Tom Johnson, founder of Hernshead Recruitment considers what the new government means for the recruitment industry.
Sir Keir Starmer has now formed a government following Labour’s win in the general election, and I wish him and his cabinet every success in driving the growth of the UK’s recruitment industry and wider economy. However, our new prime minister certainly has a difficult task ahead of him, and will need to work hard to prove he can deliver for recruiters, workers, and businesses alike.
Zero-hour contracts
Whilst Labour have made positive noises around improving workers’ rights by banning zero-hour contracts and ending fire-and-rehire tactics, more clarity is needed in this regard. The government must make a clear distinction between zero-hour gig workers and highly skilled contractors when introducing its new employment legislation. After all, access to flexible, highly skilled contracting is a vital ingredient to the delivery of a strong and efficient labour market, so businesses must be allowed to remain agile when it comes to their professional staffing decisions. Of course, this need must be carefully balanced against the crucial right of workers to fair employment.
IR35
Thus far, however, there has been no mention of how the government intends to support and incentivise the highly skilled contractor market, nor has there been talk of any changes to IR35, which is currently too complex, and can have significant tax ramifications for those who are deemed to sit ‘inside’ the rules. This has resulted in many self-employed contractors being pushed into what is known as ‘zero-rights employment’, whereby they must choose between working inside IR35 via an umbrella company, or having their contract cancelled altogether. As such, it’s vital that Labour carries out an urgent review of IR35 to protect highly skilled contractors, and boost market competition.
Immigration and public sector hiring
Immigration is another key issue that this new government needs to get right. While it’s clear that the UK’s controls over its borders must be strengthened, this cannot come at the expense of losing access to talented workers from overseas, who play a crucial role in addressing the country’s labour and skill shortages, particularly in STEM industries. In terms of tackling the skills gap and improving public services, Labour’s promise to deliver more nurses and teachers is certainly welcome, but it remains unclear whether a plan is in place to recruit and retain these people. Unless such a plan is introduced, I fear that many of the issues that have plagued development and retention in both teaching and nursing will continue to go unaddressed.
Living wage changes
One area Labour has been clear on is its plan to ‘Make Work Pay’ by delivering a genuine living wage; a positive pledge that will provide fair pay to all workers. Considering inflation in goods and services, including food, energy bills, etc., this is, of course, a welcome pledge that aims to improve the livelihoods of workers. However, as costs have risen for individuals, they have also increased for businesses, and small businesses especially are at risk as a result. The government must therefore carefully manage its proposed changes to the living wage against the need of small businesses to hire and grow without incurring adverse effects in doing so. Many small business are already struggling to make ends meet, particularly in the infancy of their business, and may struggle to find the means to pay workers more than they currently do, meaning their business could ultimately fail due to this. Therefore, it may be necessary to make an exception to living wage changes, or to offer more support or incentives to small businesses so as not to stifle their growth. Indeed, while minimum wage previously allowed firms to hire someone on a salary of £18,000, that same person now might cost them £24,000. As such, living wage changes would only add extra pressure to small businesses who already suffering high costs across the board.
Cautious optimism…
Starmer and his new government must do more to shine a spotlight on recruitment; not only to promote the industry – which plays a crucial role in tackling the UK’s skills crisis – but also to ensure that it is properly regulated, ensuring that recruitment and umbrella companies are properly scrutinised to prevent bad actors from flouting the rules, and besmirching the good name that industry relies upon.
This week marks the beginning of a new era for the UK after 14 years of Conservative rule, and there is much for businesses to be cautiously optimistic about this new Labour government. However, the recruitment industry waits eagerly to see whether the party will stand by what it has pledged, and how it aims to address many of the hiring challenges that have gone unanswered for far too long.
