Employment law and the current recruitment crisis

As the world of work begins to reopen, many businesses are looking forward to putting the tumultuous last year behind them with a focus on brighter horizons. The furlough scheme has come to an end but, although this was expected to result in another wave of redundancies, in fact there has been a fall in the proposed level of job cuts. Instead, we are hearing of many businesses planning to expand and recruit. According to the Office for National Statistics, job vacancies are at a record high. This has resulted in a highly competitive market in many industries.

To add to this, the repercussions of Brexit are further impacting the labour market, and not just in relation to the well-reported shortage of logistics drivers. According to the CIPD’s Resourcing and Talent Planning Survey 2021, a quarter of respondents said that it was more difficult to recruit due to Brexit.

The combined result is the worst staffing and skills shortage the UK has seen in recent years. The CBI has recently reported that labour shortages are a concern to over three quarters of businesses, and they are expecting shortages to last years. We are even hearing anecdotal accounts from clients of recruitment firms turning away work.

The resulting situation has left businesses looking at alternative resourcing solutions. This article focuses on the employment law and immigration considerations we are seeing as businesses navigate this crisis.

Where to recruit?

The UK is not alone in facing a recruitment crisis and staff shortages are a global issue. However, when facing hiring difficulties, we are increasingly aware of employers looking further afield to resource their roles.

Working remotely from outside the UK

Following the pandemic, many individuals have relocated or moved back to the country their family is based (or are hoping to make such a move). We are increasingly asked to review contractual arrangements involving employees working temporarily or permanently from overseas. There can be a number of legal headaches including tax, social security, mandatory employment protection and data privacy considerations (see our InBrief guide to working remotely abroad) but we are seeing that employers are nonetheless amenable to these arrangements, within certain parameters, if they enable the business to recruit or retain important skills.

Some countries have launched “digital nomad” visas to attract people who have no set home base to work remotely from that country without needing to pay local tax. These are often subject to conditions (e.g. minimum income requirements) but can be an attractive prospect to individuals, especially freelancers in certain marketing or IT functions.

Bringing recruits into the UK

There are a number of ways to bring overseas workers into the UK, including sponsorship under a skilled worked visa or an intra-company transfer visa. Although the immigration system remains strict, and now encompasses European nationals, in some respects the new framework has made sponsoring migrant workers easier. For example, the minimum salary threshold has decreased to £25,600 (or the going rate for the particular job), it is quicker to request an electronic certificate of work authorisation than it once was, and “new entrants” to the job market (including younger workers) face less stringent eligibility requirements.

A business wishing to bring someone into the UK to work for them will, however, need to apply for a sponsor licence. Increasingly, businesses are having to factor in the financial and administrative costs of making that application into their ordinary operations, because the process can take a couple of months.

UK-wide recruitment

The pandemic has changed how we work, with 36% of UK workers working at least partially at home during 2020. Most organisations seem to be moving to a hybrid form of both home and office-based working, but we are seeing more instances of businesses looking further afield and advertising for fully-remote roles UK-wide, with some moving away from well-established geography-based scales and basing pay on contribution rather than location. The Office of National Statistics has found that online job adverts for “homeworking” have increased at a faster rate than total adverts. For more information on some of the employment law implications, see our FAQs for employers on working from home.

Who to recruit?

The ongoing recruitment crisis has meant businesses need to urgently broaden their recruitment pool. There are both short and long term solutions to this problem.

Diversity

We have also seen that employees increasingly want to work for diverse businesses and this is perhaps another reason to broaden the pool of “traditional” candidates. We are increasingly being asked to advise upon the use of tools such as:

• Contextual recruitment systems, which take into account an individual’s background when assessing achievements to help employers identify candidates with the greatest potential. Usage of these systems can significantly broaden the recruitment pool.

• Positive action initiatives, which involve taking targeted steps to address underrepresentation or disadvantage experienced by people with protected characteristics. These initiatives can be very effective in increasing the diversity of your business, although the legal framework remains relatively restricted.

If they have not done so already, employers may want to consider creating diversity networks or communities, so existing employees feel they have a voice and can contribute to an inclusive culture. Any such group could also be consulted with on how to improve an employer’s recruitment and retention processes. In addition, businesses should consider refreshing their training to recruiting managers on unconscious bias.

Younger recruits

Investing in graduates and young recruits has been a focus of many businesses for years, allowing businesses to organically grow their workforce on a long-term basis. Whilst school-leavers or university graduates may not have the immediate skills or experience an employer ideally desires when recruiting for a specific role, this group of candidates do have the potential to be trained into the job.

