The clearest impact will be in respect of the overhead costs associated with direct engagement of individuals on an employed or PAYE basis. An increase in overhead may be fine if your charges are calculated based upon the costs of supply plus margin, and your client terms of business allow for an increase when costs increase (as Lawspeed client terms do!!), but even then, you may still have the administrative burden of updating paperwork, systems and notifying clients of the change.
However, problems may arise where the matter is not covered contractually, payments are subject to a rate card, or there is an agreed rate for an assignment which extends beyond April 2022. There is only a small window for agreeing an adjustment with clients. If a client refuses an adjustment, commercial decisions may need to be made, and if a decision is to cease supply, notice periods may be relevant.
Even if you do not operate a PAYE arrangement, so are neither directly responsible for employers NICs or NMW amounts, you still need to consider the potential impact on your businesses, for example, will an umbrella in the chain request an uplift in rate so as to meet the increase whilst also maintaining compliance with the AWR. Remember AWR liability can potentially sit with any party in the supply chain.
The increase in minimum wage and employers’ NICs will therefore have a significant impact on many operating in the recruitment sector, but these risks can be reduced by being prepared, having strong contracts where possible, and working with your supply chain to ensure that they are also prepared, so unpleasant last-minute surprises avoided.
For advice on where you stand contractually, compliance with obligations or suitable model templates call Lawspeed on 01273 236236.
Ravi Murphy, Director at the recruitment and employment law specialists Lawspeed.
Lawspeed group corporate clients benefit from immediate up to date advice on staff engagement and related regulation; employment status; client, IR35, PAYE, and umbrella contract templates; contract review/negotiation; self-employment and CIS contract templates; trade membership and government representation; accreditation services and a state of the art digital contract management platform.
