subject: Recruitment Sector & The Legal Risks [print this page] Sanjay Parekh, MD at WebExpenses, discusses the potential for cloud technology to avert the threat to recruitment companies from mounting red-tape and increasing costs
Recruitment agencies and hiring firms are increasingly at risk from legal bombshells hidden amidst rapidly-rising mounds of red-tape. The result is that they are turning down business opportunities, splashing out large sums on external consultants, numbercrunchers and pen-pushers and jostling to swap the burden of legal responsibility.
The REC recently claimed that many recruiters are wary of working with the umbrella industry due to expenses rule changes which increase the legal risks attached to the off-shore products and tax-free travel dispensations which many umbrella firms offer in order to attract agency workers.
Meanwhile, many hiring firms are reducing the number of recruiters they use to avert the legal risk associated with the latest AWR changes and recruiters are concerned about the fact they will be held accountable if hiring firms are not aware of the full implications of the laws. The National Audit Office says many companies are already deterred from expanding due to the aura of legal risk surrounding new hires; AWR now extends this risk to temporary workers.
AWR puts agencies and client companies in joint jeopardy, by requiring recruiters to inform their client companies of the full array of financial and legal implications of the changes, across a rapidly-fluctuating workforce. It also drives up the admin burden for recruiters, now compelled to continuously update their calculations to incorporate looming regulations, ranging from the Pregnant Workers Directive to the Parental Leave Directive.
The daunting cost of compliance has been laid bare by a number of recent studies: it is estimated that implementation of new workplace rights expected over the next four years alone will cost an estimated 24 billion, a cost that will now be partly borne by recruiters, and businesses already spend 5.8 billion annually on external advisors. Some 29.8 billion of potential business opportunities fly past each year, while company managers are chained to the admin desk.
Yet this extraordinary annual admin outlay does not appear to be helping either recruiters or client firms dodge the legal minefield.
A recent report exposes gaping holes in corporate payroll calculations; over a third of hiring companies have still not factored in the additional pension liabilities they will incur as a result of AWR, which is storing up future legal problems for both recruiters and firms.
And the legal vultures are swiftly swooping on these corporate admin oversights: new figures show that the number of tribunals has trebled over the past five years, at an average cost of 8,500 each.
Expenses: a case in point
expenses-management is now fraught with risk for recruitment agencies, after recent HMRC moves to clamp down on umbrella firms who encourage contractors to exaggerate claims, and prevent agencies from using travel & subsistence to top up worker fees.
Recruitment firms need to take note of HMRC plans to penalise companies for VAT-dodging even if they merely fail to prevent employees from entering excessive travel claims.
Despite strict HMRC rules requiring that all employees log precise details and evidence of their work-related travel in order to claim tax relief, a recent survey found less than 2% of expenses claims are investigated, up to 25% of all travel claims are false and 1.3 billion is leaked each year through excessive claims.
The failure to accurately record and monitor expenses may also cost business major opportunities: the latest AWR changes allow umbrella companies to incorporate any reimbursements of agency-worker expenses in their payroll calculations, when comparing the wages of temps with those of their full-time counterparts.
Averting the Risk and the Red Tape
Much of the hazardous legal complexity now putting agencies and firms at risk can be avoided by simply changing the way companies manage their HR and Finance Departments.
Archaic paper-based methods of managing payroll systems or logging and monitoring expenses claims, are consuming valuable time and resources and leaving companies facing the perennial risk of a devastating legal oversight.
With new cloud-based expense management systems like WebExpenses, recruitment agencies can automate the process of anticipating and implementing new laws, and the data-storage capacity can be scaled up or down, in lockstep with the fluctuating size of the agency workforce.
They allow agencies a level of control over their finances that was difficult and expensive to achieve with traditional on premise software. The transient nature of their workforces and the large numbers of temporary staff claiming T&E are perfectly suited to taking advantage of cloud based technologies which can be scaled to an ever changing workforce on a pay as you go, month by month basis.
Newly-developed apps also enable employees to use smart-phone cameras to submit photographic evidence, while entering claims on the move. Because the information is in the cloud, agencies or umbrella companies can monitor employee expenditure in real-time from any location, and the complete archive is instantly-available to the Finance Department.
Recruiters and businesses alike may find that cloud-based solutions will ease the admin burden and the climate of fear surrounding the unpredictable legal environment we face today.