Making use of apprenticeships (discussed below) can be a pragmatic way to entice younger workers. Employers should also consider making use of the government’s Kickstart Scheme which provides funding to employers to create jobs for 16 to 24 year olds on Universal Credit who are at risk of long term unemployment. This funding covers 100% of the national minimum wage for 25 hours per week for a total of 6 months, plus associated employer’s National Insurance contributions and minimum automatic enrolment pension contributions.

In recent months we have noticed an increase in recruiting under-18s in hospitality and retail. This involves extra considerations such as additional working time constraints. In particular, 16 and 17 year olds must not work more than 8 hours a day or 40 hours a week and there are different rest break and night-working requirements.

Older recruits

With an aging population it is unsurprising that the proportion of those aged 65 and over who work has almost doubled since records began. In the US, nearly twice the proportion of over 70’s work, compared to the UK, suggesting this is an untapped market.

Businesses are increasingly taking steps to retain and attract older generations of workers by providing increased support, for example in the form of menopause policies. As referred to above, it is also important to train recruiting managers on unconscious bias to ensure any outdated and stereotypical views of older workers are overcome.

Perhaps a future area of focus for employers is grandparental leave. Grandparents currently have no legal right to paid (or unpaid) leave to care for their grandchildren. Government plans to allow shared parental leave to be taken by grandparents were announced in 2016 but have since been put on the back burner. We are seeing an increase in employers enhancing family leave policies in more creative ways in recent years, and a focus on time off for grandparents could be a very real benefit for older workers.

Many older workers are looking to build their pension pot and so employers that offer generous matched pension contribution benefits could find it easier to attract this generation.

Returners

Longer term solutions for recruitment could also focus on recruiting employees who have taken time out to raise a family, care for a dependant, for medical reasons or to travel or study.

Whilst a prolonged break from work was once seen as an obstacle, employers are now beginning to value those looking to return. This has been a growing focus for the Government Equalities Office and best practice guidance for employers considering returner programmes was published in 2018. There are a growing number of employers offering “returnships” – a short term, professional internship to re-introduce recruits back into full time employment in senior roles. This recruitment strategy often works best alongside other measures, such as mentor schemes and coaching, as well as a focus on flexibility and potentially also broader measures such as partnering with after-school providers.

Apprenticeships

Apprentices are often cited as a way of futureproofing the workforce against skills gaps. All employers with a wage bill of more than £3 million will already pay an annual apprenticeship levy of 0.5% and can use their levy funds to pay for training and assessing apprentices. The government applies a 10% top-up and offers additional incentives for recruiting certain categories of apprentice.

Apprenticeships may not be appropriate if your business is struggling to recruit for specific specialist or senior roles, but they can be a longer-term solution for ongoing skills gaps. They also make use of levy funds that, if left unspent, will become unavailable to you after two years. You can either recruit new apprentices or have existing employees or consultants begin an apprenticeship. There is a wide range of apprenticeships available, with the government having significantly invested in the development of over 500 standards. Apprentices can be of any age, making them a potentially attractive option for existing employees who are interested in retraining.

If your business cannot commit to the minimum 12 month duration of an apprenticeship, you may be interested in the new Flexi Job Apprenticeship Scheme, which will allow apprenticeship agencies to supply apprentices to work with multiple host employers and for short periods of time if necessary (see here for our earlier article on the scheme).

It is crucial to put the correct contractual arrangements in place when recruiting an apprentice so that you can access funding and avoid falling into the old common law regime for apprentices (for more detail see our InBrief guide to apprenticeships and, for the latest changes to the funding rules, see here).

Resourcing through intermediaries

We are seeing an increase in requests from individuals that they be engaged via personal services companies, especially in the logistics sector. Such arrangements may help attract labour and provide tax efficiency from the individual’s perspective, but businesses should be careful this is not a form of tax avoidance and will need to consider the recent IR35 changes. To avoid IR35 implications, many businesses are trying to resist engaging individuals via personal services companies and are increasingly pushing to remove personal services companies from their supply chain altogether, for example they are asking that individuals are instead employed by umbrella companies or other staffing intermediaries. The final arrangements are increasingly influenced by the strength of each party’s negotiation position.

To engage individuals abroad, businesses are increasingly using an “employer of record” or professional employer organisation (PEO). These are entities which have responsibility for employing and paying employees, dealing with all tax, social security, benefits, visa applications and other such matters. The ramifications of this type of arrangement are discussed here.

Attracting candidates (and retaining your existing employees)

The ongoing labour shortage has forced many businesses to take a step back and re-evaluate their overall employment “package” and what stands them apart from competitors.

