WARNING: What you must know about your contractors before April 2020

Earlier this year, I wrote an article about the UK Government’s consultation on the introduction of IR35 tax rules.  This is in relation to contractors in the private sector. If you use contractors in your workplace and you are a medium or large sized company, then you need to prepare for these changes.

Many employers remain unaware of these changes. If you do know about the changes, have you discussed them with your contractors? Have you agreed on their taxable status?

The Government announced in July that the consultation had finished and changes would be effective from April 2020.  Tax and National Insurance payments for contractors will become your responsibility.

It is best to avoid the blanket payment approach

These rules were brought in for the public sector back in 2017. Most public sector employers decided to tax their contractors as employees.  But they did not give those contractors the other benefits of employment. As a result of this approach, many contractors stopped working in the public sector. Public sector employers now find it much harder to attract contractors. Where they do still use contractors, they often have to pay a huge amount more than before.

What are the tests which prove whether or not a contract worker is genuinely self-employed?

Unfortunately for employers (and contractors), the only real test is in employment tribunal. There have been several high profile cases about employment status and there are likely to be more.

There is no hard-and-fast rule which shows that one person is genuinely self-employed. But there are some indicators which the Courts will consider in these cases. So it would be wise for employers to consult with their contractors about these issues.  This will help to determine how their tax should be calculated. Not all of these indicators apply to every contractor.  But they can give a guide to the true status of employment.

Some of the factors

  • Can the individual work at times and from a location to suit themselves? Or do you require them to be at a specific location, at specific times.  Do you require a set number of hours? If so, then that would indicate that you are their employer, not their client.
  •  Does the individual use their own equipment and tools? Or do you expect them to use tools and equipment which belong to your company? Again, this would indicate they are employed by you. If you are happy for them to use their own tools, this is another indication that they are not your employee.
  •  If you provide skills training, this might indicate they are considered an employee. Especially if you require them to undertake such training. A true contractor (supplier) should already be trained and skilled in what you need.  So it should not be necessary to provide any skills training for them.
  • Is there an expectation that you will continue to provide work once the specific job has been completed? Alternatively, are they expected to do work for you, other than what is specified in the contract? Or do you expect them to continue to be available for work for you once the project is done? Any of these things would suggest “mutual obligation” between you. This indicates that they are an employee.
  • What happens if they are unavailable (off sick or on holiday)? Do you allow them to provide a substitute to do the work while they are off?
  • Are your contractors free to do work for other companies at the same time as they work for you?
  • Do you provide transport, uniforms or other “employee benefits” for your contractors?  For example,  can they use a company subsidised gym or restaurant?

This is not an absolute or exact science

The answers to these questions can help you and your contractors decide on the fair way to deduct tax and National Insurance. Should it become clear that they are an employee, then you may need to offer employment terms and conditions and benefits. If you do not do so, then it is unlikely that the individual will be prepared to continue to work for you.

Your discussions  – and their answers – might indicate that they are a true contractor or “supplier of services”.   This will not guarantee that HMRC does not investigate further, of course. But your records of these discussions and their answers will help to show that you have investigated their employee status and have valid reasons for your decision.

Discussions sooner rather than later

If you want to avoid last minute decisions about the status of your contractors, then you need to start these consultations now. Otherwise you might face significant disruption and loss of talent at the last minute. Many public sector organisations are still facing skills shortages. Some are finding it hard to attract and retain contract workers.

The Government has developed a tool to help businesses to decide on the tax status of their employees. There has been some criticism of this Check Employment Status For Tax tool, but it may help employers and their contractors to make an informed decision.

 

If you think this article is useful and you would like any strategic HR support or information on dealing with this – or any other people-related issue in your business – please join our mailing list, or contact us for further guidance.

Jill Aburrow runs an HR strategic consultancy business – JMA HR . She provides strategic HR advice and support to businesses who want to improve loyalty, growth and profit. Jill has been a professional strategic HR advisor for over two decades. She is a Fellow of the Chartered Institute of Personnel and Development (FCIPD) and has a Post Graduate Certificate in Employment Law.

Collaboration, Collaboration, Collaboration – Implementing A Positive Employment Culture

In recent articles we have looked at how to implement a positive employment culture in business.  This will help to increase employee loyalty, business growth and profitability.

But who is responsible for introducing employee engagement into an organisation?  And how can trust and engagement be maintained?

