Vince Cable was praising the UK's flexible workforce at the LibDem conference. So why is the government proposing measures that make it harder to use temporary staff?
Everyone accepts that public sector employers are dealing with difficult competing pressures. Budgets have decreased in real terms, yet demand is going in the opposite direction. At the same time structural changes are being implemented and innovation and reform of services is being called for.
All these factors – tight staff budgets, organisational change, the demand for fresh thinking – can be helped by more intelligent use of contractors. At one end of the spectrum, temporary staff can help flex up employee numbers to deal with the ebb and flow of demand - but with less financial commitment than a fully permanent workforce.
At more senior levels, the skills and experience needed to handle key public sector projects or jump-start new ways of working is expensive – but can be brought in temporarily via contractors and interims.
The UK’s flexible labour market is often cited - including by business secretary Vince Cable from the platform at the LibDem conference - as one of our greatest assets. It is one of the reasons why unemployment has not been higher despite the deepest recession in living memory.
The Recruitment and Employment Confederation’s latest monthly survey on UK employers’ future hiring intentions showed that more than one in four employers are planning to increase their use of contract and temporary staff over the next three months.
At a time of skills shortages and caution when it comes to making permanent appointments, contractors and interim managers provide a crucial source of talent for both public and private sector organisations. A recent report from the Institute for Government think-tank pinpointed commercial and commissioning skills as particular areas where public sector bodies were in need of more experienced staff.
In this context, recent moves by the government to restrict the public sector’s use of flexible staffing arrangements seem ill-thought out and potentially damaging to public service reforms.
The government proposals threaten the kind of flexible staffing arrangements that are increasingly recognised as crucial to cost-effective resourcing. The proposed measures would force public bodies to place any ‘controlling persons’ (ie senior level staff) on their pay roll and make deductions from them for PAYE and NI.
Essentially the complexities around implementing such proposals will create an environment in which many high-end contractors and interims will find it impossible to function, resulting in a loss of key service providers to the public sector.
The back-story to this increased scrutiny over the use of contractors is the Ed Lester case; the chief executive of the Student Loans Company who was paid through a private firm, reducing his income tax liability. However, both the REC and the Interim Management Association have argued against a knee-jerk regulatory response that would restrict the ability of employers to quickly deploy highly skilled executives on short-term contracts.
Although the ‘controlling persons’ proposals are still being debated, a separate review sponsored by chief secretary to the Treasury Danny Alexander is already having an impact in the public sector.
All government departments using off pay roll contractors have had to adopt a new assurance process to ensure that they are able to satisfy themselves that ‘off payroll engages are meeting their income tax and NICs obligations.’ It has become increasingly evident over recent weeks that employers are unclear about what this means in practice and have often put unnecessary pressure on contractors and on the agencies that supply them, resulting in many assignments being cut short unnecessarily.
The Cabinet Office recently published an updated guidance note which is a step in the right direction and will hopefully address some of the inconsistencies. However, there still appears to be a perception that contractors and other non-PAYE workers are doing something wrong and are a public relations risk - which is complete nonsense.
Ultimately, public sector employers will lose out if they cannot access the right level of skills and harness the benefits of flexible staffing arrangements.
The contribution of contractors to all organisations – including local councils, NHS bodies and the civil service - is something that should be celebrated rather than decimated through ill-thought out regulations such as those outlined in the ‘controlling persons’ consultation.
Tom Hadley is director of policy & professional services at the Recruitment & Employment Confederation
