The budget announced earlier in the week by the Labour Government contained a “skip load” of construction related policies, and a promising indicator for growth across the industry - particularly in the public sector, house building, green energy and infrastructure sectors. However, challenges around employment costs mean businesses will need to carefully consider their workforce strategy to stay competitive. We caught up with Nick to get his thoughts on the announcement.
Q: Broadly speaking, what does the budget mean for the Construction Industry?
Nick: The headline announcements for the construction industry were a real commitment to both investment in public works (transport, education, NHS and prison infrastructure), the streamlining approvals for large residential projects, and boosting the housing supply. For over a decade, the need to build new houses has been a top priority on multiple government agendas but restrictions in the planning system and funding have stalled these efforts. If the government really does both inject capital and ease the planning process this could be a positive and exciting time for the construction industry.
Q: It sounds like the budget means no shortage of work for the industry, but might it also create a shortage of workers or present challenges related to demand?
Nick: It’s an interesting situation. More work will mean more demand for construction workers, but the hike in Employers' National Insurance contributions will undoubtedly drive up the costs of an employed workforce and likely suppress wages thereby reducing supply. We suspect that this may a) lead to many companies avoiding taking on staff under PAYE arrangements in order to remain competitive, and b) that skills shortages will counterbalance any consequential attempts to lower pay rates. In summary, the labour market will be supply side driven and self-employment will increase.
Q: Are there however risks attached to this drift to self-employment?
Nick: Potentially, yes, but it is all about the self-employment model. Taking on self-employed sub-contractors directly is for a long time been fraught with danger. Sub-contractors can subsequently claim to have been workers with all associated rights, and the HMRC can likewise retrospectively reclassify contractors as employees if their very subjective “self-employment” tests are not met. With the hiring of 1800 new compliance officers tasked with “ensuring that corporations and individuals pay their fair share of taxes” we can expect these challenges will only increase.
Abolishing Personal Service and Umbrella Companies have long been a priority for Labour and included in the budget was commitment to new legislation aimed at tackling ”false self-employment” a move that EEBS welcomes.
Q: What's a Safe Solution?
Nick: In our assessment the only safe and viable way to steer through these legislative perils is to use a reputable, experienced and HMRC compliant contracting intermediary like EEBS, that specialises in Construction.
Q: So this budget increases the attraction of having a compliant yet flexible workforce?
Nick: We’ve always maintained that having a flexible workforce makes complete sense for construction. Our client base typically has a core of employees and a flexible ring of self-employed tradesmen around them to handle workload fluctuations. This mix helps them adapt to demand without the increased overhead costs of a fully employed workforce. It’s really common sense as far as employment strategy goes. Having a core of employees alongside a flexible pool of contractors allows construction firms to match their staffing needs with their workload demands, and that’s exactly what we aim to facilitate at EEBS.
Need advice? EEBS are here to help! If you have any questions or need advice please don’t hesitate to get in touch with our friendly team. You can reach us on 01245 493832 or email info@eebs.co.uk.