Can a strategic HR partner – such as JMA HR – implement employee engagement for you?  The answer to this is that –  whilst we can support, advice and facilitate –  we cannot make it happen.  The change in the organisation’s culture has to come from within –  from the top –  and everyone in the company has a part to play.

Living the dream

It is a bit of a cliché that you need to model the change you want to happen.  You would probably like to have a workforce which is actively engaged in improving your business.  You want them to work towards achieving your business vision and to be an advocate for your organisation.  Your attitudes, behaviours and approach  will all filter down throughout the organisation.  If you are invariably polite, helpful, and friendly to people, then you are a positive role model for your employees.  If you lock yourself in your office and discourage others from interrupting you, then you cannot blame your staff if they do not make an effort to engage with your customers.

In previous articles we have looked at positive ways of interacting with your employees.  If you show trust in people, recognise their efforts, listen to their ideas and concerns and share your vision with them, you are a model for the behaviours and attitudes you want them to demonstrate.

Implementing a positive employment culture

The individuals who have people management responsibilities (including you if you manage others) are key to the successful introduction of a positive employment culture.  Like the senior team, they are role models for the workforce.  But their role is more critical.  They will hear employee views, concerns, ideas – and ensure implementation, or answers.  They are the people in the ideal position to recognise – and highlight – small successes.  You need to provide training and development for line managers, so that they know and understand their role in achieving a high level of engagement.

Other stakeholders

There may be others within your business who have an impact on the levels of employee engagement.

If you recognise Trade Unions and have Union representatives within the organisation, then you need to partner with them. Again, they may need some training or development.  At the very least, you need to consult and collaborate with them on the best ways to achieve success.   Even if you do not recognise Trade Unions, you may have employees who are members of a Union.  Those employees will want advice and support from their Union and if you are aware of such a link, then you may want to inform the relevant Union of your intentions and the (positive) impact you are intending.  In my experience, relationships with Trade Unions work much better where the Union is considered as a partner with the business.  Everyone is (or should be) aiming for the same goal – fulfilled, engaged and happy employees.

The most important player

The lynch pin to all of this effort is, of course, the employee him/herself.  You can implement as many positive practices as possible but if the employee does not engage with you, then you cannot force that to happen.

In my experience (and reinforced by recent research), there are relatively few actively disengaged employees.  These are the ones who are seeking other employment and who are taking every opportunity to give negative views of your business.

It is far more likely that your workforce is largely made up of people who come to work every day, do an “OK” job and are not really terribly interested.  They may take another job elsewhere if the opportunity arises, but they are not actively seeking a change and may stay with you, jogging along, for years.   Think how much your business could grow and thrive if you could catch and maintain the interest of even some of these people.

Where do we start?

The key to a positive employment culture is to actually start engaging with your employees.  It sounds obvious and simple but it is, surprisingly often, the missing ingredient.   You can start by telling your employees what you are trying to achieve and why – and emphasise the benefits for them.  If you collaborate with them on ways and means to achieve their engagement, then it will start to happen.

If you think this article is useful and you would like any strategic HR support or information  on dealing with this  – or any other people-related issue in your business – please join our mailing list, or contact us for further guidance.

Jill Aburrow runs an HR strategic consultancy business – JMA HR .  She provides strategic HR advice and support to businesses who want to improve loyalty, growth and profit.  Jill has been a professional strategic HR advisor for over two decades. She is a Fellow of the Chartered Institute of Personnel and Development (FCIPD) and has a Post Graduate Certificate in Employment Law.

The Truth About Zero-Hours Contracts

In recent years there has been a great deal of discussion in the UK press about zero-hours contracts and how they are used to exploit workers.  It is rare to find a positive word and there have been calls for such contracts to be banned.

Yet the majority of people do not even know what a zero-hours contract is.  And many of those who actually work on such a basis are quite happy to continue.  So what is the truth and should you consider offering zero-hours contracts to your employees?

In my many years of working in Human Resources, I have seen examples of zero-hours contracts which work extremely well for all parties. I have also seen evidence of exploitation.  The devil, as they say, is in the detail.  As with all things that involve people, the key is common sense, flexibility and  good intentions.  Where those factors are brought into play, this type of employment contract can work really well.

By the end of this article you will understand what is involved in  zero-hours contracts.  You will know the advantages and disadvantages of using them and what the changing legal picture around them looks like.

What is a zero hours contract?

There is no legal definition of  a zero-hours contract.  It is just a contract between a business and a worker which outlines how the work is done. So for employees it is an employment contract, but unlike other contracts of employment it does not specify a number of hours to be worked.

