With Nicola Hayman, Legal Manager, Kingsbridge
00:00:00 - Legal experience with recruitment, IR35 and GDPR and resilience to change
00:08:40 - Describing the differences between people-based and outcome-based models
00:17:30 - Where IR35 impacts contracted-out services
00:26:00 - Insurance considerations for delivering work via SoW
00:45:00 - Choosing the right delivery model
00:54:20 - Choices for how to engage talent
01:06:30 - Who is 'the client' when delivering services
01:15:20 - Trends for the next 12 months
Jonny: 0:00 Excellent, we can get started. Brilliant. So Nicola, welcome to the podcast. Thank you very much for joining me. How are you?
Nicola: 0:08 Yeah. Thank you for having me, Jonny. Nice to see you again. I am very well. Thank you.
Jonny: 0:15 Excellent stuff. So proper introduction. Nicola Haman, you’re the legal manager at Kingsbridge and today, we are going to be talking about the insurance implications for the move to more SoW-based work. So we’ve got some interesting bits to discuss. But obviously, there are some key differences, which we can address from different angles, around the legal aspects of it and insurance aspects of it. But how did you get into this market? What’s your path been to kind of end up where you are at moment?
Nicola: 0:46 Good. So finishing my legal qualifications, I kind of didn’t know what to do next. I remember I got offered two jobs. And one was GTV, which is a recruitment company, was vivid resourcing GT recruitment. It was specifically vivid resourcing that I was going to, and the other one was an immigration law firm, so they could not have been further apart. And I think I went for the interview, maybe one was one day and one was the next day. And when they both came back with an offer, it was like really Junior Paralegal work. And it’s just so funny to think back to go, that was where it all started, because I obviously chose vivid. And then I’ve been in the recruitment industry ever since. So I was there for a few years. And that’s where I learned everything, very kind of contract focused, but signing up to big onerous client terms, advising on that. And then I moved to APSCO as their legal adviser. And that’s really where I learned everything. So I worked on the legal help desk just over three years, I think I was there for and advising recruiters mainly offering the legal and compliance training, but taking queries around anything it could be from, oh, this is honestly true. We had one saying that, “Someone’s feet really smell in the office. We don’t know how to talk to them about it.” Deadly serious. So it would go from that to then, I35, obviously, in the main GDPR happened when I was there. So that absolutely took over the help desk, we were dealing with hundreds and hundreds of queries and then I made the move to Kingsbridge beginning of 2019 to help, support them with their whole I35 offering, along with Andy Bessie, who’s our Head of Tax, I vast amount of experience with I35. So working alongside him, and then helping grow a whole I35 offering, I very conveniently timed having a baby, I must have predicted that they were going to postpone it. But yeah, she was due in September 20. So thought that we were all geared up and ready for the refund to come in. And then suddenly they announced it was being postponed. And I would obviously be on maternity. So I think it was a lot of white faces when they announced that. But they managed it and they did an incredible job, which I’ll touch on a bit more. But yeah, they really have expanded in that area and now offer so much to recruiters and end clients around I35.
Jonny: 3:33 It’s brilliant. If you think about the last, when did GDPR come in? Was that?
Nicola: 3:39 2018.
Jonny: 3:40 2018. So in the last kind of like, yeah, last three or four years, there’s been so much change, Brexit thrown in there as well, COVID thrown in there as well. It’s been absolute carnage, really, isn’t there? Just in the market in general. But from a legal perspective, so many things to get your head around. But I guess doing the APSCO role must have been incredibly useful, just in terms of giving you massive exposure to everything ranging from athlete’s foot to IR5. That’s amazing experience really, isn’t it?
Nicola: 4:10 No, it is. And I think that’s what I love so much is it recruiters are so good at adapting. And this is obviously what we’re going to touch on. It has nothing to do with kind of getting a bending the rules or anything like that. They’re just so reactive. And if you give him a piece of legislation, they will find a way to work with it. I mean, when we first were talking about GDPR with Stephen King, God, we can’t send these, how we get, this is the recruitment industry dead that absolutely not, they’re all still flying same as I35. It’s a massive impact. But they find ways to work with it. So I think that’s what I really like about the industry.
Jonny: 4:52 Yeah, I’ve always said that the recruitment industry isn’t incredibly adaptable. I remember back in my early days in the job board world, back in kind of like, early 2000s, and people were saying, “Oh, job boards are going to be the way forward, recruitment industries is dead,” everyone’s just going to go direct and advertise directly. No, it just basically reduced the recruitment industries, advertising overheads by like a factor of 10. They just adopt stuff very quickly, I think, by their very nature, recruitment organizations, and people who work in the industry are problem solvers. And when you’re dealing with people as the product, anything can go wrong, anything can happen, it’s a very, very difficult product to control when you’re placing people. So I think that lends itself to that problem solving nature. But certainly, recruitment organizations have had their work cut out over the last few years to adapt some of these changes. A lot of them are really thriving at the moment. And certainly, obviously, it’s quite candidate short market and those kind of resourcing areas, but then we’ve got the stuff that we’re seeing around a lot more organizations either ramping up or starting to dip their toe into other delivery models. So you’ve got some agencies that are moving into more kind of MSP and RPO, annuity based revenue type services. And then you’ve got the whole SoW side of it with everything ranging from project and consulting services, through to the sort of administrative management of SoW engagements for a range of clients to full on services, procurement, MSP. certainly the three main cases that we’re seeing within the industry, but it’s very different. And that’s quite a big thing to adapt to. I think all of these things have been big things to adapt to. But I think if you look at things like I35 or GDPR, it’s a variation on a theme where the fundamental concepts still apply. Whereas when you’re dealing with the delivery of a service under a statement of work, as opposed to the user by paying for somebody’s time, it’s a very different proposition, isn’t it?
Nicola: 7:02 Yeah, massively different. And I think that’s why I’m always quite careful when I’m talking to people. Because, like I said, recruiters are so adapted, they’re amazing at the way that they can change according to the market, and according to legislation, but I think we also need to take a step back sometimes and say, “Okay, this is very different. Therefore, we need to deal with it properly.” So although in a way we say it’s the same, because they’re very good. They’re very good business people, they’re really commercial, they can definitely work in this way. But it’s very different to their standard recruitment activities. Therefore, they need to be really careful when they’re starting to look at engaging in that way, because it’s very different from the standard recruitment world that we all live in.
Jonny: 7:46 Yeah, I think the parallels that there are, are the main one being, it’s just about getting work done.
Nicola: 7:53 Yes.
Jonny: 7:53 So again, it’s a problem solving exercise, there’s a piece of work that needs to be done. I mean, in some ways, it’s an extension of the scenario where some work needs to be done, the company has a resource requirement, and a recruitment company will be able to advise them to say, you could hire a permanent member of staff, you could hire a contingent worker, you can hire an interim, there are various different ways to do it already. So engaging a supplier to deliver some work under a statement of work is just a different way of doing it. But obviously, when you kind of get under the hood of it a little bit, when you look at the contractual setup, and the liabilities, and there are a lot of differences there. Obviously, it’s nuanced and it depends what type of engagement and how you’re pursuing that engagement? But just at a very basic level, how would you kind of describe the key differences between a people based time materials engagement and a Statement of Work engagement, as you said?
Nicola: 8:51 So, I mean, this is where we get into the nitty gritty of it, isn’t it? And then you kind of look at the definitions that fly around everywhere. And everyone is slightly different in their approach. So I think it probably helps if I just clarify some of the wordings that I use, because then it helps going through it. And if you don’t agree with any of them, tell me. But so when we’re talking around statement of work, we are talking about the document, the statement of work contracts that we have that usually supports your master services agreement. Whereas some people might say, “We’re a Statement of Work business or we’re working,” they use the words interchangeably, and then everyone’s confused. So, I kind of when I’m talking about statement of work, I’m talking about the document that usually falls under the master services agreement, which is the big chunky document that goes with it. But then you have the company that’s offering the services. So a lot of the time that we’re calling them the consultancy, they’re offering the services that sometimes gets confusing because we used to called PSC...
