Over the past month there have been several articles around the NHS and how the public sector is being effected by the new Government legislations. With some reporting in response to the IR35 legislations, while others are announcing new membership groups for people to discuss all their issues and concerns collectively. Either way the NHS is extremely topical at the moment and in particular the recruitment aspect of the NHS, so we thought we would share those articles discussing these hot topics.
Recruiter Magazine: “Unite urges NHS to ban umbrella companies”
Trade union Unite has called on the NHS to outlaw umbrella companies operating throughout the service, labelling these organisations “parasites feasting off workers’ wages”.
In a statement on its website, released yesterday, the union claimed that new laws brought in in April, affecting all pay grades within the NHS and effectively outlawing agency workers operating in the public sector from being paid on a non-PAYE basis, have meant some agencies operating within the NHS have begun to force workers to be paid via umbrella company contracts.
The union claimed this means if a worker is employed via an umbrella company, they lose 46 pence in the pound of eligible earnings, through national insurance (NI) and income tax.
Consequently, after being contacted by several members working within the NHS, Unite revealed it has contacted the NHS and urged the organisation to stamp out the use of umbrella companies but that NHS Improvement, the body responsible for overseeing foundation and NHS trusts, has refused to do so.
In its statement, Unite national officer for health Colenzo Jarrett-Thorpe said: “Umbrella companies are simply parasites feasting off workers’ wages. Although they are not technically illegal, they are certainly immoral.
“Unite will be now targeting individual NHS trusts that allow umbrella companies to be used; not only will we ensure they ban their use in future, but we will also demand they pay back the money our members have lost in being paid in this way.”
But the union’s damning indictment of the umbrella sector has not gone unchallenged.
Defending the sector, Julia Kermode, chief executive of The Freelancer & Contractor Services Association (FCSA), an independent trade association that represents umbrella companies, said: “Like Unite, FCSA is committed to protecting the workforce from exploitation, so I am disappointed to hear Unite’s national officer for health tarring all umbrella companies with the same brush and calling for the NHS to ban the use of umbrella firms. I have been talking to NHS Improvement about the important role of compliant umbrella firms in the supply chain, and I am meeting up with its agency team in the next two weeks to discuss how we can work together in the best interest of contractors and freelancers.
“As a result of the IR35 reforms that took effect in the public sector in April, we are indeed seeing many newcomers entering the umbrella market with no track record, so due diligence is essential to minimise risk. We are particularly concerned about the increasing proliferation of offshore loans and disguised remuneration schemes that seek to reduce contractors’ taxable pay via contrived means. These schemes put individuals at significant personal financial risk as HMRC will pursue them for the unpaid tax and NICs, plus penalties and interest,” she said.
“The new Criminal Finance Act coming into force on 30 September will pose an additional risk for agencies to manage, as they could be accused of not preventing tax evasion if they put contractors in touch with such dubious schemes. It is important that agencies and contractors choose compliant umbrella firms to partner with, and I will also be raising this with NHS Improvement.
“FCSA-accredited members adhere to a strict code of compliance, and we are committed to ridding the industry of its ‘cowboys’ as well as promoting umbrella employment as a positive choice for the hirer and the worker.”
Also commenting, Damian Broughton, executive chairman at accountancy firm Danbro, accused the union of using inflammatory comments to gain headlines while showing its ignorance on how personal service companies, umbrellas, agencies and general PAYE schemes operate.
He told Recruiter: “All of these ways of operating have to account for employer’s NI, which, at some point, is taken off the gross rate that is agreed with a worker. Even if a worker is a full-time employee, the NHS trust still has the cost of employer’s NI to be added to its agreed rate rate, to show the total cost to the trust.
“NHS Improvement says that it wants to encourage the use of PAYE mechanisms. Compliant umbrella companies operate the most transparent PAYE mechanism in an efficient and cost-effective manner. The transparency can sometimes cause confusion, as every penny is accounted for in information that is given to the worker.
“In addition to the transparency, many of the advantages of working for large organisations are given to workers who operate through umbrella companies, such as private medical insurance, life insurance, sickness cover and discount-buying schemes,” he said.
“There are some umbrella companies who do not operate compliantly, and we applaud HMRC’s efforts in stamping these practices out. We encourage Unite to focus its comments on non-compliant umbrellas rather than calling for a blanket ban on the whole sector, which provides an ideal solution to thousands of workers who understand, and prefer to work in, this manner.”
