Delayed or not, IR35 is not the first example of the UK government transferring responsibility for compliance monitoring to the recruitment industry.
The IR35 reform, which came into force from 6th April 2021, forces companies to act effectively as an agent for the HMRC in collecting income tax and national insurance contributions from contractors, under the threat of some stiff penalties! Recruitment agencies that place contractors must also comply if they handle payments to contractors they place.
Shifting policing from government to recruitment
This legislation is a part of a growing trend by the UK government to use regulation to shift the policing of malpractices to businesses. We've seen this in the past with bribery, modern slavery, tax avoidance, and right to work - where the law requires companies to conduct due diligence and prevent malpractice by their associated persons and supply chain.
Let's take the example of the right to work. Since 2006, companies have been forced to the Home Office's job of checking the legal status of every individual they hire, to ensure that they have a legal right to work here in the UK. This means that if you employ individuals who do not have permission to work in the UK, it may result in a fine of £20,000 per illegal worker and other punitive measures.
Recruitment & modern slavery risks
Modern slavery is a heinous crime against vulnerable individuals, forced to work for little or no money in appalling and dangerous conditions. You'd expect the government to stamp it out. Yet, after decades of trying and failing to do so, the UK government finally passed the Modern Slavery Act in 2015. It holds companies responsible for modern slavery not only within their own operations but also their supply chains.
Bribery Act & recruitment
Bribery and corruption are crimes that undermine democracy and civil society, especially in the developing world. However, it is difficult to investigate and prosecute. So, the UK government added a corporate offence in the Bribery Act 2010 to force companies to police not only their employees but all associated persons, to prevent bribery. The bribery risk in recruitment not only arises from jobs for cash but also non-monetary favours such as jobs or internships handed out to friends and family of public officials.
Two other regulations that significantly impact recruitment are data protection and equality and diversity.
Recruitment data protection responsibilities
The UK has been a global leader in Data protection for many decades, but this regulation got a whole lot more complicated and stringent with the introduction of GDPR.
In addition to protecting personal data, recruitment managers now have to be sure that they have the legal basis for processing candidate data, and that they're not collecting excessive amounts of data or storing it excessively long. Special provisions need to be made to obtain, utilise and store criminal record checks via the Disclosure and Barring Service (DBS) reports. And recruitment managers have to be aware of the rights of individuals to access and control their data. That includes opinions recorded by recruitment managers, the rectification of data, restrictions on processing and the ability to erase their data.
Finally, they have to be careful not to share the data internally unless there is a 'need to know', and not to transfer it internationally, for instance to a colleague based in the US.
Equality Act & recruitment
Equality and diversity is another critical consideration. The Equality Act 2010 makes it illegal to discriminate against individuals in hiring, training and promotion decisions based on nine protected characteristics: age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex, and sexual orientation.
However, equality compliance obligations are not limited to this regulation alone. Societal norms and pressure from regulators are forcing firms to reevaluate their hiring practices to include greater participation of women in their boards, and more opportunities for BAME candidates.
Managing the recruitment compliance burden
Recruitment managers often find themselves at the front lines in terms of corporate compliance with this thicket of regulations. And as the complexity and interdependencies of rules increases, it's no longer enough to do an annual tick-box training on these topics.
Recruitment managers now need a more personalised approach to training and monitoring. The most forward-looking companies are using more progressive methods. These techniques range from microlearning, continual reminders, gamification and adaptive content to scenario-based assessment.
For instance, one regulation might require a company to obtain specific personal details for all candidates for senior positions. However, a second regulation may prevent the company from requesting these details without the explicit permission of each individual. Then a third may prevent the company from seeking that approval due to the risk of tipping off the individual about an investigation against them.
Most of the regulations now require companies to demonstrate that they've taken reasonable steps to prevent breaches. Many fines imposed were for the lack of compliance measures rather than legal or regulatory breaches. For this reason, companies must not only give managers compliance training but also confirm whether that training was online or in person.
This article was originally published by The Global Recruiter, a magazine that is essential reading for everyone who is serious about the business of recruitment.
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