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NOW’S THE TIME FOR THE INFRASTRUCTURE SECTOR TO GET IR35 RIGHT

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Matt Fryer, Head of Legal Services at Brookson Legal

 

The Government’s recently announced £650bn programme of infrastructure works is a welcome boost as we emerge from the pandemic and organisations look to grow. However, talent shortages combined with a recent change to the tax laws governing contractors, commonly known as IR35, have the potential to cause major challenges to project delivery.

 

The competition for talent

Matt Fryer

To strengthen the recovery of the infrastructure sector, the Government also recently announced a Plan for Jobs which will support young people entering the construction and engineering industry. This initiative, however, will not address the current shortage of skilled and experienced technical contractors that will be required to deliver these vital projects.

As job vacancies top an all-time high, we are already seeing that contractors are able to pick and choose the programmes that they work on. In fact, data from the Recruitment and Employment Federation’s (REC) Report on Jobs found in September that hiring activity rose sharply amid unprecedented demand for candidates, but a shortage of experienced talent is being felt across almost every industry. As a result, fierce competition is driving up starting pay for both permanent and temporary workers. With data continuing to highlight increased hiring activity, it’s clear that the competitive hiring environment will not be a short-term challenge.

 

Contractors are vital to the sector

Infrastructure businesses rely on expert contractors to help deliver their projects on time and, crucially, on budget, so these talent shortages pose a major commercial risk. A similar situation can clearly be seen in the haulage sector where competition for HGV drivers has combined with poor management of the IR35 tax changes to result in significant delays to deliveries across the country. Thankfully there are steps that can be taken now to ensure that they are maximising their ability to attract and retain a reliable flexible workforce.

The changes introduced earlier this year to IR35 off-payroll legislation transferred compliance for tax and national insurance (NI) contributions for contractors from the individual contractor to the end hirer. The means that the hiring business is now responsible for producing the Status Determination Statements (SDSs) of its contractors and clarifying whether they should be paying employment taxes (NI and income tax) to HMRC. The legislation aims to ensure that contractors, who would be employees if there was no intermediary, pay the same tax and NI as employees.

Genuine contractors working through intermediary companies are classed as working outside of IR35 and are paid gross for work completed. However, if the contractor is classed as inside IR35 the hiring business is responsible for the employment deductions, effectively leaving the worker with a 20% reduction in take-home pay. Given the choice between working inside and outside or IR35, experienced contractors are voting with their feet.

 

The risks of a poor IR35 solution

If we look to the public sector, where similar IR35 rules were introduced in 2017, we can see the impact this had on key projects, such as HS2 which experienced well-publicised delays.

This was due to one of the most common knee-jerk reactions to the IR35 changes – implementing a blanket “inside IR35” determination on all of their contractors. Such an approach effectively puts them on payroll in order to avoid exposure to any tax risk. This comes with a number of significant challenges, the first being recruitment of talent to complete projects as skilled contractors, who could find outside IR35 roles elsewhere, will either seek alternative roles with higher pay rates or demand an increase in pay to compensate them for the loss.

While the risk posed by HMRC tax liabilities is easily quantifiable, this needs to be weighed against the commercial risk of project delays. If talent cannot be recruited to deliver projects on time and within budget, this presents a major reputational risk to private sector companies delivering public infrastructure projects, not to mention costs incurred through fines and increased resource costs.

 

Compliance

Another learning we can take from the public sector is that inadequate approaches to IR35 compliance can create hidden tax liabilities. Included in the financial reports of Government body organisations which receive bills earlier this year, the sums owed by The Department for Work and Pensions (£87.9m), Home Office (£33.5m) and HM Courts & Tribunal Service (£12.5m) are a clear warning that a robust solution is required.

Theses public sector fines demonstrate the complexity of IR35, and the need for specialist support. HMRC sought to help public sector organisations and private sector businesses manage their new responsibilities with an online tool ‘Check Employment Status for Tax’ (CEST). However, as their government colleagues have discovered, the legalities are too nuanced and intricate for organisations to rely upon to produce accurate status determinations.

The tool is only as useful as the information entered into it and if a question is misunderstood, or inaccurate data is used, the outcome will not be correct or compliant. The HM Courts & Tribunal Service annual report clearly states that a £12.5m deduction was for ‘incorrect assessments of the employment status of workers’. In addition, the CEST tool returns an undetermined result in 20% of cases, meaning that a professional-led approach is needed to evaluate the contractors IR35 status.