Jonny: 10:03 Yeah, and sometimes recruitment companies are called recruitment consultancies. So it just gets even more confusing.
Nicola: 10:08 It is. And that’s why like, I always like to try and clarify how I’m going to talk about it, so it’s clearer. And then you’ve got contracted out services. And I feel like that’s a really important one when we referring to it, because that’s what HMRC call them. So although people don’t usually like the definitions, it’s really helpful, if you’re ever looking at HMRC guidance, which is really important. If you’re looking at this model, because of I35. Maybe that you understand what HMRC say about it. And to be fair, contracted out services kind of sums up what it is, doesn’t it? Like you said, it’s not your time and materials, your standard recruitment way of working, it is much more project base deliverables milestones, so it’s quite easy to separate them, when you really think about it, it is clear when you’re going, “Okay, this service is being contracted out to a company, and therefore client is not controlling it.” So we always talk around supervision, direction, control, this time, we’re saying the client is not controlling that services, they have used an outsource provider or consultancy, whatever we’re going to call it to come and deliver those specialist services. So it’s very different to a standard recruiter that is going, “Okay, we’ve got a role to fill, we’re filling a role, we’re going to use X limited company to fill that specific role.” It’s not that, it’s much more, we’re providing a service, entirely different business model from traditional recruitment, which then leads to the financial risk that we’re talking about, higher insurance premiums. So it comes with that added risk. But I don’t know, what you think and it also usually comes with the added benefit that you do get paid quite a bit more the margins, are usually higher in that world. So it’s kind of weighing up the risks against the margins that you might be getting paid.
Jonny: 12:03 Absolutely. And I think that’s that is definitely a bit of a new paradigm for staffing organizations that are looking at this, because, they’re used to the cash cow being their traditional recruitment business. And they’ve got smart people within their organizations, or they brought people in who are saying there’s an opportunity here, because clients are either asking us to deliver projects or they’re asking us to help them manage Statement of Work engagements, or they’re coming to us saying, they’ve got a services procurement problem, and they need someone to get their arms around it. So there are real opportunities, again, for these companies to solve the problem, to take the problem away from the client. So that’s where particularly with the organizations that are maybe not so much like MSP RPO focus, but pure staffing, they’ll typically get the opportunities from what we see. And firstly, around the project delivery side of things. And that’s just so different in terms of the investment in liability, the legal setup, covering off that liability with insurances, etc. And being able to deliver it in a structured and compliant manner that got the opportunity, sometimes almost seemingly on a plate. But there’s a lot to it. And that’s where I think it’s the most different from the recruitment cycle where that liability for the delivery of the work is falling on the staffing organization, although I’m sure you mentioned very briefly in your introduction, but I’m sure we’ll come on to in a bit more detail just about, sometimes organizations separating out a limited entity to kind of deal with that. How’s that risk? But yeah, the opportunities there. But people have to make decisions, and they have to make clear investments in it. And you often hear this kind of chicken and egg scenario where people are looking at going after this market, but they want more opportunities before they put a real sophisticated setup in place. But if you’ve got a real sophisticated setup in place, then it’s easier to get the opportunities because clients look at you as having a much more credible solution. I think there’s one more thing to touch on with and that is, they look at the consultancies. So staffing organizations are looking at the big consultancies, and maybe placing people with them as well, and seeing how their model works and seeing how much markup they charge and thinking? We could do a good job. We think we could do a better job, we think we could do more cost effectively, because they’re smaller and more agile. So it’s really kind of, it’s mixing up that market a little bit. It’s created a really interesting dynamic where you’ve got the sort of recruitment organizations moving in one direction and the consultancies moving in the other direction. It’s almost like a bit of a convergence in the middle.
Nicola: 14:38 Yeah, exactly. And I think that’s always the point I make that we speak about this model, or this way of working like it’s new. It’s not new. It’s been around for years and years and years. And the larger organizations obviously seize that opportunity years ago and they found it a lot easier to adapt to it when it was coming. Of course they did because they probably they might have already had that arm that worked in that way anyway. But that’s not to say, “You are smaller, you are medium size organizations can’t look at this as a viable option.” That’s why I always try to be really careful. I never want to put people off by going, “God, it’s really risky. You’re taking all these massive liabilities, look at your insurances, make sure you do it properly HMRC are going to look at it. Because it shouldn’t that shouldn’t, you just need to take it seriously and go, “Okay, we’ve considered all the risks, but we’ve decided we are actually going to look into this,” because like you said, we can do a really good job, if not a better job than some of the big organizations out there, which I think they’re right, I think they could just have to do it properly.
Jonny: 15:39 Yeah, I mean, we’re seeing serve our clients doing a fantastic job delivering great results. And there’s lots of business out there, there’s lots of opportunity out there, particularly as more end clients are coming round to this now for large organizations globally, getting things done under a statement of work. People spend hundreds of millions, it’s like usually about four times their budget on contingent workers, for example, it’s a massive span. So all the stuff that they’re all the services, they’re buying, consulting, facilities, whatever it might be legal marketing services, etc, companies are already doing it. But with the changing legislation, like the equivalent of legislation in Germany, the AUG legislation, obviously, I35, 1099 versus W2 in the US, some country, I’d say that places like Germany, the UK, the US are in a similar sort of place in the market, and other European countries are looking at this much more intensely now. But it’s generally the same sort of principle. So companies are kind of used to it. But they’re getting to a point now where the other types of resourcing are blending in with this. Not so much crossing over. But it’s almost like, sometimes it’s better to use this model over here. Whereas previously, that was always just contingent workforce, or it was always just permanent hiring, because how markets changed, half the time, you can’t find the talent. And contractors carry more risk now with the way that legislation has changed. It’s just a different dynamic. So when an organization is looking at how it can get stuff done? They are much more conscious now that actually we could engage suppliers under a statement of work. And they might be small suppliers. They might not just be your big four. And but as I said, there’s some areas of convergence and I35, as a piece of legislation. Obviously, I’m not a legal expert, but as a piece of legislation, it always seems to me like it’s got slightly more gray areas than some. But what do you see as the kind of, or what do you think people see as the key gray areas where you look at the I35 legislation and how that crosses over with Statement of Work delivery?
Nicola: 17:48 Yeah, so I think that kind of you’ve got your legal perspective on secular work, and then your I35 perspective. So, I think the legal issues around it is the fact we have very little case law, when we’re talking about contracted out services. At the moment, we’re just very reliant on HMRC guidance as to what it looks like or what HMRC consider it to, if you look online at some of their guidance documents, they give you all these scenarios, “If Jill does this and they try and really simplify it. But we don’t have much to go by legislation wise, we only have that guidance that kind of scopes out. I think that there’s one case, Tilbury consulting, I think that touches on it briefly. But yeah, we really don’t have much case law or legislation, we’ve just got the guidance that they’ve given. So from the guidance that they give, they just try and spec out the differences. So your kind of labor supply, the client contracts for the workers, they manage the project, they work as part of a team, they might work on client premises, contracts about services totally different. They contract for the task or the deliverables, the service provider, providing that their services manage it. And yet they work on the kind of services, they usually work on their own premises, etc. So they do try and give you some guidance around it. But that’s where the gray area comes from the legal perspective is, we just don’t have much to go by. So we just kind of have to take what HMRC have given us and apply it. I35, so from my point of view, it originally came when we first saw it, mentioned when they started talking about public sector changes and everyone picked up on it straightaway go, “Brilliant contracts about services, they’re out of scope of it.” So everyone’s gonna move into this way. And I think HMRC obviously picked up on that that happened. They further clarified it with public sector and then they gave him more guidance around it when it came into the private sector. But the manuals that they’ve given now, do specify that when a person receives a fully contracted outside services they don’t need to apply off payroll legislation. I think it’s also brilliant. But if you look into the nitty gritty of it, you do that, the off payroll legislations, if there’s limited company contractors, they’re.
