Owen Goodhead, chief operating officer at Randstad, highlights three issues facing housebuilders that are in danger of being overlooked in the wake of the Coronavirus pandemic.
The Covid-19 pandemic has thrown up a range of unprecedented challenges which the construction and housebuilding industries have generally tackled extremely well. Naturally, adjusting to the new normal diverts resource and senior attention away from other crucial problems which, whilst less immediately urgent when compared to a global pandemic, nevertheless require innovative and urgent solutions.
Here are the three ‘under the radar’ challenges I am keen to resurface for construction businesses as we move forward into a New Year.
- Be ready for changes to the rules on ‘disguised employment’
‘Tax’ is one of those subjects which is both important and complex, and the changes to the rules regarding off-payroll working (IR35) due to come into play in April this year are no different. However, our recent research found that a concerning proportion of the 200 medium and large construction businesses we surveyed (70%) were still unprepared for these imminent changes.
The IR35 rules govern the tax status of an individual working as a contractor (or freelancer) and whether, for taxation purposes, they ought to be deemed an employee on the payroll. From 6th April businesses that fail to exercise reasonable care in determining the IR35 tax status of a contractor could face significant penalties and fines from HMRC. Previously it was down to the individual contractor to decide their own tax status.
Given construction’s reliance on contract workers, this will disproportionately hit our sector, so being prepared is absolutely vital. The good news is the public sector has already gone through this overhaul, which means there are important learnings here.
The IR35 changes have already been delayed from 2020, but for businesses still not prepared my advice is to check you’re in scope, many people I have spoken to aren’t aware smaller businesses are exempt. Second, some contractors may increase their rates as a result, so I recommend budgeting ahead so as to minimise the impact of new deductions and contributions which are necessary. Thirdly, lean on experts in this complex area to reduce the risk to your business.
- Don’t lose sight of talent diversity
The construction industry has certainly made significant strides in diversity of talent and one aspect of this has been ensuring that the industry is as attractive as possible for women. 2020 saw an unprecedented shift toward home working, which brought with it a shift in responsibilities, some of which are impacting women more keenly.
According to research from Deloitte on the impact of the pandemic on women, of respondents whose experiences shifted due to the pandemic, 65% had more responsibility for household chores, 58% of those with children reported added childcare responsibilities, and 53% reported having home-schooling and education responsibilities. The survey also found that many women are concerned about both the long and short term impacts the pandemic may have on their careers.
Whilst this won’t be impacting workers who must be physically on site, employers should be aware that working from home, for those whose roles allow, is not necessarily the flexible working dream it may initially appear to be. Being pulled in different directions can make it difficult for employees to ‘switch off’ and day-time responsibilities can make working unsociable hours the norm.
To continue to attract and retain the best quality talent from a diverse range of backgrounds it’s really important to initiate a culture which allows for open dialogues about workloads and daytime commitments, as well as implementing a genuinely flexible way of working (not just being visible from 9-5pm online) which is based on trust. Our research shows that more flexible working hours are a key factor for women in deciding to stay in their construction role.
- VAT domestic reverse changes for building and construction services
In essence, the reverse charge means the customer receiving construction services has to pay the VAT to HMRC instead of the supplier. Like IR35, these changes have been pushed back to this year following the pandemic and will now come into force on 1st March 2021. The reverse charge is likely to have an impact on cashflow and administration costs, particularly for smaller businesses, which may not be welcome at such an economically challenging time. Given this change is even closer than the IR35 legislation change, it is vital that companies get their houses in order now and subcontractors in particular take steps to protect cashflows.
I’m finding in my conversations with people, that each of these three challenges has been somewhat dwarfed by the seismic events of last year. Given Covid-19 is a daily reality which is not abating, there is a real risk of these falling by the wayside, when companies can’t afford any slippage in 2021. By taking heed and getting ahead on these, construction businesses can protect cashflows and their access to the best talent.
