Government research suggests that more than 2,000 public-sector workers could be avoiding the full rate of income tax through off-payroll contracts. Apparently, 40 per cent of those have been in their roles for more than two years.

These 2,000 individuals are likely to fall into two categories:

• Legitimate interim executives/managers and contractors; and
• “Disguised” employees

Legitimate interim executives/managers and contractors

The Institute of Interim Management (IIM) estimates there to be approximately 6,000 trading interim managers and executives in the UK, providing specialist services to private and public sector organisations.

Interim managers bring valuable skills and expertise to bear at short notice, typically at a board or senior level. They implement complex solutions including change, transformation and turnaround management, business improvement, crisis management and strategy development.  They consult, plan, advise, implement, and embed the improvements, then leave. The average interim assignment lasts just over 7 months.

Of the 2,000 workers identified in this study, the IIM expects that some will be legitimate interim professionals who bear the risks of self-employment without bonuses, benefits or employment rights. They pay their taxes like any small business and, as such, they pay their way fairly and equitably. After an average of seven months, they are off assignment, not earning and looking for their next assignment.

Disguised employees

It is apparent that some people are carrying out established positions in the public sector, but operating ‘off-payroll’. This appears to be the case with the chief executive of the Student Loans Company, Ed Lester, which started the current alarm. Mr Lester originally operated as an interim manager for an eight month period. When his role was extended by two years, he did not transfer to employee status and the extension was paid via his Limited Company.

The IIM has no issues with Mr Lester, who is said by Vince Cable to be "an exceptionally useful individual who has helped to turn round that organisation [the Student Loans Company]".  We can however understand that a longer contract than 8-12 months may imply the individual concerned is no longer functioning as an independent (Limited Company) interim professional moving from assignment to assignment.  For individuals in post for more than 12 months, we can see that discussing a move to a permanent payroll may have ethical, practical and indeed political value, subject to the nature of the work.

Towards a more effective public sector … and a fair deal for (legitimate) interim managers

As a rule, public sector board members and senior officers with significant responsibility should be on the organisation’s payroll.  There are genuine exceptions, when a crisis or change situation requires a senior interim executive to implement change that cannot otherwise be done, they should join as an independent practitioner, for a fixed time-period.

An automatic six month cut-off, however, may be too short for such executives to make a key difference and then hand-over to a permanent successor. It ties the interim professional’s hands and threatens the success of the much needed public-sector improvement activity. A 12 month review trigger is more fitting. After that time, an employment discussion, if the person decides to stay, can be undertaken.

Professional interim managers meet their tax obligations as responsible small business owners. Managing a small business and paying appropriate business taxes, is not and should not be seen to be a crime. Forcing them to be ‘employed’ on the public sector payroll for 6-12 months, along with all the costly administration, benefits, pension and employment rights that entails would be a fool’s errand.

It is essential that both immediate remedial measures and, following consultation, detailed arrangements should be very carefully drawn so that they rightly capture instances of abuse without depriving the economy of much needed flexibility and innovation that interim managers and executives provide, solving significant public-sector challenges.

Ad van der Rest, co-Chairman, The Institute of Interim Managers

A popular feature is the ‘Leading Interim Service Providers’ ranking. The ‘long list’ from which Interim Managers will be voting has been published on the IIM website.

Additions, updates and corrections are welcomed from the interim community.

Detailed progress about the survey may be followed on the IIM’s leading interim Linkedin group: ‘Interim Management – IIM‘.

Ad van der Rest

co-Chairman IIM / IIM Linkedin Group Moderator

“Workday is fast becoming recognised as a lower cost, all-round more attractive proposition to the traditional HR modules offered through SAP and Oracle ERP systems. Having been recognised by technology analysts Forrester as ahead of these two established players, we can expect to see many more medium and large-sized companies choosing it. HR interim managers and consultants who understand Workday, and have the required implementation and programme management skills, will find themselves in a seller’s market for some time to come.”

One HR interim manager with the requisite hands-on experience is Helen Phillips, currently on assignment as an HR programme manager at Kerry Foods through BIE Group. Helen, who worked on Workday implementations at both Aviva and RBS Insurance, adds:

“Workday is delivered through an agile methodology, which involves using small, fast-paced cross-functional and self-organising teams with lots of user interaction. This approach is counter-intuitive to IT departments in many organisations.  However, the biggest challenge in deploying the software is not technical; it’s getting users to change how they work. Workday is all about line manager empowerment and self-service. This is the key attraction for companies because it creates major opportunities to simplify processes and improve service performance.  But it’s a big culture shift for both managers and HR teams, who are used to being the custodians around HR transactional support in a business.”