Jonny: 20:13 Doing it.
Nicola: 20:14 Yeah, exactly. I’m not going to go down the route of when a contractor is working under a statement of work solely themselves to directly to a client, because it is a gray area. And there is some guidance from HMRC, that actually says, they didn’t even apply the off payroll rules, because they don’t think they apply. So but we’re not looking at that, we’re looking at mainly when recruiters are looking at this way of working, so recruiters are going, “Okay, we are now going to go and deliver the services. We have contracts that work underneath of us. And let’s not look here at when you’re employing the contractors, because then we don’t need to think about off payroll,” we’re solely looking at a company is delivering services to an end client, and they’re using limited company contractors. So, I35 applies, because there’s B or C contractors. So who is responsible? And it is the service provider providing the services that suddenly then has to consider if it’s within scope of I35 or not. So hopefully, that kind of clarifies why I35 is even anything to do with this. It’s because it’s really appealing to our clients. Because they can go, “Okay, brilliant, we suddenly, this really annoying piece of legislation that suddenly made us responsible for making these determinations, we don’t have to worry about it anymore. We can basically contracting out by just working with that company,” where they kind of muddle your waters is where clients are still going, “Oh, no, but we’re still going to do these status determinations.” It’s like, “No,” if you’re going to look at this, which is a viable option, and I35 does still apply, then you need to understand who is them responsible you that you need to trust in your supply chain, that they’re doing it properly, you do your own due diligence, you’re comfortable with who you’re engaging with, and trust that they are that is the party that is then going to do things properly. Because if that end engager is carrying out status determinations. If that middle person that the service provider is carrying out, I don’t know, it’s just become so confusing. And you can imagine when HMRC look at it and go, “Hang on. We’ve got status determinations flying around everywhere.” And I think they have made it quite clear now with what they’re trying to say. So I always make the point when we’re talking to recruiters, if you are looking at this way of working, don’t just go, “I35 doesn’t apply great. No, you have to consider that, you are probably the end client now in that chain. Therefore, you probably have to be making terminations.” But if you’re doing everything properly, it’s a very outside of I35 way of working, isn’t it? It really does look favorably between towards working outside of I35.
Jonny: 23:07 Yeah, if you’re doing a genuine statement of work, you’re caring, and it’s being delivered in a manner that is consistent with how its contracted, then, absolutely a statement of work is a completely different thing. You’re paying a company to deliver an objective, rather than engaging in individuals to and paying them for their time. So yeah, the devil is absolutely in the detail. And I think, when you look at the demand for work to be done. So, we both know, lots of people in the recruitment industry, majority of people that I know in the recruitment industry are incredibly busy at the moment, there is massive area of demand. And it’s a really candidate short market, it’s really hard to find the skills and all that something. So there’s a lot of work to be done. So there are opportunities for some of this work to be delivered by supplier companies and consultancies under a statement of work, it doesn’t have to be individuals engaged in a time materials basis. So there’s a huge opportunity to apply this. But I think, when you were just talking about the statements of work there and the parameters around them and where that sits outside of I35. I think one of the other things that contributes to this sort of slightly gray areas in terms of trying to capture it in like an HMRC definition is statement, it’s so varied, it can apply to so many different things, really small tasks delivered by a really small supplier to a massive, giant, maybe even multi-year project delivered by big consultancy. So there’s a lot of variation there. So I think when you look at all of these things, and this is something that for us because we are solely focused on statement of work, lifecycle management, and our system is purely designed to support proper state Statement of Work workflows, which is obviously, a benefit to people that are using it because they’re being channeled in the right direction to make sure that they’re doing it properly. And that’s where I think this fact that the statement of work being that document, and that type of engagement, that is almost like, it’s sort of like an island of safety for people in the sense that they need to come back to and does it make sense to engage a supplier to deliver under a statement of work? And if you almost start with that, if it makes sense for that piece of work to be delivered under a statement of work, and you build everything out from that, then you’ve got a really good chance, the best possible chance of doing it properly, and not having to worry about these things, but they have to be considered so there’s a really big need for organizations to make sure they do it properly. What do you think are the key things that companies need to consider when they’re looking at delivering services and work in this way?
Nicola: 25:57 Yeah, so number one, is always going to be, do it properly, isn’t it? Make it actually is what it is. I don’t personally think you can mold time and materials engagement into an outcome based arrangement. So it actually is only appropriate for the ones that really do fit in that way. So, it’s looking at the whole scenario, isn’t it? The commercial reality, it’s what we will say, the commercial reality of the arrangement, they kind of really need to heavily scrutinize it, that is the same as when we’re talking about I35. In general, it’s not just in the contract. Contract, we label it. If you provide your labor, you’re providing labor. And I think this is where HMRC are getting quite hot on it again, and this isn’t to put people off looking at working in this way. But don’t think it’s gonna just go under the radar. They put in one of their manuals. If the reality, it’s same. Same thing, if the reality of the contract is a provision of labor, that’s not going to stop I35 from applying. So, basically make sure you do it properly. I don’t know if you are aware, because we saw the compliance letters, it’s probably month back now. And the compliance letters that went out to the banking and finance industries, basically, fishing for informations, what are your processes? Are you doing everything properly? But one of the things that they touched on there is, are you delivering any outsourced services? If you are how are you doing it? Or are you receiving any outsourced services? If so, how? So they’re basically saying, are you Mr. Own client receiving outsource services? If so, we want you to tell us how? So it just shows that they are aware that this is happening. They obviously want to pick up on the ones that aren’t doing it properly. So if you’re doing it, just make sure you’re doing it properly. And I think that’s kind of what we’re always trying to get at, isn’t it? If it looks like it’s labor supply time and materials, walks like a duck, quacks like a duck, [inaudible 00:28:08] say, as a duck, kind of the point that I’m getting at is, you just have to, I think it was they said something about the systems and processes that you use around off payroll. And the processes you’re using, if any of the services are outsourced, so they’re looking into it. So you just get, like I said, you need to make sure it’s, you’re doing it properly. Therefore, the point I made at the beginning, I look at it as if you’re starting up a new business, it’s just the easiest way of doing it. I’m not saying you have to start up a new business. I know a lot of people did actually say, “You know what? We’re going to start from scratch, new limited company.” If you look at it as in, what would you do, if you were setting up a new business? You wouldn’t just quickly decide it in your directors’ board meeting, download a statement of work contract offline, and then send that to your client. And then contractors have their Monday, you would do it or probably and then that’s obviously where insurance implications it’s something to consider same as if you set up a new company, you will go and get insurance for that company. So I think that’s kind of where Kingsbridge has been supporting some of our partners that are saying, “You know what? We’re looking at this now or we really move into this area, or we’ve been doing it for years,” we’re then trying to support them with the insurance side of things, making sure that they’re covered.
Jonny: 29:27 And so when you do support them from an insurance side, or you also consulting with them as part of that on their contracts or does it go to that depth? Or is it more a question of looking at their process and their setup and everything they’re doing and then pointing them in the right direction of the right insurance for their particular setup?
