Millennium

From April 2020, the government’s revised off-payroll working legislation (IR35) will apply to the private sector. By making the fee payer responsible for determining a worker’s employment status, these new rules represent a significant shift in liability from contractor to hirer. Already, a succession of big-name enterprises have phased out limited company contractors in favour of permanent hires. So should your business take a similar approach?

Here’s a closer look at what’s changed, and at what this means for your wider hiring strategy.

IR35: the new private sector rules

IR35 is HMRC’s answer to the perceived problem of “disguised employment”: arrangements akin to employment where workers bill for their services through an intermediary (usually their own personal services company) purely as a means of reducing their tax and NI liability. If the arrangement falls within IR35, HMRC will tax it along the same lines as a standard employment relationship.

In 2017, the IR35 rules covering the public sector were changed to shift two key responsibilities from the worker to the hirer. From 6 April 2020, similar rules will apply to the private sector.

Here are the two main changes:

• Previously, contractors were required to determine and declare their own IR35 status. From April, this status determination becomes the responsibility of the organisation using the worker’s service (the ‘end user’).

• If the arrangement falls within IR35, the organisation responsible for paying for the worker’s service (the ‘fee payer’) is responsible for calculating and deducting tax and NI through PAYE. The end user and fee payer will usually be the same party; one notable exception being agency hires where the agency is responsible for paying the worker’s fees.

Does the rule change apply to my company?

The new rules apply to medium and large employers, defined as follows:

Unincorporated bodies with a turnover of more than £10.2m.

Incorporated bodies (companies, LLPs, unregistered or overseas companies) where two of the following apply:

• Annual turnover of more than £10.2m
• Balance sheet total of more than £5.1m
• More than 50 employees.

Where a parent company meets the threshold, the new rules will also apply to all subsidiaries.

Your recruitment model: questions to ask

If you currently engage meaningful numbers of contractors, now is the time to review both your existing arrangements and your wider hiring practices.

For some businesses, the nuclear approach may seem tempting: to bring all existing independent contractor arrangements to an end and offer to re-engage those contractors as permanent or fixed-term employees. This means automatically taking a hit in terms of employers’ NI, but it side-steps the need to evaluate the IR35 status of each and every contractor, and removes the risk of sleepwalking into non-compliance.

But does calling time on contractors actually make sense from a business perspective? Especially when it comes to bringing tech talent on board, the contract model is often a natural fit: it provides vital support for project delivery, it equips businesses to deal with fluctuations in demand, and helps to plug skills gaps – often at short notice. Rather than jettisoning the contract model completely, organisations should ask the following questions:

• Which roles is there a business case for bringing in-house?
• When, and under what circumstances is there a business case for hiring independent contractors?
• For those contractors, how do we construct the arrangement to avoid IR35 liability?

Permanent recruitment: time to take stock

GlaxoSmithKline, IBM, Lloyds Bank, HSBC and Barclays have all opted to phase out the use of contractors operating through personal service companies, mostly offering to re-engage existing contractors on PAYE terms.

The bigger the organisation, the greater the likelihood of being able to take this type of blanket approach. As well as being able to absorb the cost of adding large numbers of staff to payroll, the typical multinational tends to have considerable leverage in the recruitment market – so, isolated gripes aside, persuading contractors to stay is less likely to be an issue.

But let’s say you are head of HR at a software house with 50+ permanent staff already, and a similar number of PSC contractors. Compared to a bluechip, the financial implications of adding large numbers of extra people to payroll at a stroke are likely to be much more significant. As an alternative, this may be a prime opportunity to take a wider view of your staffing strategy, review your operating model, to assess what skills you need to drive the business forward and to cut back on overlapping roles.

Will it be harder to recruit and retain after April?

In a word, probably: especially if you are forcing current workers and new hires to accept a status determination they are unhappy with.

Switching contractors to PAYE can reduce their income by as much as 25%. For one thing, salaries are taxed at a higher percentage rate than dividend payments through a PSC. They will also likely find themselves out of pocket for many of the expenses they were previously claiming.

On top of the financial benefits of operating through a PSC, many workers also appreciate the freedom and flexibility that the model offers. Try to force them onto payroll and they may be inclined to walk away. For instance, one survey suggests that 59% of contractors would consider working for someone else if they found themselves caught within IR35 in their current role.

Particularly in specialist, in-demand areas such as data science and AI, firms are going to have to balance HMRC compliance, the needs of the business and the commercial realities of the recruitment market.

