and sometimes unlawful management processes
• Breaches of national minimum wage

Speaking to Shout99, Bob Jones, an ex-Revenue Inspector and Shout99 expert had this to say: “Last year HMRC published a consultation document regarding umbrellas. I was convinced that HMRC were going to introduce legislation to make umbrellas, at best, a less viable alternative. In my response via Shout99 I suggested that some of the problems with umbrellas were of HMRC’s own making because of, amongst other things, a lack of staff awareness and failure to use existing powers. In the end HMRC announced their intention to use their existing powers [50/09] is the end result of that decision.”

He continued, “There are some umbrella companies without robust overarching contracts, without adequate checks that expenses have been incurred, without adequate audit trails where expenses have been incurred and using salary sacrifice to pay below the minimum wage. Those responsible umbrellas who comply with all their legal obligations simply cannot compete with those who do not. Compliant umbrellas will welcome this approach by HMRC. Non compliant umbrellas will be expected to make good all tax, NIC together with interest plus all conceivable penalties that HMRC can charge.”

The results of the latest Powerchex Annual Pre-Employment Screening Survey are in and they show that almost one in five job-seekers are lying to their prospective employers. The research is based on questions posed to 4, 735 job-seekers within the financial sector. According to Powerchex 19% of those seeking work lie on their CV and young people under 21 are now 30% more likely to lie on their CV than they were this time last year. Moreover, the research showed that IT contractors with less than factual CVs had increased three-fold to 18% over the past year.

Most young people surveyed stated that they were likely to change their academic qualifications, for example changing a 2:2 degree to a 2:1. Other job-seekers surveyed said that they would be economical with the truth regarding previous job titles and duties to exaggerate the responsibilities they had held. Others lied about their reason for leaving their previous employment.

Managing director of Powerchex, Alexandra Kelly commented: “This is the second year in a row there has been an increase in the number of candidates lying to recruiters. The pressure of the recession job market seems to have led more applicants to believe they should lie or make embellished claims to get jobs.”
Emma Entwhistle from IT staffing firm Crimson Skills, in an interview with Recruiter, said that recruiters needed to take the time to understand the industry, in order to identify those candidates who are being less than truthful.

She continued, “I have been in IT recruitment for 15 years. The way that most recruitment works is on buzzwords. It takes a long time if you are non-technical to keep up to date with technology. You have got to put the time in as a recruiter to keep your knowledge up to date and I think that is where a lot of recruiters are falling down. Get a proper appreciation of what contractors do rather than recruiting off buzzwords. Properly understand the role and don’t just recruit off the job spec.”

Logica have just announced their first half year results and they are better than expected. However, Logica has stated that with the uncertainty still lingering in this sector, it is “key” to manage contractor levels. In fact, the company confirmed that they had cut their contractor levels by 20% across all of their major markets in the second half of last year. They also confirmed that they negotiated “significant rate reductions” with their suppliers as part of their planned savings of £110m.

Logica are not currently planning any further redundancies than the 190 which they have already announced but their staff salaries will be frozen throughout 2009.

Their UK market was the only site to announce a sales growth over the past six months. Logica stated that streamlining their services over this period saved them £30 million. This proved most beneficial within the UK.

TechMarketView analyst, Anthony Miller, commented: “The UK improvement was mainly due to property rationalisation and lay-offs, which raises the question as to what Logica has to do to push UK margins further. I do wonder whether Logica is pushing blended delivery hard enough, especially in the UK. Sure, the UK is public sector heavy, but other players have shown this work does not all have to be onshore. With half its UK business coming from outsourcing, there should be a bigger opportunity for Logica to move more work offshore – and I struggle to see how else Logica could protect let alone expand margins otherwise.”

Speaking to the Financial Times, Logica chief executive Andy Green said that as “uncertainty remains in the consulting and professional services market” they are expecting their full-year sales to fall by around 2 per cent.

The most recent CIPD/KPMG Labour Market Outlook (LMO) has shown that demand for staff within the private sector has begun to stabilise. Both the scale of redundancies and the number of planned redundancies have reduced over the past quarter. By contrast, employer pessimism continues in the public sector. Pay increase expectations have also fallen below the rate of inflation.