Nicola: 29:46 Yeah, so we’ve kind of got different parts of the businesses that would kind of help for different parts. So you’ve got your I35 team. So if a business was looking into setting up or working in this way, you kind of got out I35 consultancies, usually would be Andy Bessie, usually at the higher end of when you’re looking into working in this way, and he can kind of give specialist advice around it. So he would embark, he would kind of advice on that. But then you also have a broker. And that’s the whole point of having a broker, you can send a contract, you could send an engagement that you’ve had and said, “Can you have a look at this as our insurance gonna cover us?” But also, they can advise on or basically changing the way that you are described in your insurance policy, your business needs a different description. That’s the key provision is, in our Kings policies, you are described as a recruiter, offering employment services. So you need to change what you are being described as if you are now a consultancy, offering IT services, etc. So it can be done. It just needs to, you might need to change. That’s kind of like, the key first step, but like I said, you’re setting up a new company, they would say, what kind of services are you offering, you’re not just offering recruitment services you’re offering, whatever services is that you’re delivering to client?
Jonny: 31:13 Yeah, and I think the idea of that kind of start from scratch mentality, whether you’re setting up a separate limited entity or not, is a really good point. Because, as you said, you’ve got the commercial reality of business planning out and making sure it makes sense working out when it’s going to start to tip in your favor, because there are probably going to be some upfront costs. But obviously, in the long term, there’s a very lucrative opportunity out there. I think for organizations understanding the true liability on delivery, if they are using this model to deliver product and consulting services, and actually deliver work themselves, maybe back that off to sub suppliers, associates, contractors, or however they’re doing it, somebody needs to be in charge of that delivery. So there’s not only the financial risk and the legal liability around delivery, as per, however, they’ve structured their contracts. But there’s the practicalities of the kind of operational nature of it as well. And this is where we’re seeing, if you’re a program delivery specialist, and you’ve got experience of working in the kind of staffing industry, then you’re probably in pretty high demand right now, where organizations are looking at kind of like internal PMO functions or even just kind of like, a central linchpin for their offering, who really understand the project delivery side of things, which is an interesting, it’s an interesting direction for the recruitment industry to go in. But they’re very capable of doing it. And we’ve seen people doing that really well. And alongside that delivery, kind of risk, as it were, is making sure, again, that it’s being delivered in the way that it’s supposed to be delivered. So you could have a lovely segment work and all things considered, it looks like it should be fine. But if you’re not tracking milestones effectively, and you’re not looking at where changes are made, and you haven’t got an auditable process, then it’s quite difficult to back that up. And it’s actually quite difficult so on top of it, so I think that’s a really important part of it. But the other side of it with kind of separating it out is the fundamental fact that people who are purely on the recruitment side won’t necessarily understand this area particularly well. Certainly, initially, there’s a real kind of education process required within organizations that do, do this. But there’s a huge benefit to that. Because if their recruiters are all really ofay, with this offering, they are going to spot opportunities, they’re going to be talking to delivery managers, they can be talking to procurement, they can be talking to HR within organizations, where the opportunity may arise for it to not necessarily be a perm head or a contract placement, it could actually be that there’s a project that could be delivered, or there’s some statement of work to be managed. So I think that by giving it some credibility and building its own, even if it’s just a separate offering, that’s clearly defined with the right things put in place, then for a salesperson who’s on the recruitment side, they can get their head around that. And they can potentially add some real value because they’ve got their connections in with all these customers, which is where the big opportunity is for these recruitment organizations.
Nicola: 34:21 Definitely, I think that most of the recruiters that I speak to are fully capable of doing this. And it’s not to belittle them at all by saying, “You’ve got all these considerations.” But I think what you don’t want to see happen, which like I say, we have seen happen is, them thinking it’s as simple as and I know this from being at Kingsbridge where I’ve had people email me, probably from pre-APSCO, just saying, “Hi, do you just send me a copy of your statement of work contracts? We’re going to do this now instead.” And I think that’s exactly where the issue lies, is just people simplifying it way too much. And it’s not only because we kind of start off, “Okay, yes, looking at insurance for your business, you’ve got to be accurately described in your insurance policy, what potentially is not going to cover you? At the moment, probably, if you’re under a Recruitment Policy, it’s covering your recruitment activities of finding workers and then sending them over is absolutely not covering you to deliver X services.” So I think that’s kind of key step one is, let’s have a look at what you’re covering there. But then also is the actual statement of work contract. And I think we’ve discussed before some of the liabilities in there are huge. And, of course they are because you are responsible, and it’s so clearly defined, you’ve got your milestones and your deliverables in there. And you usually paid on satisfactory performance of those, it’s so clearly scoped out that therefore, it’s even easier for a client to say, this hasn’t been completed. And you’re then potentially on the hook for those liabilities. So, yes, you’ve got your insurance that you need to make sure it covers you for the work. But then you also need to make sure that your insurance is covering you further liabilities that you might be taking on. And I’ve seen all different amounts out there. I’ve seen unlimited liabilities in some of them. So it’s making sure that each part of your policy is going to cover you. And that’s hopefully where most recruiters can speak to their broker and say, “Can you have a look at this agreement that we’re signing up to? It’s, we’re agreeing to X, Y, and Z liabilities. Is our insurance going to cover us?” And then sometimes they might even make the decision where there is a really high liability in there. And they can make the commercial decision of the insurer going, “We only cover you up to 5 million, you’re taking 10. Do you want to do if the insurance isn’t going?” No, you absolutely can’t do that, you can, but your insurance is only going to cover you up to a certain amount.” So then you can kind of see the business risk that you’re taking on. So you’ve got your insurance company is your hole that you need to consider. But then you’ve also got insurance to make sure that those liabilities that you might be taking on are accepted. And then that flows through to what are you passing down to the contractor because we know, mostly recruiters’ standard they sign up to terms of their client, they would push back as much as they can and go, “We are absolutely not taking responsibility for the services here.” That’s not what we do with the recruiter, push back on these terms. And then they have their contract or contract where they go, “You are actually responsible for all of the services that you’re going to deliver.” So that’s why contractor insurance becomes a vital part of this as well. Not only is the recruiter probably taken on a lot more responsibility than they used to. But you want to make sure that the people that are delivering those services have adequate protection as well. So it’s really varied when you get into insurances. And then you have I35 insurances, which maybe we’ll touch on today, because it’s kind of going one step further. But I’d say when you’re looking into that model, and how do you make sure it’s done properly? That’s the bits that you need to consider, you need to consider your business insurance, you need to consider the liabilities that you’re looking at if they’re covered. And you also need to consider your contractor insurance to make sure that they’re all covered as well.
Jonny: 38:30 Yeah, that’s really interesting, I’m sure you’re probably seeing some pretty significant demands being placed on recruiters that are looking to do this by their clients, in areas the recruitment organization is just not used to, and potentially levels of risk and levels of liability cover that they need that are just completely different order of magnitude to what they normally dealing with.
Nicola: 38:53 Exactly that.
Jonny: 38:55 I guess the other thing is it’s just staffing agreement contracts or MSP RPO contracts, or just recruitment terms, or however, even if they’re specified by the client or specified by the recruiter, most organizations are pretty ofay. With all of that, there’s some variation, but it’s well tried and tested. It’s a well-trodden path, going back to your comment earlier, there’s a lot of case law when it comes to just like standard recruitment processes, but just the type of agreement that these organizations are going to be having to look at putting in place or dealing with where the client may dictate along those terms. It’s just a completely different setup really, isn’t it? So, it’s a whole set of problems that they haven’t had to face before for their legal teams, for the people selling it, for the people delivering it. And I think, when we look at things like I35, that has been quite a big adaptation requires and things like GDPR and dealing with Brexit in some cases, but I personally feel like this is a bigger adaptation. In some ways, it’s a more strategic adaptation. But I think that it will be very well worth it for the people that can do it properly. And we’re seeing a definite trend towards this, where people are really looking to do it properly, they made strategic decisions to invest, they’re hiring the right people, they’re doing their due diligence in the background, and they’re setting up from the ground up as a separate thing. And I’ve seen some really smart people in some really good organizations do a great job of literally building it from the ground upwards, getting all the legal stuff in place, all the financial stuff in place, the right delivery teams in place, putting structured software in place and a kind of a tech stack to take them right through the process and fit in with what they’re doing to deliver it. So I think it’ll be huge advantages for those that have done it. But it’s not just a question of taking a contract and sticking a statement of work on top of it or doing something very standard.