Recruitment process

The government has recently confirmed that it will not be taking forward earlier proposals to require employers to specify in job advertisements whether flexible working would be considered. In practice, however, employers understand that the employee’s experience starts at the point an advert is placed, and that offering flexibility may be increasingly key to recruitment. In our recent survey on post-Covid employment policies, around half of our survey respondents said that they are already changing job adverts to explain or promote their approach to flexible, hybrid or remote working.

As the market becomes more competitive, employers need to be careful not to lose employees before they have started work. When an offer is accepted, extra effort should be taken to welcome the individual even before they have started; a strong sense of belonging will mitigate any counter offers a prospective employee will receive. Employers should also take care not to breach any contractual terms that an employee may have with their existing employer.

Salary and benefits

It is being widely reported that companies are planning standard pay rises across the board to both incentivise their current workforce as well as lure new recruits. We are also seeing clients adopting more focused performance-based bonus schemes or rewarding employees on a team success basis.

Employees are, however, increasingly prioritising other factors such as company values and flexibility over salary. Businesses that have not already done so should consider reviewing and potentially expanding their benefits package, for example to include additional health insurance, enhanced pay for family leave or higher pension contributions. We are beginning to see an increase in flexible benefit schemes, giving greater control and choice. Where possible, employers should take advantage of opportunities to provide benefits in a tax efficient way – see our article on how to structure employee remuneration packages after Covid-19 for more information on the options.

It is well reported that employees’ mental health has suffered throughout the pandemic and benefits focussed on health and wellbeing can help increase an employer’s attractiveness. These might include wellness programmes, employee assistance programs, gym memberships, subsidised or free healthy food and/or extra days off to support mental health.

Training and development

Investing in your existing workforce has been a common response to recruitment difficulties, and over half of businesses have turned to upskilling their existing employees. Investing in training and development could incorporate internships, returnships, apprenticeships as well as training programmes for existing employees to boost their skill set or upskill them into different roles. In addition, it could enable businesses to recruit individuals who are a good culture fit but lack the necessary skills. Businesses should also be open to allowing flexible working patterns to allow employees to undertake studies outside of work.

Environmental, social and governance (ESG) and value-driven policies

We have seen a rise in employers adopting value-drive employment policies in the wake of the pandemic, including policies on menopause, miscarriage, transitioning at work and policy initiatives such gender-neutralising employment contracts and handbooks (to read more see here).

Sustainability is an emerging area of focus for many employers who are looking at reducing waste, energy efficiency and implementing greener supply chains. There are some very early signs of employment practices changing, for example as companies explore more cycling to work and less business travel by plane, but in future we can expect employment law and the world of work to evolve to require organisations to take greater account of the climate emergency (as discussed in our article on the climate emergency, work and employment law).

The law has helped drive companies forward in relation to ESG matters, requiring companies to examine their approach to, for example, modern slavery and gender pay gaps. However, we are seeing employers going further than they are required to. For example, despite the government’s delay in legislation, we are seeing increasing numbers of employers calculating their ethnicity pay gaps (for the latest position, see our recent article on the government's delay).

A genuine engagement from employers with these issues can help form and drive the culture of a business, in turn attracting candidates and helping retain employees.

Flexibility and hybrid working

As offices re-open, many employers are re-thinking how they require their employees to work. There is a real focus on agility and flexibility as many businesses are exploring new “hybrid” ways of working (for more detail on the legal issues, see our InBrief guide to hybrid working arrangements). Introducing hybrid working is difficult to navigate in practice, however, and we are receiving an increasing number of queries about employees who are reluctant return to the office at all. Keeping employee morale high whilst implementing new ways of working is a priority for many employers at the moment.

Protecting your business

Employees are increasingly isolated from each other as a result of the pandemic and it is therefore much harder for managers to gauge employee satisfaction. Setting up a works council or an employee forum is an increasingly common approach to improving employee engagement and thereby helping to stabilise a workforce (see should employers set up a standing body for collective consultation?). Other options include using tools such as employee surveys to check in with employees.

Clear policies on social media use, conduct and data protection can also help ensure that wrongdoing such as stealing confidential information or sharing confidential matters on public forums is dealt with promptly and robustly.

With job vacancies at an all time high, it is perhaps inevitable that some employees will leave, even if employers are implementing the steps and initiatives set out above to incentivise and retain their employees. If employees do leave, you need to ensure your business has taken steps to limit any damage. This starts at the recruitment stage and should include having adequate notice periods and, where appropriate, post-termination restrictions in place. Clear processes for leavers, particularly for the purposes of regulating employees’ access to business-critical information, will also help ensure businesses are protected if an employee is leaving to go to a competitor. For a summary of the steps you can take to protect your business as recruitment and retention become more challenging, see our article on protecting your business where employees are in short supply.