Andrew Smith, KPMG Chief Economist commented, “Despite the recent flurry of more upbeat economic news, many firms still lack confidence in the recovery and continue to expect tough times ahead. Most striking is the large number of firms planning to defer or cancel pay reviews. This conservative approach indicates that business remains unconvinced that current economic green shoots will lead to sustainable healthy growth in the near term. Expectations that pay increases will fall below the rate of inflation, resulting in a reduction in real earnings, will be a further concern and could stifle any consumer led recovery.”

Recruitment and Employment Confederation (REC) director of external relations, Tom Hadley, spoke of the job market for temporary workers: “The employment landscape remains volatile at best but life is slowly returning to the temporary work market. The rate of contraction for temporary and contract work has eased to the slowest in 10 months and flexible working options will continue to provide a crucial outlet for both job-seekers and employers over the coming months. With the government currently considering how best to implement new EU regulations on agency work, it will be vital to ensure that the new legislation does not negate this positive contribution and clog up this key route into work for thousands of workers.

HMRC are warning taxpayers to be extra vigilant about emails offering them tax refunds. These ‘phishing’ scams, which are operated by illegal gangs, have increased to an all time high throughout July. HMRC reports that they have received over 15,000 reports of scam emails over the past twelve months.

Taxpayers have reported the receipt of emails requesting bank and credit card details in order to process a tax refund which they are told they are entitled to. HMRC have warned taxpayers that anyone responding to these emails is at risk of fraudulent activity on their credit card or bank account.

Recently similar phishing scams have been shut down in other overseas countries including USA and Thailand. HMRC continues to work with law enforcement agencies on this issue. Anyone receiving suspicious emails should forward them to phishing@hmrc.gsi.gov.uk and then immediately delete the email from your computer. Under no circumstances should you respond to the email or follow any links contained within.

Certain sender email addresses have already been identified as being linked to this scam. These include refundtax@hmrc.gov.co.uk, service@hmrc.gsi.gov.uk and hmrc@hmrc.gov.uk. The full list of email addresses to be wary of is listed at www.hmrc.gov.uk/security/index.htm. Emails often start with a sentence such as: “Following a review of your fiscal activity you are due a refund of tax of £…”

Chief Executive of HMRC, Lesley Strathie said: “We only ever contact customers who are due a refund in writing by post. We never use emails, telephone calls or external companies in these circumstances. I would strongly encourage anyone receiving such an email to immediately send it to us for investigation and delete it from their computer.”

Recent reports have suggested that HMRC are looking at the feasibility of outsourcing tax return processing offshore. This has raised a number of concerns regarding the security of confidential data within such an operation.

Internal documents leaked to Computer Weekly revealed that two of HMRC’s main IT contractors, Fujitsu and Capgemini, who provide services under the Aspire consortium have been asked to consider a number of options under the Quantum project with the aim of saving the department £205 million per annum.

HMRC is due to release an internal report on its Quantum project in the next month. It is expected that this will reveal plans to reduce the costs of the £8.5 million Aspire programme. This contract had been renewed back in 2004 but its costs have since doubled and HMRC are grappling with the need to cut costs while continuing to provide quality services. They also must ensure all of their departments work within the strictest security guidelines. Public trust in this area has hit an all time low due to some recent data security lapses by the government.

The Public and Commercial Services Union Capgemini Group have already released memos to HMRC Aspire staff stating that Quantum has considered “offshoring some future work”. The likelihood is that this would be in India. However, HMRC have stated to the Telegraph that the Aspire programme “does not permit” IT services to be delivered offshore and that this restriction is unlikely to be amended.

The disclosures made to Computer Weekly include a six point plan with the aim of improving the supply of IT and restructuring this service to ensure it maximises efficiency and value. This will then be standardised and tailored to meet the needs of HMRC. Aspire  and the services provided through this consortium will be central to the Quantum money saving initiative.

Hopes have been raised that the economy is starting to grow again in this third quarter following data released by the CIPS/Markit Business Activity Index. This showed that the service sector reached a 17-month high. The index reached 53.2 which was a sharp rise from 51.6 in June. Industry experts had predicted a peak of only 51.8 for July.

Overall the index has risen 13 points since November when it reached its all time low. In the history of this index, this period shows the most marked improvement in the sector.