Nicola: 41:00 No, and I think that thing is so much bigger than insurance. You can’t just change your insurance, and go, “Okay, we’re fine now.” Same thing, there’s so much like you said it, what technology you are using? What advice have you given your legal teams? And I know, because I’ve been in they’re so used to going, you kind of get into a bit of a pattern of looking at contracts and going, “[We don’t accept].” They kind of have to take a step back and go, “Oh, you obviously need to,” they need to start accepting some of the liabilities, which they’re just not used to at all, they’ve never done that before. So, it’s a completely different way of working. And it’s not as simple as we’ll just get the agreement in place, we’ll just get some new processes, and we’ll just get some insurance to cover it, there just considerations that you need to make. It’s actually the company working in that way and doing it properly. So yes, okay, we’ll tick all the boxes of making sure it’s genuine and making sure we’ve got good processes. And like I said, some of them have got great people that have started working and delivering those projects, and making sure that it is all done properly. And I think that’s where it’s really vital, isn’t it? It’s the people that are doing it, that are offering kind of most value. And that’s where we’re seeing it come from, it’s always going to grow. I mean, it’s quite frustrating where we just did a last week, and we did a CIPD event. So we were going out and talking to a lot more and clients now. So we still work with our recruitment partners. But obviously, end clients are so responsible for these decisions anyway. So actually getting in front of them has been really valuable. But it’s frustrating with I35, that they kind of thing, “Oh, everyone just moved back to either agency POA or just take them on directly.” It’s just not the way the world is moving. So I think we all have to understand. And I think to be fair, the recruitment industry does understand, just because some of these changes have happened such as I35 and COVID, Brexit and all of those kinds of things, doesn’t mean that everyone’s going to suddenly go back to being an employee, we are so far removed from that now. We’re just making sure that everyone is adapting and doing it in the kind of the best way that they can. So as simple, as we’re not taking on contractors anymore, because of off payroll, which obviously we hear all the time from end clients. It’s just educating them to say, “Okay, you feel like you’re taking that risk away. But what added risk are you taking somewhere else?” And I think that’s the bit that they’re not quite sure about. And they’re trying to get their head around. They’ve been offered things under the sale, we’re going to actually start to look at some outsource services. I think it would have been a couple of years that we had some statistics from, which would be way out of date now. And COVID probably had an impact on those. But if you could see the way that they were looking at Statement of Work offerings growing over the night, it was over the next 10 years, I think but it was pre-COVID is just going up and up and up and up and up. And I think there’s no denying the fact that, that is a way that we’re moving to. It’s not to say, “Recruitment is dead. We touched on the beginning,” I don’t see that happening. But this is definitely something that a lot of organizations are now taking very seriously. And if they weren’t doing it before, they’re getting advice on how they might do it going forward. And I think that’s where we’re just trying to support as much as possible, not just advising on insurance, but advising on all the other things that we’ve kind of gone through, how good are your processes, and to make sure that you’re doing this properly?
Jonny: 44:46 Yeah, and ultimately, it comes back to the fact that it’s still getting work done. Organizations, look at how busy most companies are now. And we talked about all the different factors and people saying, “Well, we’ll just do a blanket decision on no PSCs in the supply chain, everyone has to go [inaudible 00:45:04] through an umbrella company or they’d go permanent. Well, you’re not going to end up with the same level of resource that you had before. because not everyone’s going to do that it’s not going to suit everybody. It’s not necessarily going to be feasible and when you start running, like cost benefit analysis against it, is it more expensive to outsource it? Maybe, maybe not. If you’re getting work delivered to deliverable outcomes to clear objectives, that’s potentially more cost effective, if you have a situation where people are employed on a time and materials basis, but they’re not well managed, or their output isn’t well measured. If you’re paying a consultancy to deliver a piece of work you’re going to have, the person who’s defining that work is going to have to really understand what the company’s strategy is? How what they’re doing applies to that company strategy? How that breaks down into things that they need to achieve, and how that breaks down into what they’re going to ask your supplier to do for them? That’s very different, just having a big team sitting there cranking away. So it always comes back to it’s the right work delivery model for the piece of work. And as I said earlier, if you start with that decision around, okay, what is the task? What is the resource requirement, and what is the most effective way for this company to get that done? Then that’s where you can make the sensible decisions, because it might well be, that’s permanent headcount, it just makes complete sense for it to do that, sitting on the headcount, and we should make that decision, we should go for that and hire and go out of our way to hire the best people and train them well, and look after them well, or it could be contractors, in which case, they need to be compliant contractors, which is perfectly doable with the right proven partners and the right process, etc, that can be done. If it’s best to deliver it under a statement of work and outsource it, then that’s an avenue that companies need to have available to them. And that’s where, again, this is a big change for staffing organizations, but they’re still helping their clients get work done. And if they can facilitate this model, yes, they might be bringing in smart people who come from like a project management, program delivery type of background. And that’s culturally quite different to a standard recruitment kind of staff, but they can fit really well together. And we’re seeing that happen, where you get these specialist divisions that are designed purely for this kind of consultancy provision model. But they can be really well supported by the staffing side of the business when it comes to actually fulfillment. So as I said, when you look at the convergence between recruitment organizations moving up the value chain and big consultancies or consultancies, moving into more other services, staff augmentation, and they obviously augment a lot of their work delivery anyway. And this kind of mishmash, where clearly there is work that needs to be done, someone needs to take responsibility for it. And somehow the person who’s taking responsibility has got to make sure that it gets done by people with the right skills. So these are the sort of problems that decent recruitment organizations are actually pretty well set up to solve, they’ve just got to adapt to that different front end to it. And they’ve got to make sure they’re building a whole new process, and they’ve got to make sure they do it properly. One of the other things that I found quite interesting is we’ve seen some organizations that are getting started in this area, really partnering with their clients, their clients really partnering with them, in the sense of almost helping them get started, where the client has got a problem. And the recruitment organization can potentially help solve it for them by taking on the delivery of a project, for example, and being able to then take the risk on resourcing that, where the client might not be willing to do that, or the client, there might be reasons for the way that they need to spend their money, that they have to do it, and they have to outsource it. And we’ve seen some examples of that, where that has been a really interesting way where people have got started because the clients been patient, they’ve had a clear indication that there’s work available for the recruitment organization, and therefore, it’s a clear decision for them to say, “Okay, well, we got this opportunity, there’s going to be worth X, we need to invest upfront, take a bit of a hit, do it properly, because then there’s a really great opportunity for us.” And that’s an interesting way that I’ve seen some people get started. But for others, they’re just plugged into the market. They know what’s happening. They know there’s this shift. And they’re taking the strategic action, maybe even before they’ve really started to go and sell a proposition.
