Jim Goddard - Divisional Manager, Oriel Contractors is intreviewed by The Recruiter magazine for high insight on the construction industry and umbrella schemes.
What is the biggest challenge facing contractors and their suppliers at the moment?
The market is still in recession which has led to severe pressure on profit margins, a lot of churn in the market with short term contracts and low pay rates. Contractors are having to travel further to find work and some are only finding assignments for one or two days a week. There is little sign of the governments promised infrastructure projects helping to generate work in the construction industry.
Has Oriel had to alter our services since the on set of the recession?
We have had to become more flexible to help our clients and the extra churn is meaning that we are handling a far greater number of new starters each week. We are dealing with far more agencies than the same time last year but most of our agencies are on lower overall contractor numbers. The market has become more competitive with agencies constantly looking for the best deals for their contractors. Oriel Contractors has positioned itself to offer rates that compete with all those offered by the major contractor payroll suppliers.
What advice does Oriel give to contractors/agencies when contracts are ended early or day-rates are altered mid-contract?
We have not had experience of this. Some end clients are looking to our agencies to reduce their charge rates and if this does happen and it affects the contractors pay rate this is always communicated in advance so the contractor has an opportunity to accept or decline the work.
Is Oriel worried about debt transfer after the legislation came into force at the start of the year?
We are not concerned as we have consulted with a big 4 accountancy practice to ensure that all our payroll products are fully compliant with the MSC legislation; as a result we do not believe the debt transfer legislation will affect us or any of our clients. However, for the industry as a whole we are concerned that there will be an impact where non compliant schemes exist. Please note we also have a specific worry over some umbrella schemes with regard to expense dispensations and minimum wage rates - see below
What could the government do to support the industry at this critical point?
Probably the main actions are to commence and/or accelerate the promised infrastructure projects and also to avoid yet more legislation for the contractor market. However, there are areas of concern that Oriel has regarding certain umbrella companies. The main issue we see is that some suppliers are actively encouraging contractors to exploit expense allowances by cliaming expenses when costs have not been incurred. This is a wrong practice and if the expense claims are found to be invalid the contractor could face a large bill for back taxes and NI, as could, potentially, the employment agency concerned. Our approach is that we will only allow business expenses that are supported by receipts. This approach is fully compliant but many contactors will be seduced not exploting the higher expense dispensations that other suppliers promote without fully understanding the risks that they are taking. It would help if HM Revenues and Customs were to remove dispensations that are misused in this way.
Are there any other issues facing the industry that you would like to highlight?
The recession has led to an erosion of margins across the industry and this is most apparent for the lower paid workers. Some agencies are using unscrupulous umbrella companies to pay contract workers below the minimum wage. The increase in the holiday allowances in April 2009 has added to the cost of the agencies supplying labour at a time when clients are demanding a cut in labour at rates. These factors can lead to agencies supplying contractors below the minimum wage. Some umbrella companies pay a gross wage for the week or pay on a day rate so that the actual hourly rate cannot be easily derived.