Typically, such a contract is offered where work fluctuates and an employer cannot anticipate how many hours per week might be needed. So in some weeks there is a need for, say, 37 hours (a full-time week) and other weeks might only require a few hours – or even none at all.

The benefit (and sometimes disadvantage) of such an arrangement is that there is no guarantee of any paid work at all in any given week.  For the employer, the benefit is that they only have to pay for work when it is needed.  For the worker, the advantage is that they can fit work around other commitments.  This type of contract is popular with students who can work and still find time for their studies.  Some parents of young children or people with caring responsibilities like these contracts.  It means they can manage work to fit around family or other commitments.

The agreement between the two parties is that the business may ask an individual to work for them, but there is no minimum number of set contracted hours.  The contract states what the individual will be paid if they do any work.  It also covers what will happen when they turn down any work that is offered.  There is a statement about what will happen if there is a change or cancellation of the work.

What are the advantages of a zero-hours contract?

If care is taken with introducing a zero-hours contract, it can be a working arrangement which works successfully for everyone.

For those who have read any of my previous articles, you will know that my first advice is always to consult with your employees .  If you have the kind of fluctuating work which would lend itself to this type of contract, then talk to the individual(s) concerned.  You can agree what might work for them as well as for your business. Beware, though, that this type of contract is not suitable for everyone.

Some people value the flexibility which allows them to balance work with studying or with caring responsibilities or other commitments.  But there are other ways of providing such flexibility.  In addition, there are other considerations with regard to things such as mortgages and other personal financial commitments.  Where possible, you  should accommodate the hours which individuals tell you they need to be able to work.   This will lead to a happier workforce.

For some workers, this might not be the only job they have.  They use it as a way to top up their income without having to commit to a specific number of hours per week.   For others, it may be a way to gain experience in a specific type of job or industry.

Why are zero-hours contracts not suitable in some cases?

If you want to use zero-hours contracts, then you must ensure that you provide a contract which details what the payment will be for any hours that are worked.  You must also  agree and specify what will happen when work is cancelled at short notice.

Someone may have to make specific arrangements in order to be able to do the work on offer (childcare, for example).  It can be costly and difficult if the work is cancelled with little notice.  It is sensible to agree between you what is workable notice and what is not.  Where the notice you can give is shorter than the notice period agreed in the contract, then you may want to agree to pay compensation.   Whatever you do agree with an individual, this must then be spelled out in a written contract.  That will avoid any conflict at a later date and will  help to give the worker some confidence in the arrangement.

For some people, the variability of the work and thus the earnings can cause financial hardship and contribute to stress and anxiety.  Where people have financial commitments, mortgages, loans, etc, they need to have a regular income and zero-hours contracts cannot supply that.  They may also need to show regular hours in order to be able to access such financial arrangements.  You should discuss these things with individuals prior to agreeing a zero-hours contract.  That will help to ensure that they have taken these factors into consideration.  A failure to do this can contribute to mental health issues, such as stress, depression or anxiety.

Things to consider when implementing a zero-hours contract arrangement

There are some things which any good employer will consider before implementing such a contract:

  • Think about the nature of the work you have on offer and how it fluctuates. Will this be a short-term issue, or do you need a longer solution?  Does the type of work lend itself to being carried out on this type of contract? Does the work have to be done by a specific deadline?  Are there other types of flexible working arrangements or employment practices which might suit this type of work?
  • Consult with the individual(s) who will be impacted. Does this type of arrangement work for them?  Have they thought about financial implications?  Do they need to have a guaranteed minimum number of hours?  How much notice do they need for some work to be offered? How much notice should you give if you need to cancel the requirement to work, or change the number of hours?
  • Consider the employment status of the individual. Will they be an employee of your business?  Or will they be self-employed and providing work and invoicing direct or through a third-party?  Can they refuse work offered?   What happens if they want to do some work for other people?  Can they provide a substitute if they are not available?  Will they provide their own equipment and tools?

Other things to think about

  • Make sure the contract  is clear about the agreed terms, particularly the employment status, the payment due and any cancellation agreements. If you agree a minimum number of hours, then you must specify that. You must also include provision about the obligation or otherwise to accept work offered.
  • If you intend that the worker will be an employee of the Company, then you are required to provide an employment contract which includes terms and conditions of employment in line with other employees.
  • It is helpful for you to regularly review the situation with the employee.  This is a chance to decide whether the employment relationship has changed and whether the arrangements still work for both parties. Such review should be on an annual basis, at least.
  • You may need to provide training to line managers to ensure they understand the implications of zero-hours contracts.  They need to know how to manage the work and the individuals who are contracted to do the work.
  • You should ensure that people doing the same job, whatever their employment status, are paid comparable rates of pay.