Workday was founded by PeopleSoft veterans Dave Duffield and Aneel Bhusri. The software unifies Human Capital Management, Payroll, and Financial Management solutions and is cloud-based. The company has more than 280 customers worldwide, from medium-sized organizations to Fortune 50 businesses. The company is expected to make an initial public offering of its shares later this year as part of an aggressive global expansion plan.

Media contacts: Andy Turner, Six Sigma Public Relations, Direct Tel. +33 689 487 617 or Gordon Whyte, BIE Group, Direct Tel. 07770 898487, email: Gordon.Whyte@bieinterim.com

Read our latest blog entry: Using blogging and Twitter to defend yourself from media attack

BIE Group will be the new name for the soon to merge Archer Mathieson and BIE Interim Executive, two formerly separate companies within The Cornhill Partnership. From 2 April, BIE will lose the words ‘Interim Executive’ from its name and begin trading as BIE Group, with two distinct but tightly-integrated divisions offering both senior-level executive search and interim services. 

The newly combined business, employing 24 people, will build on Archer Mathieson’s ‘multi-specialist’ model, and continue to operate from offices in The City, Birmingham and Windsor.  BIE Group chief executive Rob Walker said:

“We spent a lot of time looking at the name and we found BIE has the most brand equity; it’s a name most senior executives know and trust. It didn’t make sense for us to continue operating under a brand that name-checks two people that long ago ceased to play a role in our business.”

Walker added that Cornhill Partnership’s executive board has sought to create a strong incentive plan for the leadership team of the new BIE Group, with everyone sharing in company profits regardless of divisional contribution.

“I believe that’s something new in executive recruitment and we think that’s the best remuneration plan to drive a mutually-supportive culture, and true integration of the search and interim teams,” he explains.

The company has also announced the appointment of Layla Jaff, who specialises in resourcing senior level HR interim roles. A native of Beirut, Jaff is ex-Frazer Jones and Penna and speaks five languages fluently. She has lived in 12 countries, making her a key player in BIE Group’s international expansion plans.

The company is now actively recruiting for three more consultants, two for the search division and an additional team member for the interim division.

Further information: Rob Walker, chief executive, BIE Group, Tel. 020 3440 5203

Mob. 07768 208759, email Rob.Walker@cornhillpartnership.com

In yesterday’s budget Red Book, George Osborne announced plans to tackle avoidance through the use of personal service companies by “requiring office holders/controlling persons who are integral to the running of an organisation to have PAYE and NICs deducted at source by the organisation by which they are engaged”.

Whilst the measures are clearly intended to prevent senior executives (who would otherwise be employees) from avoiding tax obligations by routing their salaries through private companies, the IIM is concerned that – if poorly drawn – such legislation could severely impact interim managers who work at a senior level.

Interim managers are independent professionals each running their own small business and providing expert services to client organisations, as required: expertise on demand.

Interim management provides business agility in periods of uncertainty and change. However, interim executives operating at a senior level (perhaps an interim Managing Director guiding a company through a turnaround, or an interim Finance Director engaged to manage an acquisition) are often required to adopt responsibilities in their client firms that could position them – for a limited period – as “office holders/controlling persons”.

Said the IIM’s Director of Public Affairs, Tom Brass: “It is essential that these measures be very carefully drawn so that they rightly capture instances of abuse without depriving the economy of much needed flexibility and innovation. The IIM would welcome an opportunity to consult on these measures as they are drafted.”

END

About the Institute of Interim Management

Founded in 2001, the Institute of Interim Management (IIM) is the pre-eminent professional body for practitioners of Interim Management in the UK. The IIM is the voice of the Interim Management profession and the Institute’s focus on professional development, best practice sharing and accreditation ensures that the IIM and its members represent the provision of professional, accredited expertise on demand. For further information, please visit the IIM’s website: http://www.iim.org.uk/.

IIM PR Contact:

Andrew Munro, Director, PR & Comms.

Phone: +44 7801 881347

E-mail: Andrew.munro@iim.org.uk

Other IIM Contacts:

Tom Brass, Director, Public Affairs

Phone: +44 7768 890970

E-mail: Tom.brass@iim.org.uk

Ad van der Rest, Co-Chairman

Phone: +44 7793 593862

E-mail: Ad.vanderrest@iim.org.uk

Hilary Husbands, Co-Chairman

Phone: +44 7739 391991

E-mail: Hilary.husbands@iim.org.uk

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• The Government, civil servants and the media should avoid a knee-jerk reaction to the debate surrounding the role of limited company contractors working within government departments and arms-length bodies.
• They should avoid branding all one-person limited companies as ‘employees attempting to avoid tax’.