Nicola: 49:33 Exactly. I think you’ve picked up like clients are the biggest issue, accept it. It’s not that recruiters need to adapt into this way of working, it’s that they have the option to adapt to this way of working if they want to. But I think the biggest issue that everyone has at the moment is talent shortages, and it’s been an issue for ages and I think it’s going to continue being an issue going forward. So why if you were an ending [Gabriel], would you restrict yourselves? And I guess it all boils down to risk. They feel that their risk appetite is really low, therefore, they’re not going to do X, Y, and Z. But if every ending [inaudible 00:50:11] did exactly what you just set out and said, you know what? For people where we feel like we really need permanent staff, or we want to take them on directly, we have the option to do that. I guess our point around that is that’s becoming quite restrictive, because people don’t necessarily want to work in the way, a lot of people do. So that it’s still there. But they’ll struggle. So why would you restrict yourself from working in the way where you go and actually hear we’ve got a pool of people that we feel can be agency workers, and be pay rolled by our umbrella company or our recruitment partner. And but we also have contractors here that we now make sure we’re compliant. And we have a good process in place around that. But we also sometimes outsource certain services, because we feel that it’s easier to do it. Yes, there might be a higher cost implication, but we feel like it’s worth it in the long run. And you think if an end client could just look at it in that way, and go, “I’m just not gonna restrict myself because what do we need more than anything, we need good talent. And this is the best way we can do it.” And I know it’s not as simple as that, because you speak to end clients and we get pushed around to have like said, HR, it might be ahead of tax, or it might be a finance. And no one really knows where all of these areas set, if they’re big enough, and they’ve got a whole procurement army in gray. But it’s so varied. So I think we’re kind of always banging the drum that, our biggest issue at the moment is talent. Therefore, what can we do about it? And how can we support you and how can the whole market support you in general? And I think that’s like you said, you get a lot of good recruiters that really partner up with their clients and say, “Okay, look at what they need.” And then they can try and spec it out. And that way, make sure that they’re covering it as best as they can. But yeah, we can’t deny the fact that this all boils down, doesn’t it, to talent and getting worked on, that’s basically what whether we’re talking about statement of work, I35, recruitment in general, insurance, all of these things, clients need the resource, how can we make sure that they get it without them feeling that they’re taking on a kind of massively added risk? And I think that’s what happened with I35, they just got so nervous. And they said, “We’re not going to work in this way.” And what they didn’t do is look at the implications that it has not just talent wise, employment right implications, supply chain implications. We’ve seen all the stuff around the umbrella companies and kind of everything that’s going on in that market. So it’s just not simple enough to say, “No, outsource services could never work for us, because we’re this, no, we wouldn’t take on them to companies anymore because of I35. So we’re going to pigeonhole ourselves only to do this.” And then they sit back and go, “Well, I’m really struggling to get people at the moment.” But when you get the recruiters out there, which, there’s so many of them that are really adaptive, and kind of supporting their end clients directly, I got taken along to quite a few end client meetings when I35 was first kind of, we thought it was coming in 20. So we were going along to a lot of end client meetings. And I think that’s just amazing from their recruiter going out and go, “We’re gonna take insurance with us, we’re gonna take umbrella companies, pretty much, we’re gonna go in and go, this is everything that we can do to help you,” that just so big from a recruitment company saying, “You’re not only outsourcing us to help find people, you’re outsourcing us to help kind of identify risks, and all those...”
Jonny: 53:49 They’re solving problems, aren’t they? So is that problem solving mentality? That is just, the problems to be overcome. But they’re worth overcoming. And that’s for the end client, that’s for the recruitment organizations as well. It’s not going to be easy. But if you can adjust to it and invest in adapting properly, then it’s absolutely worth it. But just to pick up on another point you made earlier about, which I think is quite often easy to miss is. you’ve got to think about how people want to work? And there are different ways that people want to work, some people want to permanent jobs, some people love being a contractor, regardless of I35 or similar legislation, other countries, that is the best thing for them, then you’ve got things like the employing consultancy model. And I had Jessica Holt from Resorts Solutions recently. And that was a really interesting conversation just about that model and how that can work? And then you’ve got just this whole growth of outcome based work delivery models, ranging from the gig economy, task based, it’s massive now, I remember being at the SACWS Summit and the gig economy conference that they do back in 2019, and looking at all the growth stuff around that, but COVID accelerated that massively in my opinion and just remote working just more flexibility and just COVID, as also just made everyone think outside the box or outside the box is possible. How many people you’ve spoken to you sort of said, “Oh, God, we never would have thought, it’d be possible for our business to work in this way. But it’s absolutely fine.” Doing video calls, people working remotely, people have been more flexibility, it’s brought a lot of good things, in terms of adding more flexibility to the way that people can work. And so when you look at ours or isn’t it, a bit of a shame, or is everyone gonna go back to the way it was, but they don’t have to, and actually, the world was moving in that direction anyway, just where people are have choice of how they apply their skills and abilities to earning money and getting work done and engaging with the type of work that they want to do. So for recruitment organizations who are all about helping end clients fulfill requirements. This is another way that they can help them fulfill requirements. And those clients will also probably use the odd marketplace in the future, a digital marketplaces and things like that, as well as other avenues. But I think as you say, with this adaptability, the recruitment industry is very much alive and well. And they’re trying to solve their own problems around talent shortages, but they’re also the problems of their clients. The clients also have the problem of just needing different avenues to get things done, because regardless of I35, there are going to be situations where outsourcing a project to a company to be provided on deliverables basis, is the most effective way to do it.
Nicola: 56:55 Yeah, exactly. And I think I mean, we have dinghy insurance, who is part of the Kingsbridge group, and they specifically insure the gig economy. It’s kind of like a switch on and off insurance kind of thing, because obviously, they could work for a few hours or a few days, or here and there. And that, yeah, the growth there is just ridiculous, because we can all see where we’re moving to and COVID, just accelerated that massively. It’s not to say that there isn’t still [inaudible 00:57:28], if you speak to any [inaudible 00:57:30], they say, “Yeah, we’re doing really well, at the moment. It’s huge.” So it’s definitely not to say, that’s the avenue still isn’t there. But I just find it really frustrating. Never recruiters, but when you’re speaking to end clients, and they just have absolute blinkers on to, “Oh, yeah, well, limited companies had it good. Whilst they had it, and no longer,” and it’s like, “Oh, God! It is a lack of education. And some people would shoot me for saying this, it’s not a lack of education from HMRC. Because as hard as they could, they really did try this time to educate, and they’re probably happy with what’s happened obviously, you can imagine the kind of increase in tax that they’re now receiving, but everyone did try and educate him this. And that’s why we will just continue to do it. Because what? Seven months on now over. Yeah, seven, just over seven months and I think we can see a slow kind of incline of contractors increasing, but nothing like it should be. So I think we kind of need to carry on, I’ll carry on talking around this model around PSE contractors, the talent shortages that are out there and just kind of continuing to educate end clients in this space, because I think recruiters have been learning about it since 2017, if they’re in the public sector, but they have been educating themselves around this for so long now. That it really is the kind of carry on the pushing it to the end clients. And as soon as you get one end client that listens, and says, “Actually, I think this can work.” We can sit here, so many kind of good stories where they’ve explained the way that they’ve kind of worked with a client, and now they’re doing X, Y, and Zed. And you can see that it’s just working so much better. So I think that’s kind of from our point of view, where we see the market going, gig economy is going to continue to grow, stay at work, businesses are going to continue to grow. All of our recruitment partners. Businesses are just kind of through the roof at the moment. I think the struggle is finding the talent. So it’s just making sure that we can open those doors as much as possible.
Jonny: 59:46 Yeah, you just need all options available.
Nicola: 59:50 Yes.