However, businesses still continued to reduce their staffing levels throughout July, both by non replacement of staff leavers and also through redundancies.

Equivalent data relating to manufacturing was released earlier in the week that also showed an increase during the month of July. This is the first sign of growth in this market since last March.

These figures could be taken as a sign that Britain is now coming out of recession, despite the 0.8% fall in the second quarter.

Chief executive of the Chartered Institute of Purchasing and Supply, David Noble, said: “The services sector is rebounding at an unprecedented rate after what has arguably been the most savage economic downturn since the end of World War II. After hitting an all time low in November, July saw the sector make marked gains with new business activity rising for the third month running and at the sharpest rate in almost a year and a half. Increasing levels of higher new business have helped.”

He continued, “Nonetheless, the scars inflicted on the sector by the troubled economy will take time to fade as companies are still cautious about committing to a substantial spending. We’re still seeing companies reduce their prices and the job landscape remains difficult with wage pressures blunted as overall staff levels continue to fall steeply. This is a pattern we’re likely to see continue until the end of the year and employment and employment will, from a longer term perspective, recover at a slower rate than business activity.”

The trade union body TUC has publicly declared its support of the controversial Agency Workers’ Directive. The TUC have asked the government to make sure that on implementation of this EU directive, all agency workers are protected from exploitation and receive equal pay, holidays and working hours. The Directive has caused much concern amongst freelancers and contractors who fear that their services may be less attractive to clients as a result of these new measures.

The TUC are basing much of their support of the Directive on a survey they have carried out. They interviewed more than 2,700 temp workers, including those who have worked through agencies over the past year. Their finding showed that many temp workers have felt discriminated against in the workplace. 33% said that they were paid less than employed staff for doing the same job. 46% said that the received less holiday entitlement than their permanent counterparts.

There was also confusion regarding statutory entitlements as an agency worker. 75% of those interviewed said that that agency workers were entitled to less redundancy pay and 70% felt that they were entitled to less maternity pay.

Brendan Barber, TUC General Secretary, said: “While agency working has a legitimate role to play within the economy, TUC research has exposed widespread mistreatment of agency workers across the UK. Agency workers have told the TUC they regularly find themselves with less basic pay, holiday pay and entitlement, redundancy pay, maternity pay and access to training and childcare than directly employed staff doing the same job.”

He continued, “The government must introduce the new regulations in the Directive quickly to ensure that temps are protected and that the exploitation of agency workers by rogue agencies ends as soon as possible. The new laws must provide real protection and any loopholes which would allow unscrupulous employers to avoid the law and continue to mistreat agency workers must be closed.”

Northgate Information Solutions have doubled the time it takes to pay their suppliers. This increases the payment of invoices from thirty days to sixty days. Northgate are a provider of many public sector IT contracts. Effectively this means that contractors who invoiced for work carried out in July, expecting payment in August, will not be paid until September. This move has left many contractors out of pocket.

Northgate announced that they made these changes public back in June. They have defended their actions by saying that they are merely standardising their payment structure. They also stated that as their customers have changed payment terms, they had no choice but to pass these changes on.

Northgate have now found themselves listed in the Forum of Private Businesses’ Hall of Shame. This list serves to highlight companies who operate poor payment practices. The Forum of Private Businesses has also written to the owners of Northgate to remind them that their actions could have a serious effect on the business of their suppliers.

One supplier who has been affected by this change to Nortgate’s payment times said that this was proof that, “big companies are still trying to bully smaller suppliers.”

He continued, “When I received the letter informing me that the company was standardising its payment terms, I thought it would be beneficial for us all to work together more smoothly. It took several readings before I realised what the catch is. It certainly isn’t for the benefit of the supplier base that they are increasing the time they pay invoices from 30 to 60 days. One of the things I resent is that they are not being straightforward – they’re pinching an extra 30 days from me.”

Northgate have said that their suppliers have ten working days to decide whether or not to accept these changes.

Chief executive of the Forum of Private Businesses, Phil Orford, said, “Although we can sympathise with the company’s claim that it is not being paid on time by many of its public sector customers, it is disappointing that it is passing on these additional costs to its small suppliers.”