The changing legal picture

Since 2015, if someone is employed under a zero-hours contract, then it is against the law for their employer to prevent them from working elsewhere.   So an employer cannot include a clause in a zero-hours contract which excludes the person from working somewhere else.

In July 2017, the Taylor review on modern working practices was published and the UK Government has issued its response.  Many of the recommendations have been accepted by the government and some are currently under consultation.

The two major proposed changes with regard to zero-hours contracts are:

  • To give workers, including those on zero-hours contracts, the right to request a more predictable contract;
  • The possibility of paying a higher National Minimum Wage and National Living Wage for hours which are not guaranteed as part of the contract.

Beneficial for business

The Trades Union Congress (TUC) in UK has called for zero-hours contracts to be banned.  One of the reasons cited is that their research shows that most workers on zero-hours contracts feel exploited and want to be able to work more hours on more stable contracts.

Since 2017, the fast food chain McDonald’s has offered its  UK workers the option to move from zero-hours contracts.  Workers can move to fixed contracts with a minimum number of guaranteed hours per week.   McDonald’s has offered this change because some of their staff complained that they had difficulty in some financial arrangements  because they lacked guaranteed employment.

McDonald’s ran a trial across some of their sites, but 80 per cent of workers in the trial chose to remain on their current contracts.  This is in contrast to the TUC findings above. McDonald’s now offer employees the choice.

The benefit to McDonald’s has been an increase in employee satisfaction.  They believe this is because they consulted with staff about their hours.

If you think this article is useful and you would like more advice on dealing with this  – or any other people-related issue in your business – please join our mailing list, or contact us for further guidance.

The Facts You Should Know About IR35 Tax Rules and Your Contract Workers

If you have had difficulty in recruiting skilled staff to undertake specific projects, then you may  have turned to the contract world.  In some industries the way to ease recruitment has been to use contract workers.  This is particularly the case in the IT world.  Technology changes fast and it is difficult and costly to keep trained employees.

I have worked in Human Resources in both the public sector and private sector for some years. So I know the difficulties employers face when it comes to recruiting technologically adept staff.

IR35 Tax Rules are coming to your contractor workers soon

The UK government is currently consulting on the intention to introduce IR35 tax rules to the private sector from April 2020.   These rules have applied in the public sector from 2017.  But many private sector employers are unaware of the rules or the implications for their business.

In a nutshell, the proposal is that private sector employers who use contract workers will become responsible for deciding whether to deduct tax and national insurance from those contractors, via payroll.  They would be classified as falling within IR35 tax rules. This would effectively give the contractors employment status.  They would be able to claim benefits enjoyed by other employees, such as holiday entitlement, sick pay, redundancy pay, etc.  They would be taxed as an employee and it would be your responsibility as an employer to deduct that tax.

What have we learnt from the public sector?

This legislation has been in effect in the public sector since 2017.  It was brought in to combat tax avoidance by contract workers.  If they  were providing their services via an intermediary (often a limited company) then they would be subject to different tax rules.  They might otherwise be taxed as an employee.   There have been some high-profile and costly cases to determine whether or not an individual is considered an employee and  what the costs of that decision are for the employer.

Contractors have been widely used in recent years as a way to circumnavigate recruitment difficulties.  This has been particularly prevalent in the IT industry, where there is an ever-changing skills requirement for projects.  There is a need for existing employees  to learn new skills regularly, in technology which may only turn out to be short-lived.  This has been prohibitive for business in terms of cost and capacity.   In such a fast-changing environment,  it has proved beneficial and cost-effective to use contractors.

What do I need to do about IR35 for my staff?

But from April 2020 in the UK, the onus is likely to fall on private sector employers to make tax decisions regarding these contract workers.   If your business relies on contractors, then you should start to consult with them now about these proposed changes.

There are various ways to determine employment status.  You will need to consider what applies to your contractors and what does not.

