The past year has been like no other for recruiters and contractors, and 2022 is sure to bring additional surprises, challenges and opportunities.
Here Generate’s payroll and contractor management specialists reveal the most urgent and most impactful payroll and compliance trends to watch in 2021 and 2022.
5 Most Important Payroll & Compliance Trends for Recruiters and Contractors
1. Changing Employee Benefits (Even for Contractors)
With remote working set to remain popular for both workers and companies following the pandemic, many companies will review their employee benefits packages and their offerings to all workers, temporary and permanent. Employers will respond to lessons learned from Covid-19 and focus benefits away from in-person socialising and towards wellbeing, mental health, holiday allowance and career development.
Contractors can increasingly expect to enjoy some similar benefits offered to permanent employees. Interim managers, freelancers and temporary staff will be presented with greater flexibility, remote or hybrid working as a standard, and real opportunities for formal skill development on the job. As employers aim to claw back overhead spending following Covid-19 and businesses struggle to recruit for short-term roles in a candidate-led market, many end clients will invest greater efforts to differentiate themselves from other employers and provide a beneficial working experience that truly appeals to contractors.
2. Fraud & Cyber Security
Whilst the UK has generally had tougher laws against financial crime than those of the EU Anti-Money Laundering Directives, Brexit has sparked an opportunity for the Government to introduce greater focus on tax fraud, AML and data security. Online fraud in the UK increased by over one third during the pandemic and is predicted to cost British taxpayers billions in the year ahead.
To reduce the risk of non-compliance and avoid investigation, recruiters and contractors must work much more closely together, and involve end clients in the compliance process. Stay informed about the introduction of new tax and security laws and read the results of recent cases to ensure your compliance processes are fully up to date.
3. More Negotiation on Pay
Other than key players in the healthcare and essential food markets, most businesses across industries have delivered cost-cutting measures following the impact of Covid-19, with much of this equating to redundancies and hiring freezes. Financial stability will be front of mind for end clients coming out of the difficulties of the pandemic, meaning increased focus on efficiencies with reductions largely coming from legacy systems, underperforming operations and headcount.
Alongside redundancies and appetite for cost savings, the pandemic has also driven an increase in temporary work. Contractors of all trades are clawing back lost earnings from contract cancellations in 2020, new professionals are entering the contracting scene out of necessity and those in difficult situations are relying on short-term work as a temporary solution to financial challenges.
Increased competition from existing and emerging temporary candidates will drive some to negotiate on working conditions including day rates. Despite the impacts of IR35 and Covid-19, 70% of freelancers and contractors intend to keep contracting in the next three years. Although most industries will remain candidate-led markets, contractors will begin competing with new entrants in sectors such as nursing, teaching and IT, which are plagued by urgent skills shortages and where seasoned permanent professionals are realising they can raise (and in many cases even double) their take-home pay by transitioning to contract work.
To compete, demonstrate your worth by putting your skills and evidence of your success front and centre. Invest in your personal brand to emphasise your unique abilities as an experienced contractor and cement your status as the ideal candidate, thereby reducing the amount of expected negotiations, whilst also positioning yourself positively with the potential end client. Upskilling, networking, testimonials and social media recommendations will all contribute towards building your unique brand and promoting your worth to end clients and recruiters.
4. New Technology
Payroll software will increasingly empower umbrella and contractor management companies to support their recruitment agencies and candidates by:
- Quickly and accurately establishing contracts and compliant solutions for candidates wherever they are in the world, aligned to world-leading legal standards and the local regulations of the end client country
- Automatically generating timesheets and digital payslips for hundreds of currencies and any level of complexity
- Keeping accurate, easily accessed records of all candidate, end client and assignment data in one place, significantly reducing risk of compliance errors and helping recruiters and contractor management specialists to identify and rectify any instances of non-compliance as quickly as possible.
Technology and in particular AI and automation will increasingly require HR, Finance, Sales and payroll suppliers to collaborate and communicate. HR and payroll systems will become more integrated, empowering departments and suppliers to share and transfer data to dramatically reduce time spent on admin and improve service speed and quality.
5. Legislation Amendments
Following the recent off-payroll updates introduced to temporary workers in the private sector, IR35 has already changed working life for freelancers, interim managers and sole traders across the UK. However, for those who provide services for small businesses that have yet to fully grow into an official SME, 2022 will mark the real impact of IR35. Smaller incorporated businesses will only need to apply the new rules in the tax year following two consecutive years of being classed as medium-sized.
The lack of specific details and largely untested results of IR35 will start to be felt further into 2022. With only around 30 off-payroll cases ever reaching court decisions, and wins split almost equally between contractors and HMRC, the next year ahead is likely to see a marked increase in IR35 cases. As the Government’s official status determination tool returns inaccurate results for 1 in 7 contractors, future legal challenges will deliver some good news in the form of greater clarity on application of the law – and additional complexities as the legislation is further amended.
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