 

Getting IR35 right

However, it does not have to be like this and it’s never too late to adhere to best practice. Network Rail implemented a blanket ban when IR35 was introduced in the public sector, but four years later it has taken the positive step to reconsider its approach.

In fact, Network Rail’s contractor status determinations found 74% of contractors outside of IR35 compared to its previous approach of 100% inside determinations. This clearly demonstrates the risks of a blanket ban – by implementing a blanket ban for four years, Network Rail had lost access to three quarters of its skilled contractor workforce, risking project delays and fines as well as loss of reputation.

Ultimately, IR35 management is a governance issue. Getting it right now will give organisations in the infrastructure sector a competitive advantage in securing and retaining talent during this vital period of opportunity. Investors should challenge the businesses they work with to ensure that a robust IR35 solution is in place, which meets HMRC’s reasonable care threshold, reduces the risk of unexpected tax bills and maximises the organisation’s ability to recruit and retain a flexible workforce to support business growth.

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SET YOUR BUSINESS UP FOR SALES SUCCESS IN A POST-PANDEMIC WORLD

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SET YOUR BUSINESS UP FOR SALES SUCCESS IN A POST-PANDEMIC WORLD

Dean Fiveash, Head of FinTech Sales, IFX

Without doubt the Coronavirus pandemic impacted every aspect of our lives and fundamentally changed the way in which we all conduct business.

From the widespread adoption of working from home, to the amplified focus on employee wellbeing and work life balance, to simply acknowledging that people are more than their job titles and are often juggling childcare, pets and terrible wifi issues all whilst trying to do their job. The last 18 months have altered the way we work forever and in order to set our businesses up for success we have also needed to rethink how we operate.

Dean Fiveash

In a people facing sector like sales,  it’s  clear that the loss of face-to-face interaction is perhaps the biggest loss and an impending challenge as we slowly emerge from the confines of the pandemic. Gone are the days of instant downloads from ‘water cooler’ conversations with the team discussing deals or general matters. Instead, our inboxes and diaries are full of zoom catch ups. This isn’t to say that success has dwindled. Flexibility of working from home has helped many businesses to grow rapidly. In fact at IFX we have enjoyed our ten best months of company sales, but there is no denying the way in which we work within our teams has shifted. So how can you set up your sales teams to maximise its chances of success?

 

Adapting To The Times

For many businesses operating during these unprecedented times the shift towards the work from home culture has seen its benefits. Speed is key in the fintech industry and video calls on top of isolated working has greatly improved our time efficiency allowing us to do more for our clients in the long run. Equally, with the workforce being spread around the country and in some cases even globally, came the need for further rigorous checks and processes to ensure the high standards set in the office environment are still being met.

Despite this I would argue that this made us better sales people, and in turn a more successful and thriving sales team.

Post-pandemic success is grounded in not just the talent of your employees but also how you choose to structure your teams. For me, the old adage ‘People Buy People’ remains the most relevant factor for developing a slick sales team. At the end of the day, the technical stuff can be learnt over time but the proficient people skills needed in client facing roles is more innate.

When evaluating team skills, individuals who demonstrate determination and the ability to keep smiling through adversity are a vital asset, especially in the fast paced fintech industry.

Having worked in numerous team leader roles within the sales industry,  I know the difference that a collegiate and supportive team can make to successfully securing deals. The key is to have people at your disposal who are going to pitch in to help others, in turn making the team more robust. In the post-pandemic world, this will remain the key quality to look for and embed as a core value across the business.

 

Fostering A Successful Culture 

Whilst the team structure and core skills are an important part of the team set up, good management and personal development structure is crucial to success. At IFX, our sales leadership team all have client portfolios and are regularly signing and navigating deals. It’s through giving my team practical experience and regular client interaction that we can gain far better market insight than through managing team activity or KPIs alone.

More discipline is also required when working at home to retain the sales focus whilst navigating domestic distractions. As such, maintaining your employee motivation and focus is something each business should work on. A difficult feat without the physical presence of your team and one balanced on knowing your employees and their individual needs. But little things go a long way, so incentives and perks such as company socials, bonuses or simply a free breakfast can work wonders to motivate others. Another tip is to set  attainable goals and regular check-ins with your team to keep motivation on track to reach peak productivity.