In response to Unite’s claims, a spokesperson from NHS Improvement said: “NHS Improvement does not have the power to ban ‘umbrella organisations’ from operating in the NHS. Such organisations must, however, comply with existing HMRC and other relevant legislation.
“We do not encourage the use of these organisations or other intermediaries, and instead urge NHS staff to use PAYE mechanisms, as well as working within substantive and bank roles.
“We also expect all NHS providers to comply in full with their legal obligations by ensuring that all locum, agency and bank staff are taxed appropriately following a proper analysis of their individual circumstances.”
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Recruitment International: “New Health & Social Care Division”
TEAM, the UK’s largest network of independent recruiters with nearly 700 locations, has added a new Division to its ever growing Membership. “We have recently seen a rapid increase in our Members specialising in the Health, Dental and Social Care sectors. With over 100 Members working within at least one of these sectors, TEAM is one, if not the largest network of Healthcare Specialist Recruiters in the UK. We therefore have responded to this by creating a specialist division in which Members can discuss and share specific issues within these sectors” .
We are delighted to announce that we have appointed Carol Borhani of Angel Human Resources, as Divisional Director, to head up this new division. Carol joined Angel Human Resources, an independent multi-discipline recruitment agency, with a strong social care division, in 1985.
The next meeting is on Thursday 2nd November at Whittlebury Hall Hotel and Spa. For further information please contact TEAM at firstname.lastname@example.org or Carol on 0207 940 2000.
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Recruiter Magazine: “IR35 tax reform causes mass exodus of public sector contractors”
April’s IR35 tax reform is causing a mass exodus of public sector contractor talent and delays to projects agencies are recruiting for, according to research from contracting site ContractorCalculator.
The findings of their survey of 1,500 contractors, released this morning, reveals 76% of public sector departments have lost top talent due to the reforms, with the talent drain causing 71% of projects to be delayed or cancelled.
The research, which follows on from anecdotal evidence that contractors had been leaving the public sector in droves in the month after the introduction of the new rules, also shows:
- 27% of public sector contractors surveyed have left the public sector
- 47% of public sector projects lost at least a quarter of their contractors
- 61% of contractors left due to their refusal to work under new IR35 rules
- 52% of contractors of those leaving the public sector are yet to be replaced
- 50% of contractors say they will now never work in the public sector if caught by IR35 and 46% will only do so if the government effectively pays the extra tax.
With regards to public sector IT projects and the NHS in particular, the research found:
- 79% claim IT projects they have been working on suffered delays as departments couldn’t draft in replacements, with 37% of IT contractors abandoning public sector in the wake of the reforms.
- 25% of NHS departments have lost 50% or more of their flexible workforce
- 63% of NHS contractors are thinking about a new career entirely, with 40% indicating they may quit contracting altogether.
And public sector recruiters are witnessing this outgoing talent affecting projects they are recruiting for.
Matt Gascoigne, chief operating officer at GatenbySanderson, told Recruiter project decisions are being delayed due the changes in IR35 rules.
“This has limited the flow of flexible talent in the market. While robust commercial conversations do need to be undertaken, this has often resulted in a failure to appoint or to appoint at an elevated price point in comparison to 2016 levels.
“In some cases, vastly experienced interims have chosen to exit the public sector either in favour of opportunities within the private sector or simply to retire. At a time of rapid economic and political change with communities looking for reassurance, not disarray, then the public sector needs the very best flexible talent at hand. Our role has been increasingly to navigate these complex negotiations and continue to engage highly experienced interims who are vital to the future of our public sector and its infrastructure.”
David Leyshon, chairman at technical recruiter CBSbutler, adds: “Whilst we at CBSbutler have been proactive in addressing the IR35 reforms and evaluating solutions, there is clear evidence that contractors have left the public sector and, in particular, the NHS in droves.
“In many cases, we’ve seen a transition of contractors to other companies in the supply chain, but it is incumbent on the government to evaluate the real damaging impact this legislation will have on business before it’s too late.”
But in a statement an HMRC spokesperson claimed ContractorCalculator’s findings were based on an “unrepresentative” sample.
“There is no evidence of a drift from the public sector and there have been no delays to IT projects due to the new rules. There is no change to contractor pay other than to make sure the correct tax is paid,” the spokesperson added.
The IR35 rules, introduced in April of this year, make public sector end clients responsible for determining whether a worker who operates through a personal service company or other intermediary is caught by IR35 or is genuinely self-employed. Where the worker is caught by IR35, the new rules would also makes the fee payer, who will often be a recruitment agency, responsible for deducting and then paying the worker’s tax, National Insurance and employer’s NI.
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