What are the key issues affecting online recruitment?

Written on 10 Oct 2014

In this briefing:

  • The UK Government’s review of marketplaces that allow people to share time and skills (and specifically what it means for online recruiters).
  • How does that relate to the ongoing UK review of recruitment regulation and prohibitions on charges to workseekers: new laws about to be published in the UK.
  • VAT rules that may apply to online labour exchanges operating across borders.
  • Payment Services Regulation: an update for online labour exchanges.

UK Government launches review of marketplaces that allow people to share time and skills

The recently announced review of how collaborative consumption models etc (some of which involve to provision of personal services) should be regulated will look at peer-to-peer marketplaces that allow people to share possessions, time and skills.

The Government’s focus will be on three sectors where the sharing economy is increasingly well-established:

  • Personal and commercial space
  • Transport (e.g. car clubs and ride sharing)
  • Time and skills

The review will consider any risks to consumers or established businesses.

Questions may include:

  • Are traditional recruiters being hurt unfairly by online recruitment/ online marketplaces for personal services?
  • Does the regulation of “payment services” need to apply to online marketplaces that also act as payment collection agencies for users?
  • Does there need to be a special consumer protection law governing these marketplaces?

We wonder whether the review may also look at tax opportunities (and tax avoidance) in the shared economy! Are these marketplaces allowing people to “earn” outside the PAYE/VAT system?

This is a separate initiative to the long-promised review of whether online labour exchanges and other platforms which help people find work should be treated as recruitment companies for UK regulatory purposes (thereby prohibiting them from charging introduction fees or membership fees to work-seekers). We were involved in the consultation about this in 2013 and are expecting draft regulations from BIS in October on this.

Are you ready for the VAT changes to e-services?

Online labour exchanges (which help individuals and small businesses provide services to homeowners) operate internationally, but with the service effectively being supplied from servers based in one country (e.g. the USA or the UK).
These companies may, for tax purposes, be treated as e-commerce companies and may be affected by new VAT developments in 2015.

Click here to find out more.

Payment services regulations and online labour exchanges

Online labour exchanges frequently operate as introducers but not contractual intermediaries. In other words once the service provider is introduced to the hirer and they decide to do business, a direct supply contract between the service provider and the hirer comes into force. This makes sense because contractual intermediaries have huge liabilities across Europe relating to tax, social security, employment law and health and safety etc. and online exchanges are just not geared up to deal with those.

However users still like the convenience of routing payments through the exchanges even if those exchanges are not acting as contractual intermediaries. This means that many exchanges now act as providers of payment services, and the exchanges like this as well because it helps them collect fees due to them.

This role as a payment services provider(i.e. being a payment intermediary without being a contractual intermediary) presents legal problems, especially following recent changes in interpretation of the Payment Services Directive. It seems increasingly likely that this payment intermediary role may bring online exchanges into a regulated area as a “money remittance” or other payment services business. Online exchanges who have this role should take urgent advice to avoid difficult consequences.