Jonny: 59:51 And that’s where it’s not about one thing, one model being better than another. It’s just the fact that people have access to all these different models. And companies can have access to all the different models and the international reach and remote reach that they can now have that they never had before. But yeah, I mean, for end clients, ultimately, if they don’t adapt, they’re going to lose out, because they just won’t be able to get the work done. And actually, it’s like the speed of technology change now, like the speed of technology innovation is exponential, the way it’s accelerating. So for companies that are slow, they’re gonna suffer double the pain that they would have done 10 years ago, for example. So yeah, I just think that will be the driving factor, that forces people to adapt and to accept the changes happening as organizations, they need to be faster in the way that they adapt how people work? What models are available, the shortages and how to overcome it, and how they can solve these problems? So yeah, I think it’s something that will change pretty rapidly. But if you look at it on the basis of, “Okay, we just over seven months on from I35 reforms going like, it’s not actually that long, really, isn’t it? And if you think about all the chaos that happened in the lead up to it going live, and still a lot of people right up to the last minute thinking that it maybe wasn’t going to happen and that’s sad. For some people, that was quite last minute, for some organ for a lot of organizations, that was quite last minute so the fact that...
Nicola: 1:01:22 Some of them now, it’s still, some of them now, like, what’s this again? I can go into a bit more detail. And you’re like, “Okay, a bit late, but starting somewhere.”
Jonny: 1:01:33 Yeah, exactly. And you see these fines coming out in the public sector, DWP 83 million, or whatever it was, and various other parts of public sector.
Nicola: 1:01:43 Carry numbers.
Jonny: 1:01:44 Yeah. And so I think we will see an accelerated acceptance of the fact that things need to be done properly, people need to get their ducks in a row, they need to look at other models, but also where the changes and where organizations have made changes to cope with that, that have shut out some talent or dropped off some of the resources because safety first, no PSCs, they’re not going to have noticed the drop in productivity until now or the next six months. And that is going to be something that’s really going to affect organizations that have taken a very risk averse approach, which is fair enough, but you haven’t provisioned for the fact they might have had a drop off in productivity.
Nicola: 1:02:29 There’s so much, I think you’re exactly right, seven months just isn’t long enough, because of the situation we’re in because of COVID and because of Brexit, they are just so unaware of how much I35 impacted as well, because it’s just so easy to go, “Oh, it’s because of COVID. Yeah, that’s why we can’t find talent at the moment.” We gave a statistic around a survey around HGV drivers, I don’t know if you saw it, but it was just around how I35 was one of the key reasons that a lot of contractors moved out of that space. Now, I’m not trying to say that HGV drivers walked outside of I35. And it’s a shame that they’ve all left because of it, because of the changes. But I think there will be so many organizations that were not aware that I35 was impact there at all, they would have gone on it’s because of COVID and it’s because of Brexit. And I think it was over half of the contractors that responded to it said, I35 was their reasons for going. So though it wasn’t the only reason, it’s a key reason. And I think it’s overlooked so massively. And yeah, maybe when we’re a year and I think when we get to April next year, and everyone starts looking at this again, because it just happens every April, we’re suddenly become really busy again. I think maybe they will say, “Okay, we have actually realized it,” and we do a lot of research. I don’t think we’ve issued our survey results yet. But we obviously have a huge database of contractors. So going out to them and saying, “You shut down your limited company or you change your insurance when you close your insurance. What are the reasons?” If you look at where I35, it’s absolutely huge. But I think the HDV one is just good, because it’s a topical subject that people go “Okay, yeah, I know actually what happened?” And they suddenly listen, and they just weren’t aware. So when you’ve got kind of the papers actually talking about I35. We still speak to so many people that go, “What’s that?” And it’s like got it, that’s why we’re just have to continue educate and continue supporting recruiters in this space. And then just work out kind of how the markets going to play out in this regard. Because I think we touched on earlier, HMRC are going to be hot on any sort of model that’s disguised whether they have the resources internally to manage, people can dispute but you don’t want to have a red flag, you don’t want HMRC to be investigating you. So they are aware of kind of disguised setups. So organizations do need to be really careful that they’re not doing that, even if they didn’t mean to, and they just need to be really careful that they’re not doing that. But we’ve said it many times, during this chat, recruiters will always diversify and adapt, we just need to get clients to follow with them and adapt in their own way, so they can continue to access them.
Jonny: 1:05:37 Yeah, and that’s why I love this sort of conversation, because I totally agree with you that it’s all about a continued education process and communication and getting the message out there and just kind of creating discussion about this stuff because it’s not like its magical witchcraft, or something like that. There are the right ways to do things and the wrong ways to do things. There’s effort involved in any new thing, we are adapting to something. But there are ways that organizations can really do as effectively, and as a way that recruitment organizations can really support them effectively. So that’s why it’s great to get your take on it. And from your expertise and your particular angle on it, I find it such an interesting kind of conversation. And in fact, one thing I was going to just drill into as a detail was when you’re talking about the kind of assessments and who’s making assessments of where people should be making assessments and stuff like that. It’s this issue of who is the client for the purpose of the delivery of the services? What are you seeing in the market in terms of people, how people are handling that?
Nicola: 1:06:41 I think we might have touched on it earlier, the issue I’ve seen is not so much that, there are some people that aren’t aware where they think, “Oh, yeah, actually, we’re going to deliver outsourced services. Now we don’t have to worry I35 is a concern.” But actually, most of the recruiters that I’ve spoken to that have entered into this space are aware that they are now the service provider, and they are making assessments and we’ve got quite a lot. So Kingsbridge have a tool to do I35 assessment. So, obviously, yeah, you have assessed out there. But we have our own tool that’s kind of a hybrid of an online automated tool, but also has the experts that sat behind it, if there’s any kind of inconclusive results. So kind of a happy medium of a manual review that takes time and sets the 83 million issues that we were talking about. So I think, yeah, it’s trying to decide we’ve got some organizations that are using the tool that do consider themselves to be the end client, because they are providing the services in that way. So I think it’s really comforting to know that they understand that. It’s just some conversations that I’ve had, where they’ve said, “Oh, yeah, our client also wants to use the tool or as well, because they’re going to do the assessments as well.” And that’s the confusion, isn’t it? That’s where we spoke about muddying the waters that, that it’s quite clear now, the guidance that we’ve been given, and therefore you don’t want to confuse it by you saying, “You’re the end client, because you’re delivering services.” And your end client also go, “Oh, but we’ve been told, because we’re the end engage, and we have to do status determination.” So yeah, it really trying to clear up that point of saying, don’t get your end clients to do that, it’s not being really risk averse, I know, we all did it, definitely clarified. It’s not the way that it’s meant to be done.
Jonny: 1:08:39 Yeah, it feels like some people are trying to sort of almost like double bag it. But I think it’s counterproductive. But actually, if I was HMRC, it would raise eyebrows to me, because I think, why are you doing that? I heard recently, I don’t know the specifics about it, I don’t know whether it’s an actual thing that someone said to me, something about there being recent public sector case, where a consultancy, one of the big consultants providing services to a public sector body and actually they were using contractors, but [inaudible 01:09:17] client was the end client rather than the consultancy. I don’t come across that at all.
Jonny: 1:08:41 No, I haven’t come across it. I think, it probably boils down to, was it an outsourced service? Because...
Jonny: 1:09:34 [inaudible 01:09:33].