For example, let’s say you have assessed your star data engineer’s existing contract as falling within IR35 and they are uncomfortable about the idea of being added to your firm’s payroll. If money is the main bugbear, is there scope for negotiating a higher rate? Alternatively, could you formulate the new, salaried role so it better aligns with this contractor’s career goals? Good communication is essential here: only when you understand a contractor’s specific concerns about their employment status can you start to address them.

Accessing the right help

It’s important to remember that IR35 was never meant to eliminate bona fide contract arrangements. It is possible to continue to engage contractors through intermediaries and keep the arrangement outside of IR35, provided that you keep the contractor effectively at arm’s length from your organisation, allow that contractor control over their working processes, ideally provide a right of substitution and do not insist on exclusivity.

Do you need help in formulating contractor roles to stay outside of the scope of IR35? Need a tried-and-tested way to access permanent/temporary staff in the fields of AI and data science? Speak to Millennium Consulting today.

When an organisation starts a new initiative or program it’s essential there is an influential sponsor or backer available to play an active part, provide support, promote the initiative and assign the resources needed to ensure it’s a success. But who would want to be a project sponsor as when things go well they rarely receive the credit and recognition they deserve? However, if things don’t go according to plan then the finger of blame is normally pointed in their direction and they typically pay the price and their career may be adversely impacted.

The role of backer or sponsor is crucial and without someone committed to running the program and being actively involved then it runs the risk of failure. Technology change programs in particular, require a Senior Executive to be responsible for ensuring they are successful. The Project Sponsor will normally be a senior Executive from within the organisation, often at or just below Board level who will actively drive the program and provide the link between the delivery team and the Board of Directors. They will need to possess authority and influencing powers to promote the change to the wider organisation, ensure the delivery team has the financial and personnel resources needed and that the necessary controls are in place to ensure it is delivered successfully within the planned timescales and budget.

Large scale change programs may encounter resistance, so the Sponsor needs to ensure there is buy-in and acceptance within the organisation. Strong communication skills and the ability to influence are vital because even with the best business case, resistance to change can lead to project failure. The PS will need to lead the change and support the project manager and their team navigating the organisation’s political terrain. They will provide high level project backing, act as an escalation route for the Project Manager, arbitrate/resolve conflicts should they arise and communicate project closure and the outcome to the organisation,

Their responsibilities include; preparing the project brief and the Project Initiation Document (PID); appraising technology options and submitting them to the Board of Directors for approval; ensuring an appropriate project or programme management framework is in place e.g. Prince 2, Agile, Waterfall etc; securing internal project resources and external expertise as necessary; arranging and chairing regular Project Steering Board meetings; liaising with affected department stake holders; determining and managing project risk; controlling the budget including allowing for contingent risk; co-ordinating and fostering a project team ethos; evaluating the performance of the project manager; establishing a formal project reporting structure; defining project control and management criteria; supporting the project manager with problem resolution and reviewing project update reports.

The Project Sponsor will act as a single point of contact with the project manager for the day-to-day management in the interests of the organisation. They will need to have sufficient knowledge of the organisation and the program to make informed strategic and operational decisions. The Sponsor should be able to apply quality management principles and processes; apply risk assessment and management principles and processes; network effectively; negotiate effectively and apply influence; broker relationships with key stakeholders within and outside the project; be aware of the broader perspective and how external factors may impact the project.

Project sponsorship is not a spectator sport and it is essential that the Sponsor is actively involved and committed to the successful delivery of the project. They should have the authority to make the majority of the key decisions and will act as project champion to ensure the expected outcome is delivered. With a strong effective Project Sponsor in post then there is every likelihood that the change program will be a success.

For more information regarding Project Sponsorship, please call us on +44(0) 845 604 4262 or contact us using our website form.

Enterprise Resource Planning (ERP) software has progressed a long way in recent years with digital, cloud and artificial intelligence solutions entering the market and competing with traditional on-premise offerings. Emerging technologies together with corporate growth have fuelled demand for ERP solutions that automate business processes leading to reduced headcount and supporting corporate growth. The appeal of shared services, requirements of enhanced management information and post M&A corporate restructuring are also amongst the reasons why organisations decide to implement new ERP platforms.

Project Sponsor

Introducing new ERP is a considerable challenge requiring strong, effective project sponsorship from either the CFO, CTO or another member of senior management. The sponsor will provide the link between the delivery team and the Board of Directors and will oversee project governance. They will need the authority to promote change, ensure the delivery team has the resources needed and that the necessary controls are in place which will guarantee the project is successfully delivered within the planned timescales and budget.

