By Matthew Reeves, Head of Operations at Global Talent 2020.
At Global Talent 2020, we are always looking at new ways to evolve our business, and better support our clients, and candidates. We are well aware that the impact of Covid-19 on businesses and individuals has brought about huge changes, and in some cases this has regrettably resulted in closures or redundancies.
Because of this, challenging times lay ahead, especially within the Hospitality and Leisure sector and Retail markets.
At the time of writing this blog – there had been no evident “road-map” provided by any of the devolved, or UK . This has now changed, and we can all expect to return to some level of normality, and a clearer picture of what this “new normal” will perhaps look like soon.
A lot of businesses I have spoken to over the past few weeks, especially since the turn of the new year, are obviously frustrated, and have been stifled in their abilities to plan ahead. In-turn then the staffing structure, or headcount, they will then need to service those projected re-opening business levels.
Without doubt, the general consensus, specifically in the Hospitality and Leisure industries, feel that the majority of 2021 will be driven by domestic consumers and not international visitors. International trade will be driven by the reopening of travel corridors, consumer confidence in the UK’s freedom from the epidemic, and future suppression of the virus.
As a nation, we saw a “consumer bounce” domestically, and in some parts some internationally, with a return to the Hospitality and Leisure trade after the end of the first lockdown in August 2020, with the advent of the “Eat Out” initiative. This positive sign of people returning to enjoy some freedom from the lockdown 1 restrictions, meeting friends, loved ones, and business associates – showed that people will no doubt take up the same position after the current lockdown 2 measures.
Recent business webinars that I have attended virtually, which have had a highly placed Banking representative involved in presenting, have imparted that the majority of lenders and Banking institutes are confident that people will “spend”, when they are able to. “Spend trends” from people’s current accounts in 2019, are not the same levels for 2020, nor at present for 2021. Therefore, people are sat on sums of monies, that had previously be utilised for disposable means. Which in turn means, they will probably then be inclined to spend this again, when they are able to do so.
This brings me back to my earlier point, of the consumer domestic “bounce effect”, after a relaxation of lockdown 2 measures.
The best outcome for the Hospitality and Leisure industries – is that we get back to a Tier 2 level nation-wide asap, with freedom on travelling for domestic consumers relaxed as far as possible. Anything less than this, Tier 3 level, when lockdown 2 ends, will continue to impose misery, and hardship on these sectors in particular.
It is reasonable to suggest that the Covid-19 virus will not just fade away overnight, it will be with us sometime yet, and with on-going measures of some sort. Until herd immunity, if it is ever established/ maintained, be the only encompassing solution to provide a “normal” lifestyle, post- Covid 19.
However, all businesses need to trade, the economy needs to become resilient again, and to be honest, we all need to pay our bills, survive, and live.
What Term View?
Our empathy for businesses in the Hospitality and Leisure sector, should be no surprise to those that know me personally, and also our founder at Global Talent 2020, Andreas Maszczyk.
We both have worked operationally within the sectors for many successful years, and I have been fortunate that I have continued that involvement with now specialising in provision of specialist tailored services in support of the Hospitality and Leisure sectors, (as well as others). These services cover the breath of provision of Accountancy and Finance solutions, Revenue Management solutions, and obviously a bespoke, professional Recruitment solution services.
As aforementioned earlier in this blog, with the lack of clarity at present, regards the roadmap out of lockdown 2 by governments, Hospitality and Leisure businesses may find it hard to look at “when” to add, or “how to hire” new talent, as their businesses re-open, and consumer confidences hopefully return, (or are allowed to).
Obviously, first and fourth most, business must look to bring back all furloughed staff where required, over any newbie. This loyalty and integrity by a business, will hopefully be repaid in dividends with staff retention, buy-in to the business and employee performances.
Back to the dilemma though – “When to add/when to/how to hire?”
Does a business wait – and very much adopt a “suck it and see” mentality, i.e., wait till business levels dictate that they cannot provide a good standard of service delivery anymore, or keep up with a resurgence in consumer demand?
Or do they take the plunge and hire – expecting, or projecting a rise in business levels? Tricky…
Companies with good cash flow, sound balance sheet, will no doubt take a medium/longer-term view, especially if a roadmap does emerge, or is looking evidentially that it will.