Joint statement from:

• The Interim Management Association (IMA), the industry body representing UK interim management recruiters
• PCG, the association representing the UK’s freelance community
• The Institute of Interim Management (IIM), representing professional interim managers
• The Interim Hub, an online resource for interim managers

The organisations highlighted above urge Government to look carefully at how contractors are engaged in the public sector and avoid branding all one-person limited companies as ‘employees attempting to avoid tax’. Limited Company Contractors (LCCs) work in a variety of legitimate ways in both the public and private sector, and are often brought in to lead transformation and change, working on specific projects for short durations.

Firstly, however, it is essential to stress that where there is disguised employment or tax evasion, this must be stopped immediately and fully investigated by HMRC. The Government is right to look closely at how public servants are being remunerated, although any review of the tax arrangements of LCCs must not unfairly tarnish all one-person limited companies as avoiding tax. Not only is this a gross misrepresentation, it may well have the effect of damaging the image of government as a place for LCCs to work; potentially cutting off the talent pipeline of skilled workers with very niche skill sets not found in the wider civil service.

LCCs within government operate in a range of roles, including IT specialists, programme managers, change management specialists, financial management specialists and HR consultants, to name a few. Most work on specific projects for set durations, typically 6–12 months. Many brand themselves as interim managers but. above all, their purpose is to effect change and roll out processes which endure after they have moved on to a new project. They will not be seeking a permanent position and have made a conscious choice to establish their own professional practice – much like a legal or accountancy practice – providing specialist expertise on demand to a range and sequence of clients (both in the private and public sector)’.

By working as a limited company, contractors do not expect the benefits associated with a permanent employee such as holidays and sick leave. They cover their own business expenses, make their own pension contributions and are responsible for settling their own personal and company tax affairs.

At a time when all branches of government are dealing with uncertainty and change, one-person limited companies with specialist skill sets are essential for driving efficiencies and reform. A variety of government departments value that they can be flexibly deployed alongside existing teams to make an immediate impact. However, where there is insufficient understanding for the appropriate ways in which contractors can be utilised, this must be addressed as a critical management issue at the highest levels.

One-person businesses are a legitimate model and the labour market flexibility they provide is vital to the economic recovery of this country. They should be deployed strategically by leaders who understand the value they offer and the appropriate way to use them. Any government review should seek to root out misuse, but must not undermine the unique contribution one-person companies make to the public sector.

The IMA’s quarterly IPSOS Mori survey indicates that the interim management industry is worth £1.5 billion. It is essential for organisations (public and private sector) to have access to this talent, as we work towards economic recovery.

Jason Atkinson
Chair, Interim Management Association

John Brazier
Managing Director, PCG – The Voice of Freelancing

Ad van der Rest & Hilary Husbands
Co-Chairman, Institute of Interim Management

Charles Fowler (FCA)
Managing Director, The Interim Hub

Reading Carlie’s post, and the underlying reports in the Guardian and the Telegraph (in turn sparked by David Hencke’s piece on Exaronews), it’s hard not to believe that government departments are running scared in the face of ill-informed press and public opinion.

Ministers may talk about the importance of nurturing a Flexible Economy but fail miserably in distinguishing between cases of “disguised employees” attempting to avoid tax and genuine interim managers.  Interim managers are independent professionals each running their own small business and providing expert services to client organisations, as required: expertise on demand, the foundation of a flexible economy.

As the IIM said in its recent statement, The Value of Interim Management to the Flexible Economy, we need to recognise that interim management is a very different proposition from traditional employment. It offers precisely targeted expertise on demand, enabling innovation and flexibility across the economy to the benefit of tax-payers and shareholders everywhere. We must not lose sight of this difference nor of the value it represents.

Across the economy, organisations are dealing with uncertainty and change.  Some are restructuring and dealing with the need to scale down their operations; others are innovating their way out of recession.  All are, necessarily, seeking greater agility in their operations.

Interim management provides that agility.

Interim managers are independent professionals each running their own small business and providing expert services to client organisations, as required: expertise on demand. 

The typical interim works full-time on a project for an average of six or seven months (although projects can be both shorter and much longer) before moving on to look for their next assignment.  Interims are often over-skilled for the project in hand.  They are hired to “hit the ground running” and to deliver agreed results quickly and effectively using valuable, specialist skills only for the period required.  By the nature of their work, interim managers bring breadth and depth of experience to a project and they transfer valuable skills into the organisation as part of the assignment.  According to the IIM’s latest annual survey, 74 per cent of interim managers are hired for their specific skills.