Some of the considerations are:

  • Do  you require your contractors to be in a set workplace at a set time.  Do you expect a set number of hours of work per week? Or can they work the hours they choose, in the place they choose to do it.  Do they have to complete a time sheet, or just raise an invoice for the work they have done?
  • Do you provide equipment (eg. computers) and do you expect the contractors to use that  equipment? Or do you allow – or even expect –  them to provide their own equipment?
  • Do you expect contractors to undertake training provided by your company for its employees?
  • Are your contract workers free to take time off whenever they want to?
  • Do you insist that they take a specific amount of time as holiday?
  • If they are not available for work (for example if they are sick), do you expect –  or allow  – your contractors to provide a substitute to do the work?
  • Do you expect contractors to work exclusively for you, or are they free to provide services for other companies as well?
  • Do you provide transport or uniforms or accommodation for contractors?
  • Can they make use of subsidised canteens or gym facilities, etc (ie. employee benefits)?

Some of your answers to these questions may be rather vague, or dependant on such things as security considerations.  The answers  will not absolutely guarantee whether or not someone is considered to be an employee.  But they are all things which can help to determine the true nature of the relationship.

 Why do I need to think about IR35?

The government consultation goes on until the end of May 2019.  Expectations on employers will be more clear once the consultation is finished.  However,  it is very likely that you will be asked to decide on whether your workers are truly self-employed or should be taxed as employees.

It is worth beginning these discussions now.  You will then be able to make an informed decision about whether or not to deduct tax from payroll and offer employee benefits from April 2020.

Start discussions with your contractors so that they know that you are aware of the implications. You can be sure they are nervous about it themselves.   A frank discussion will help you both to prepare for any tax changes and decide how best to deal with any impact on either the individuals or the business.    It won’t do your reputation as a caring employer any harm either.

If you think this article is useful and you would like more advice on dealing with this  – or any other people-related issue in your business – please join our mailing list, or contact us for further guidance.

Thinking (and Recruiting) Outside the Box

The problems that I hear most often from employers are to do with recruitment.   Many employers have raised recruitment issues with me.  These range from things like “it’s difficult to recruit decent people”  to “we employ a large number of youngsters, but they don’t stay and it is difficult to recruit more”. I have even heard “it is difficult to recruit people who get on with their colleagues”.  Some employers are frightened of making the “wrong decision” when they are recruiting.  They are worried they will take on “the wrong person”.

Many of these issues and fears are blamed on recruitment.  But the problems actually come after the new employee has started in the job.  They are more about retaining people and engaging with them, rather than the difficulty of recruiting them in the first place.

But let’s stick with recruitment for the moment.  The news (in the UK, at least) is full of skills shortages, low unemployment rates, a fall in the number of migrant workers in the light of Brexit.  Additionally, market salary rates are rising in response to the growing difficulty in recruitment.

So are employers being too picky? 

Employers are reluctant to take on staff who have not worked in the right sector.  Public sector employees can’t get private sector jobs; non-academic staff can’t move into the academic sector; retail sector only want people who have retail experience; etc.  There might be some justification for such a preference. But most skills, experience and aptitudes are not sector specific.  Specifying experience in a given sector as an essential criterion seems to me to be a lazy way of drawing up a shortlist.  And it might be doing the employer a disservice.  They might be ruling out a raft of people who would otherwise be entirely suitable for the role.

Hiring managers always want the very best person they can get.  They look for someone who meets as many as possible of the criteria and even can offer something that the employer had never even realised they needed.  This is an unrealistic and expensive approach to recruitment when “good enough” should be adequate.  It will be easier to find someone who may not be a high-flyer, but who is steady and reliable and can do the job.  They will also be more willing to work for a realistic salary and more loyal in the long run.

Where can I find a pool of potential employees?

Employers like to recruit in their own image and are unwilling to take a punt on someone who does not fit their picture of the ideal employee.  With some notable exceptions, there is a reluctance to give an offender a second chance.  How sad that this is the exception and not the norm.

Or what about the long-term unemployed?  What about women returners, who are looking to get back into the workplace once they have started a family?  Employers seem to be scared that they will need training, or will want to work shorter hours. People with disabilities or health problems are often overlooked.  There are myriad others who fall into a minority of some kind.  So they fall into the “too difficult” category. They might need more time or money invested in them to “make it work”.

All of these groups of people are willing and able to provide good work, if only they get the chance.  In these days of difficulty in recruitment, it may be that they will be given that chance.

So the next time you need to fill a vacancy in your organisation, why not think outside the box and offer the chance to someone who is not an exact fit?

You may be agreeably surprised.

