The latest budget creates a more challenging cost environment for those considering recruitment; here is a breakdown of the key elements to consider:
The most obvious one is increased labour costs. With higher NI and the minimum wage increases, a basic minimum wage is now just shy of £25k. This means that the payroll bill is going to rise for businesses, meaning recruitment agencies will need to accommodate this increase whilst maintaining a profitable margin. For those agencies working on a percentage fee, this additional on cost to a business may be a deal breaker and they could look to using a fixed fee model. This may mean that agencies need to adjust their offerings and prices to remain competitive and attractive to businesses.
There is some relief for SME’s with the VAT threshold being maintained. This could encourage growth and more potential for smaller businesses to hire. However freezing tax thresholds means more employees get pushed into higher tax brackets; this reduces take home pay unless employers increase salaries which could affect candidates pay demands, meaning both businesses and recruiters needing to manage higher salary expectations.
There is also a government focus on sectors such as IT and Engineering, this an opportunity for recruitment to align to these growth areas, using leverage such as partnering with skills initiatives to address and shortfalls through training programs.
The Employment Rights Bill will also factor in the decision to recruit, the original plan was day 1 rights to unfair dismissal, but in a U-turn this is now liking like coming into effect after 6 months. This still may make employers cautious about hiring, so recruiters can take advantage here and support in probation periods, not walking away once the hire is complete and employers should check the fine print of your terms and conditions, if a hire doesn’t work out.
What should you do now if you are thinking of recruiting?
If you are an agency then now is the time reassess costing, pricing and remuneration strategies. Also investigate how training and technology can offset wage pressures. If you are a business looking to hire, then ensuring you are competitive in salary and compliant in your Employment Rights will stand you above those that maybe haven’t caught on to the impact of the changes.