Interim managers also bring flexibility.  Using flexible resources means that organisations can innovate more easily; able quickly to kick-off a pilot project or a new venture and then to “off hire” those resources when the project comes to an end.  Valuable permanent staff are not distracted from core activities or put in jeopardy on high-risk projects.

What interims offer, then, is different in important respects from a traditional, “permanent” employee.  The way they are paid is also different.  The amount on their invoice is not salary but revenue out of which the interim must meet the costs of running their business: insurances, training, professional memberships, computer and other equipment, marketing, bookkeeping, travel and all of the costs that employees experience as benefits: healthcare, life assurance, pension etc.

Interims must also fund their own holiday, training and sick time along with the time spent seeking new assignments.  As an independent small business, an interim manager shoulders a degree of business risk that employees are shielded from.

A comparable employee cost, as any Finance Director will tell you, is not simply the employee’s annual salary divided by the days of the year.  The cost of placing an employee at their desk is easily between 60 and 100 per cent higher than the individual’s salary.  The employer has to bear additional costs for: pension contributions, life assurance, healthcare, annual bonus, car costs, employers’ National Insurance, other employee benefits, training and equipment costs. 

This significantly higher, true cost then needs to be divided not by 365 but by the actual number of working days available; i.e. net of weekends, public holidays, annual vacation, an average of eight sick days per year and a similar amount of training days.  The resulting availability is around only 212 days, some 42 per cent lower.

Taking the true cost per available day of an employee gives a more realistic comparison with the cost of an On Demand interim manager.  Even without allowing any premium for getting the exact skills required for the exact period needed, the true cost of a ready-skilled and equipped interim manager, on the job “right here, right now” compares extremely favourably with that of an employee.

Interim management is a very different proposition from traditional employment.  It offers precisely targeted expertise on demand, enabling innovation and flexibility across the economy to the benefit of tax-payers and shareholders everywhere.  We must not lose sight of this difference nor of the value it represents.

END

About the Institute of Interim Management

Founded in 2001, the Institute of Interim Management (IIM) is the pre-eminent professional body for practitioners of Interim Management in the UK.  The IIM is the voice of the Interim Management profession and the Institute’s focus on professional development, best practice sharing and accreditation ensures that the IIM and its members represent the provision of professional, accredited expertise on demand.  For further information, please visit the IIM’s website: http://www.iim.org.uk/.

IIM PR Contact:

Andrew Munro, Director, PR & Comms.

Phone: +44 7801 881347

E-mail: Andrew.munro@iim.org.uk

Other IIM Contacts:

Tom Brass, Director, Public Affairs

Phone:  +44 7768 890970

E-mail: Tom.brass@iim.org.uk

Ad van der Rest, Co-Chairman

Phone: +44 7793 593862

E-mail: Ad.vanderrest@iim.org.uk

Hilary Husbands, Co-Chairman

Phone: +44 7739 391991

E-mail: Hilary.husbands@iim.org.uk 

DISCLAIMER

If you have received this e-mail in error, we would be grateful if you would kindly notify us by return email, and delete the e-mail and any copies of it.  All reasonable measures have been taken to protect this e-mail from viruses.  Therefore, no liability can be accepted arising from virus transmission which results from your accessing any part of this message, including any attachment(s).

PRIVACY POLICY

If you do not wish to receive further mailings from the IIM, please advise us by e-mail to info@iim.org.uk with the text “Remove” as Subject Heading.

The Institute of Interim Management is a Company Limited by Guarantee, registered in England and Wales, No. 4589083

Registered Office: Dolphins, Elmstead Road, West Byfleet, Surrey, KT14 6JB

Nigel wrote: 

I’m happy to announce that I am now working with one of the leading providers of interim management solutions, Alium Partners.  Alium is a respected and well-established firm in the interim management space, having an impressive track record of helping organisations through transformational change, and with an experienced team of function and market sector specialists. 

 My primary focus at Alium is the Retail & Consumer sector, specifically covering:  Food & Beverage;  Personal & Household Goods;  Retail;  and Travel & Leisure.  It would be good to reconnect with you in my new role.  I can also acquaint you with one or more of my colleagues at Alium, who you may wish to get to know better.  My new contact details are at the foot of this email. 

 Many organisations are in the process of significant change at the moment, as we all face the challenges of a difficult economy.  If you have need of senior interim management resource, or if you know of someone else who does, please let me know.  Alium is almost certain to be able to help in some way – and much more cost effectively than if you were to use a major consultancy firm. 

 We wish Nigel well in his new role.