The role of recruitment software in legislative compliance

May 9th, 2019 | Industry News

In April 2020, recruitment agencies will take on the responsibility for setting IR35 status – a situation that has been the case since 2017 in the public sector. It’s crucial that recruitment agency software has the capacity to determine IR35 because the financial liability for a wrong decision could have substantial implications for the agency. Designed to prevent tax avoidance by contractors, there are three key factors that help an agency ensure they remain on the right side of the law:

1. Supervision, direction and control – determining the degree of autonomy that a contractor has is vital. For contractors, the freedom to control projects is a significant factor in deciding IR35 status. To avoid getting caught in the IR35 net, a contractor has to be in control of every aspect of any project they have been recruited to complete. With IT contracts, it’s important that there be specific deadlines and tasks attached to a project to prevent it being seen as ‘without end’ which would make the contractor an employee. In all cases, contracts must not contain clauses that give a client the right to control or supervise the contractor. The best recruitment CRM allows for a clear and transparent communication trail which can be used to clarify IR35 status if there any queries.

2. Personal service versus substitution – in a nutshell, an employee cannot send somebody else to do their work, a contractor can. This can get messy where clients refuse a substitute, for example, where the substitute is seen to have insufficient training/experience or where the work is deemed too sensitive (data etc.) to be handled by an unknown substitute. It’s a complex problem and online recruitment software can help by ensuring that the right to substitution is clearly stated in the contract and that if the requirement to substitute arises and if the contractor cannot find a substitute, recruiting software is used to conduct a search within client parameters, demonstrating the intent to substitute service – regardless of whether that substitution is acceptable to the client.

3. Mutuality of obligation – this relates to employment. An employer continues to pay and an employee continues to work, indefinitely. This can be a single contract of employment or regularly renewed short-term contracts. For a contractor to escape IR35, the work for which they are recruited needs to be defined in time, and with set goals. There cannot be any expectation for further work from the contractor’s perspective and the client should not expect further work beyond the defined project. Recruitment database software allows agencies to record contract parameters, especially where a contractor continues to be engaged by an employer, to ensure that work demonstrates contractual end-points, not continuing mutuality.

A surge of recruitment in Hong Kong’s banking sector is the result of the licensing of four ventures that will operate as virtual banks. A traditionally staid financial sector, Hong Kong will now increase its banking personnel by up to 200 people with another four virtual banks seeking registration from the Hong Kong Monetary Authority, which could double the recruitment drive. Because the new banks will operate as financial technology start-ups, the salaries on offer may not be that attractive, but it’s expected that recruitment will be made more appealing by offering share options. Hong Kong is a tightly controlled banking centre with demanding legislative controls and recruitment consultants and head-hunters are searching globally to find the right teams to establish the new banks. Recruitment agencies using flexible recruitment software are able to rapidly assess the suitability of potential FinTech staff, against the tight criteria demanded by Hong Kong’s regulatory regime to ensure they waste no time in evaluating candidates.