Large change programs are likely to encounter resistance and a key role of the sponsor is to secure buy-in and support from the impacted parts of the organisation. Strong influencing skills are needed as even with the best business case, resistance to change can risk project failure. The sponsor supports the project manager overcoming political and resourcing challenges, provide high level backing, communicates project closure and the results to the wider organisation. They will also act as an escalation route if needed and arbitrate/resolve any areas of disagreement.

The Project Team

Project teams is typically a mix of software vendor consultants, third party systems integrators and internal personnel. The software vendor will provide in-depth software applications expertise whilst the systems integrator will focus on wider change management issues, new business processes and interfacing with third-party applications. The internal project team will be familiar with the organisation and the legacy business processes and will be able to contribute from an operational/ business perspective.

Software Selection

Having agreed upon the need for a new ERP platform, sufficient time should be given to specifying and selecting the most appropriate software product. In most cases external support will be needed as internal staff are unlikely to have the necessary experience and time available and may not objectively view the available options.

Initially a period of analysis and requirements gathering is needed leading to the production of the Request for Proposal (RFP). A list of potential vendors with products meeting business specifications will be sent the RFP and a short list chosen and vendors requested to demonstrate their products. A proof of concept (POC) may take place to evaluate the software under realistic conditions with authentic dummy data.

Vendors should be assessed not only on the suitability of their software but also on their long-term product road map, financial strength and future viability. Selecting the wrong product can be costly particularly if the vendor is acquired by a third party and their software deemed surplus to requirements and decommissioned.

The cost of implementing new ERP will include new computer hardware, software licences, external consulting fees and time devoted to the project by the internal team.

Existing hardware may be retained but may not have sufficient processing power to operate the new software. Overall implementation costs can be as much as 5 times the software licence fees depending upon configuration and hardware required. Other costs to consider include the effects of disrupting existing business processes and reduced management information whilst the deployment is in progress.

Project Management

Effective project management is essential to determine the scope, quality, budget and timing of the program and may involve the use of Prince, Agile or Waterfall project methodologies. Software vendors and consultancies may prefer their own internally developed project management methodology which will incorporate resource planning and milestone definition to ensure deadlines are achieved and bottle necks avoided.

Target Operating Model

The new ERP solution will be developed in line with a new Target Operating Model (TOM) and a prototype built and tested before the final design is agreed. It is essential that finance employees are involved with the systems design as their buy-in and involvement will contribute to the ultimate success of the project. The system can be built adopting either a standard out of the box approach or with customisation although this will depend upon the complexity of the business requirements and the amount of flexibility needed. Extensive customisation can lead to additional implementation costs and may provide challenges with long term support and future upgrade. User training is needed to ensure the operational knowledge is in place so the system operates effectively. Following the system build process, User Acceptance Training (UAT) and user training will be needed. Once the design is agreed and finalised then data conversion and migration will take place.

A parallel run with the old system may be performed however this can be costly and a Big Bang approach may be preferred in the interests of cost saving. Following “Go live”, support will be needed and a post “Go-live” review carried out to ensure users operate the system correctly and any outstanding performance issues are resolved.

Conclusion

The challenge and likely cost of implementing a new ERP platform should not be underestimated. Successful delivery involves three key areas; People, Processes and Technology. Projects can sometimes focus excessively on technology whilst human aspects of the change program may not be given the attention they deserve. A Change Management strategy and the availability of appropriate skills will help ensure the implementation is accepted and judged a success.

Key issues include; selecting appropriate software; ensuing there is a strong project sponsor and sufficient project governance; engaging delivery focussed project management; ensuring internal staff are fully involved and accept the new system; using the new system to improve business processes rather than simply replicating historic ways of doing things; assembling the most appropriate project team – normally a mix of internal personnel and external consultants and ensuring there is sufficient post go-live support to deal with outstanding issues.

Adopting these strategies will lead to; streamlined business processes; reduced employment cost; enhanced management information; ensuring that the organisation is committed to embracing technology to improve overall corporate performance.

Millennium Consulting has been supporting customers deploy and optimise ERP since the mid 1990’s. This has included selection, architecture, build, deployment, re-engineering and upgrade. Our customers expect the best ERP specialists available and we make it our responsibility to ensure their needs are met. If you would like some guidance on choosing or implementing new ERP software, please call us on +44(0) 845 604 4262 or contact us using our website form.