Nicola: 1:09:35 Exactly, yeah. Because I think they have been quite clear, they put it in their black and white in their guidance documents that said, “If it is an outsourced service, you as the service provider are responsible for the off payroll legislation,” I think, because of the way that, I think they started off by saying for contracted out services. The off payroll legislation doesn’t apply. And I was like, “Oh, great,” and then you kind of read that. And it says, so I think it probably is around, is it actually a contracted out service? And that’s when I spoke about, they give all these different examples online. It’s always quite frustrating for the recruitment industry when HMRC give this examples because they’re like, “Joe is a window cleaner, and now like, for God’s sake.” [Inaudible 01:10:24]. So they’ve got slightly better than when I was asked. We always fed back to them to say like, “Here’s some examples of the kind of people that these recruiters supply.” And they’ve got slightly better, but it’s always worth looking on their, at the examples that they give around, “This is a genuine, outsourced service. This one is not, this one.” And like this is where I said at the beginning, I wasn’t going to touch on the fact where a contractor is directly working under a statement of work, because that’s when it gets a bit confusing, because they say, “We decided off payroll doesn’t apply to this, the end engages decided of payroll doesn’t apply to this at all.” I think in the recruitment world, we don’t really need to worry about that. What we really need to focus on is that recruitment company offering those outsourced services, how do they do it compliantly? What insurances do they have in place? What platforms do they have to deliver this because it’s not just as simple as, here’s a CV, and here’s a contract. And then kind of your risk based approach of making sure that you actually speak to your stakeholders, and your risk managers before going on which download a contract and send it. But you can see the industry’s reactive to it, I think we can see that APSCO have started to offer kind of support around it, they have a statement of work part to their contracts now as well. So you can see that it’s definitely a big thing that’s happened in the industry, I guess what comes with that is there’s always going to be models that aren’t quite right, and making sure that they’re aware of it. So yeah, we’re definitely moving into that space, but just say, take further advice before you kind of really start there.
Jonny: 1:12:15 Yeah, I mean, you’re right, definitely, Mellon, the APSCO outsource team are doing a great job around this, this side of it. Just out of interest, in terms of the sort of models that you’re seeing staffing companies kind of adapt to in this area. Is the majority of it that kind of project and consulting service delivery or is are you seeing it more around the management of SoW engagements for their end clients, where the clients, the loads the engagement, but the intermediaries kind of, administering or wrapping their arms around it in a tri-party agreement?
Nicola: 1:12:52 I think it’s usually dependent on size, from what I’ve seen, we’ve got some of our big partners that offer kind of, your RPOs and MSPs. And they’ve kind of offer it in their way that they’ve always been able to kind of package up work. And then what I’ve actually seen is, it’s actually more the kind of smaller, medium sized ones that have set up a new company and a new brand, mainly the ones I’ve spoken to as being kind of in the IT world, but they are actually delivering the services themselves as under that new brand name, X, Y, Z limited, we deliver IT services, and therefore they’ve had insurance that covers those work that they’re doing. And then they have contractors engaged under that. So I think I touched on the beginning that sometimes they’re actually employing the people, and then they go and deliver the services. But sometimes they’re using contractors. And that’s where we kind of go into the realms of I35 again, so, from my kind of perspective, in the market, it’s been a split between kind of how they offer it as a whole, which usually comes down to the size of the business and how long they’ve been doing it for like says some have been doing it for years and years. And this isn’t new to them at all. Others are slightly newer doing it. But so far, I mean, you would have a probably a better understanding of the market in this space, but the ones that have started it and are doing it properly. And to be honest, they’re probably the ones that I speak to because no one’s really going to contact us and [Inaudible 01:14:25] really doing in a really dodgy way. And they’re doing really well. And I imagine you’ve seen that as well, if they’re doing it properly, and they’ve engaged with all the right people and got all the right platforms. It’s actually a business that’s flying for them.
Jonny: 1:14:41 Yeah, once they’re up and running, it’s a huge area of opportunity. And, as I say, if once they’ve got a clear proposition and everything really nicely lined up, they can properly educate their sales teams. And then you’ve just got this amazing access into an existing client base that most of them will have some sort of problems or opportunities in this area. So, yeah, I think it’s gonna be an amazing area of growth. But just on that note, just to kind of wrap things up, if you had to make predictions as to what we’re gonna see, bearing in mind, as you said, the kind of anniversary of I35 reforms coming in, in April, over the next 12 months, what sort of changes do you think or what sort of trends do you think we’re likely to see?
Nicola: 1:15:23 I wish I could say that we’re going to limited company contracts with PAC workers are going to just come flying back. And everyone’s going to do things properly, and I’ll get their processes sorted out. But I actually think it’s going to be a much slower recovery. I think, actually, in the public sector, we had quite a quick recovery, which is surprising. But a lot of the kind of public sector were a bit more reactive, and basically suddenly went, “Oh, crap, we’re really struggling to get contractors here, let’s look back at this.” But I think Brexit and COVID has a lot to do with that, because that I don’t think they quite understand yet the impact that I35 has had on their business. So I think it’s just slower in saying, “Okay, why are we really struggling?” A company just keep blaming COVID or Brexit, but then actually, when they realize, “There’s probably actually quite a big pool of talent in the UK that we could have access to, if we just cleaned up some of our processes.” I hope that’s when we’ll start to see it, slowly, kind of coming back. I think the whole kind of statement of work piece is going to continue to grow, definitely. I think, you know, direct contractors through recruiters is going to be a slower recovery. But yeah, the statement of work PSCs, I mean, it’s kind of every other conversation that I’ve been having, since I’ve been back is, can we get some more information on this? But then obviously, HMRC activity is going to be hot there as well. So it’s kind of keeping your eyes peeled, you have to be quite careful, you talk about the fines out there. And I try and be quite careful when I’m talking about it within clients, because you start saying those numbers and they go, “Well, that’s why we’re not using contracts.” [Inaudible 01:17:10]. I was trying to get out. So yeah, I think unfortunately, it’s going to be a slow recovery for contractors. But gig economy, statement of work, contingent workforce is going to continue to grow. Who knows? Yes, PSCs, going to have a bit of a slow start, but I think the rest is just massive, isn’t it? I think, firms. Like I said, I think firms doing well, that you can’t deny the fact that everyone wants to work in a very kind of flexible way going forward now.
Jonny: 1:17:12 Yeah and when we reflect on, the last couple of years, so much has changed. Like you mentioned earlier, having a baby at a point in time where I35 hadn’t quite come out yet, because it’d been delayed for a year and right in the middle of COVID, that obviously would have had its own challenges. And that’s obviously changed a lot for you as well. But just for everybody, stuff has changed for everybody. And that’s what makes this whole kind of last 18 months, two years such a rare event in all of our lives. Because there’s not normally things that just change stuff for everybody. And it changes in different ways, good and bad in different situations. But yeah, I think it’s when you talk, it’s a really interesting point you made actually about people not understanding the impact of I35. Because of all these other factors, that all seem massive and all seem to be, you could say, “Well, it’s all because of that, or it’s all because of this.”
Nicola: 1:17:50 This is a combination of them all. Yeah, exactly. That’s what I try and say, when we’re definitely not saying I35 is the key factor in all this, but it’s a really important one. So you can’t just kind of ignore it. But I think recruitment as a whole at the moment is just a really exciting place to be, isn’t it? Because, yes, they were struggling to find talent. But I think recruiters are in kind of the best place that they could be is that, they’re trying to support clients here, get back to where they were. So it’s gonna be really interesting to see over the next 12 to 24 months of exactly kind of how it recovers. And then we’ll have another piece of legislation coming in and we’ll all have to adapt. It’s just continuing. People always say to me that, “You’re so young, you weren’t even around for all these other bits that we’ve gone through.” So I’m just excited to see what kind of the next 20 years throws at us, but it doesn’t stop them. Like you say the recruitment industry just grows and grows and grows and grows. So, it’s definitely an exciting place to work at the moment.
Jonny: 1:19:49 Yeah, exactly. And it’s an opportunity for them to apply those problem solving skills and work it out, find the way to move forward. So yeah, I think it’s gonna be a really interesting period, time. But listen, thank you so much, Nicola, I really appreciate it. It’s super interesting chat. And let’s stay in touch and see how things pan out. And yeah, I think maybe we can always try and regroup again after the kind of start of the next tax year and see how things are looking but yeah, [Inaudible 01:20:18] exactly, because this was a great to chat. Thank you very much for joining.
Nicola: 1:20:23 Thanks Jonny.
Jonny: 1:20:24 Catch up with you soon.
Nicola: 1:20:25 Bye.
Jonny: 1:20:26 Bye.