Companies without the security level of good cash reserves, will know doubt be forced to take the aforementioned “suck-it and see” approach, until they recover, or it is business crucial to expend on additional staffing resource levels.
Being adaptive, and flexible is going to be key when consumers return.
Working as a contractor – the Impact of IR35:
“The days of independent contractors having the freedoms they once enjoyed are also now under further threat. IR35 was introduced in 2003, there have been subsequent additions to the legislation in 2000. In 2017, the HMRC/Treasury made an extension to the sectors of industry not covered by IR35 regulation and extended this to include the public sector. Furthermore, in March 2020 there was planned reforms to the private sector, on IR35 to close further loopholes in Tax avoidance, but these reforms have been not yet been implemented due to Covid-19. They will now be implemented in April 2021”.
Source: IR35: Countering Avoidance in the Provision of Personal Services – Judgment of court case CO/2302/00″. HM Revenue and Customs. 2 April 2001. Retrieved 13 July 2010:
“IR35 is a new Tax avoidance statute from HMRC to stop certain activities around tax avoidance for “disguised employees” – which basically means employees that receive money from a company they are supplying services or expertise to, via an intermediary, e.g., their own limited company, and their professional relationship with the said client, means that if they had been paid directly – then they would be seen as an “employee””.
Source: Public sector off-payroll workers” in House of Commons, Resolutions to be moved by the Chancellor of the Exchequer, 8 March 2017, accessed 2 April 2017:
“Before IR35 was introduced, workers who owned their own limited companies were allowed to receive payments from clients direct to the company and to use the company revenue as would any small company. Company profits could be distributed as dividends, which are not subject to National Insurance payments. Workers could also save tax by splitting ownership of the company with family members in order to place income in lower tax bands. (This latter practice was recommended by government publications advising on setting up family businesses, but attacked as tax fraud by other government departments, notably the Treasury”.
Criticisms of the introduction of IR35:
Source: Wikipedia IR35 Article http://www.accountancyage.com/aa/news/2036756/budget-2011-ir35-stay. T Now – Vol 51, Part 4 – British Computer Society, Swindon – ISSN 1746-5702 – July 2009; IR35 tax is a huge failure • The Register:
“IR35 has been strongly criticised by several bodies, including former Ernst & Young tax partner Anne Redston, now Barrister at Temple Tax Chambers.
Some of the key criticisms levelled at the measure include:
- IR35 does not achieve its stated aim of taxing those within IR35 at the same level as employees since those within IR35 also pay Employers NI in addition to Employees NI. This results in much higher levels of tax being paid by those within IR35.
- Its complexity and its harmful impact on many small companies which exist for reasons other than tax avoidance or evasion. These include many companies owned by IT professionals, who often have many short-term contracts rather than one steady engagement.
- That its effects extend far beyond the Friday to Monday scenario envisaged in the original press release, which indeed has never been discussed much since.
- Each contract that the Intermediary company undertakes is viewed separately, which means that one contract with client A could be considered disguised employment and a contract with client B considered to be non-employment. HMRC are reluctant to give an opinion on a contract at the time of signing the agreement on the basis that the actual working terms and conditions in reality could be considerably different to the terms of the agreement.
- Many contracts between the Intermediary company and the client company are generic and rarely go into the details of the actual nature of the work to be undertaken and the working arrangements between the two parties.
- That it is unjust that workers in small family businesses should be taxed as if they were employed by their clients, yet not receive any of the legal, state, and other benefits received by “normal” employees.
- HMRC require the Intermediary company to state whether it is inside or outside IR35 on the annual P35 declaration leaving the company with the responsibly to engage an expert to decide the company’s tax liability.
- Many businesses now feed off these Intermediary companies promising that they will help negotiate an IR35 friendly contract, however it is not just the contract that HMRC considers but the actual working arrangements between the worker and the client business.
- There is little evidence that it raises any significant amount of money.
- It renders small businesses uncompetitive with large consultancies and encourages the use of offshoring avoidance schemes, most of which HMRC has now closed, leaving the worker with a huge tax bill.
- The calculation of a “deemed payment” under the legislation is considered extraordinarily complex: the calculation involves 11 separate stages, some of which are recursively dependent on others.