 

Looking Forward

Team dynamics will continue to change to adapt to the ever-changing and rapidly evolving landscape, the secret to success will remain the same.

Something to look forward to in the next couple of years as a movement,  is the greater adoption of smarter contracts and embedded FinTech, which of course as businesses and as a team we will have to adapt to.

Ultimately, my biggest piece of advice to others is to get the basics right.  A leading-edge solution fails to achieve greatness if it isn’t backed with competent sales/relationship managers and attentive operational support. Traditional ingredients for success such as reputation and trustworthiness are built over time, often through word of mouth, but building a competent team who can make your clients happy is essential to that mix

 

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THE EVOLVING TECHNOLOGY NEEDS OF THE FINANCE DEPARTMENT

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THE EVOLVING TECHNOLOGY NEEDS OF THE FINANCE DEPARTMENT

Jennifer Sims, Senior Consultant at Xledger

 

The world of finance software is evolving quickly, but with many new software contenders entering the market it can be a mindfield for organisations. Many finance teams are already using multiple accounting apps and software packages for bookkeeping, payroll and invoicing to service individual needs. Whilst it may work fine for now, this segregated approach isn’t sustainable for long-term growth. The world is swiftly moving to agile, automated ways of working. As a result, there is a growing need to choose suppliers that can fulfil multiple functionalities within the one platform.

Financial software is evolving at such a pace that it can be difficult to keep up. Changing up a finance solution is a big step and ease of migration can be a substantial factor in determining which solution provider to go with. But how do you choose a solution that will grow with your business and still offer something innovative in five or ten years down the line? The fear is always that non-techie organisations will end up falling behind, but in such a highly concentrated industry, how do you decide which solution would work best for you?

 

Cloud-first: the term that makes all the difference 

You could find a ‘cloud-based’ service with an application that comes with automated audit trails to make it easier to meet compliance and record-keeping obligations, for example. But for a solution to offer all of the many future benefits promised by the cloud, it needs to have been built specifically for a cloud environemt from the outset – ie. not an on-premise built system that has been later adapted. Cloud-first services (true cloud) were always intended to leverage economies of scale, cope with live updates, be accessible from anywhere with an internet connection, and to scale rapidly, to name just a few of the many benefits.

When we talk about innovation in financial technology, we’re not just talking about software that makes it easier for the financial controller to create reports. If eliminating reliance on Excel spreadsheets is the only tangible benefit you have to really shout about, you are missing out on the real deal. With ‘true’ cloud finance software the sky is the limit.

Finance and accounting technology needs to directly meet the needs of the finance function and support the wider business needs.  When looking at accounting software platforms you’d be hard pressed to find one that doesn’t now promise ‘cloud-based’ enterprise resource planning (ERP) capabilities. The cloud is nothing new, but it’s the way that a solution harnesses this environment that makes a real difference. And here is where there is a need to read between the lines.

 

Automate more with true cloud 

Historically, repetitive and manual tasks are typical of the finance role – from invoice postings to expense claims handling – these can overwhelm the finance team. Research by Xledger[1] has found that an enormous 91% of CFOs and finance decision makers are carrying out at least one of these repetitive tasks as part of their job. What’s more, senior finance leads are averaging a whopping 25 hours per week carrying out repetitive and manual tasks, compared with 15 hours for other finance decision makers.

A modern, true cloud finance system can enable your business to automate repetitive tasks and provide one source of truth so that teams can make informed business decisions that will help to scale a business. Bank reconciliation, dashboard creation and reporting are just some of the tasks that can be handled automatically.These capabilities are aiding overtasked finance teams and saving hundreds or thousands of hours a year.

Whilst different companies are at different stages in their digital transformation what is clear is keeping up with the latest technology is fundamental to the future success of an organisation.

Xledger is a true cloud finance solution. The basics include invoicing, robust general ledger accounting, detailed slice and dice reporting, purchase orders, billing, VAT reporting, and cash and bank payments. It also adds process and structure to the enterprise with procurement and inventory, budgeting and forecasting, and project accounting. Users are always on the latest version of the software and with regulation more stringent than ever today, Xledger is ISO 27001 accredited.

Choosing the right provider for your financial ERP solution comes down to whether it has the fundamentals right. When hosting all of your vital data in the providers’ own servers, it should evidence a highly tested security process that comes with backup services as standard.

As our demand for technology capabilities grows and as ERP models progress, innovation will become the structure for growth – and there is no end to the possibilities.

 

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