- The introduction of IR35 combined with its complexity and ambiguity, led many freelancers into a number of Tax Planning schemes that led to a further loss of revenue to HMRC”.
IR35 Reform Benefits:
Source: Off-payroll working in the public sector: changes to the intermediaries legislation”. GOV.UK. Retrieved 4 September2019; HMRC, Check Employment Status for Tax, published 2 March 2017, updated 30 March 2017, accessed 4 October 2019; “Increasing compliance with the off-payroll working rules (‘IR35’) from April 2020” (PDF). HM Treasury website.
‘In 2017 the UK Government illustrated that the implementation of IR35 new reforms to the Public sector had generated an additional £550m in additional tax revenues collected and predicts with the new IR35 reforms for the private sector in 2022/23, will net an additional £1.2 billion in tax revenues collected’.
Global Talent 2020 Options:
As outlined at the start of this blog, Global Talent 2020 are always looking ahead, looking at better ways to help people, our clients, our candidates – our fellow humans.
I have illustrated the dilemma that the Covid-19 pandemic has presented to employers in industries, illustrated that with the Hospitality and Leisure sector, (sorry).
So – to hire or not hire that is the question.
A clear roadmap, dates, and commitment to no more stop/start with the economy is first needed, for businesses to make more long-term strategic choices on their headcount, and talent growth. Secondly, do you hire permanent? Or temporary staff solutions? Or contractual term workers? Or not at all?
A lot will also rely on consumer confidence, international flight corridors reopening, #Brexit reforms/impacts being made clear and evident, and the virus in full retreat.
Each of the outlined aforementioned options on recruitment solutions have their specific benefits, and in some cases, draw backs.
Not at all – You may save money in the short term – definitely. However, your business will suffer in the medium to long term. From lack of growth, innovation, new creativity, new ideas, lack of adaptiveness in a new marketplace, lack of business agility and dynamism; standing still while competitors and the marketplaces evolve.
Permanent solutions – something we specialise in at Global Talent 2020, across a number of key sectors. This is a medium to longer term solution to a business from a cost point of view, as the persons skills, expertise, and performance contribution will take time to take effect in a business, will be a salaried cost to the business, but offers greater stability, innovation, growth, and consistency of delivery for a business over time. It is more of an investment, but a calculated one, and in some cases, business critical as a solution.
From a candidate perspective it gives security, progressional opportunities, better income opportunities, development, growth, a sense of belonging, challenges, and engagement with the right role.
Temporary solutions – something we at Global Talent 2020 do not involve ourselves directly in, plenty do out there, with mixed results of success, and it is fair to say, with the consistency of delivery to clientele, and the temporary workers involved.
It is particularly good for a business, that want an “per hour off/on” switch to add/decrease staffing/headcount, when business levels dictate, but can be problematic with getting the “right” worker, the “right skills”, and “right attitude”, and not pay a premium for it. From a candidate perspective, they have the freedom to move on from job to job as they like, or needs dictate, or stay/leave a job – if they do not like the job tasks, or environment, or people they work with. Conversely, a temporary role can evolve into a full-time opportunity for the right candidate.
Contractual term workers – Something at Global Talent 2020 that we are now launching, which you will see from our latest multi – media channel coverage and landing pages here on our website.
What we want to offer, both our clients and candidates is the opportunity to have more fixed timelines solution, with flexibility for all parties on an agreed work period, a clear cost and a clear income projection.
We want to work with our clients, with whom hiring permanent solutions is not cost effective at the moment, and provide a quality, consistent short term/fixed term arrangement – that will cover a period of sudden expansion, a business volume peak, or business projected growth, until it is prudent to make a permanent decision, or not, on additional headcount.
We then will be able then to supply candidates in the market, with a clearly defined timeline of working hours/duration, and a fixed projected income, so that they can accommodate, and plan effectively their lives around work, and for the future in these times.
It will also give our clients, consistency of the same person over a fixed time, cutting down training costs of daily flexi-hourly staffs, potential PPE/uniform costs, and mean a cost saving overall. More so than an hourly rated temporary worker.
Your customers will benefit to!
We will manage this service for both our clientele and candidate, ensuring the right fit, and right solution for all.
If this is something that interests you, either as a candidate, or as a client, please get in touch with us.