 

If you think this article is useful and you would like more advice on dealing with this  -or any other people-related issue in your business – please join our mailing list, or contact us for further guidance.

Finding The Perfect Recruitment Fit

Many employers tell me that successful recruitment is their biggest challenge.

The reasons they give are many and varied:  the skills they need are in short supply; it costs a fortune to advertise in the right places; there are plenty of candidates but none of them “fit”; people are too young, old, not skilled, over-qualified… the list goes on.

But the problem may lie closer to home.

Many employers forget two very important things.  Firstly, recruitment is a two-way street and the candidate for the job also has a choice.  Secondly, the recruitment process should not stop when the new employee has signed the contract.

Showing your best side

If you were trying to sell your house for the best price possible, then you would spend some time and effort in preparing for the sale.  You might tidy up the garden .  You could increase the “kerb appeal” by a lick of paint on the front door. It makes sense to clean the house and make the beds. You might even go as far as putting fresh flowers on the table, baking some bread or brewing fresh coffee so that there is an enticing smell when people come to view.

But don’t forget that the candidate is also checking your business out to see if they want to work there.  If they are skilled and/or enthusiastic, you are unlikely to be the only person who is interviewing them.  So it makes sense to show your business to its best advantage.  Make sure the candidate is welcomed when they arrive and that they get a friendly reception from everyone they come into contact with.  Give them a chance to see the environment they will be working in and to meet their potential colleagues.  Ensure you explain the role accurately and clearly.   Make sure you spell out the benefits of working for  you.

Preparing for recruitment

You are probably extremely busy and recruiting people takes up a good deal of valuable time.  That is why it is important to get it right, so you don’t have to repeat the process too many times.  A little care could prevent the need.   Take time to prepare properly for the interview.  Make sure you have read the person’s CV and know a little about them.  Remember to use their name – if you need to check how to pronounce it, then ask them at the beginning of the conversation – and listen to their answer, so you get it right from then on!  Make sure you have prepared some questions to ask all the people you are interviewing, so that you can compare their answers to help you choose the best fit.

Beware the trap of over-selling, though.  The candidates need to get a good impression, but it needs to be the right one.  Don’t promise work which exists but you know is going to someone else.  Make sure they get a true picture of what you need them to do for you.  And don’t show them the beautiful new desk in the airy space by the window, if you are going to put them in the tatty old workspace near the gents’ toilet.

Decision time

You need to decide quickly about whether a candidate is right or not.  If you are not sure, then it is probably a “no” and you need to tell them so.  Time is of the essence and it is critical to get the offer of a job out quickly.  Otherwise, your ideal candidate will have got fed up waiting for your decision and accepted another job elsewhere.  Even if you have made a verbal offer and they have accepted it, you still need to get the paperwork out quickly.  It is not unusual for someone to accept a verbal offer and then to start another job in the time it took you to get the written details out to them.

I have often known employers who think that someone they have interviewed “might be OK” but they want to interview a few others before they decide.  They are frightened they will miss out on a “better” candidate.  In my experience, perfection is impossible to find and if someone is “good enough”, then snap them up.  Otherwise, you risk losing out on employing them because you are looking for someone perfect, who probably does not exist.

After the party

How many times have you moved into a lovely new house, only to discover there are rotten floorboards, rats in the loft and a jungle hidden at the bottom of the garden?  OK, perhaps that is an extreme, but you get the point.  In the same way, a new employee will be wondering if they made the right choice.  What if the job is not the one which was advertised and which they wanted to do, but turns out to be something different which they don’t want to do?  If the reality is very difficult from the promise at interview, then they will very quickly move on.  Then you will have to go through the whole process again.

Recruitment is their choice too.

If you think this article is useful and you would like more advice on dealing with this – or any other people-related issue in your business – please join our mailing list, or contact us for further guidance.

The Truth, The Whole Truth and Nothing But The Truth

The Art of Giving a Reference

When we change jobs, we are all keen to be given a good reference to give to our new employer.

On the other hand, many employers these days only give a basic reference which confirms that the person worked for them for a specific period and what the job title was.  This is only of limited use to a new employer as it gives no indication of how well or badly the employee performed in the role or how they got on with colleagues and/or customers.

As a result, there is a general belief that “references are not worth the paper they are written on”.  This is a real shame when a little care could really help the recruitment process along.

Why do we only give out basic information?

Employers are frightened of horror stories of legislation.  “We might get sued if we say something nasty” and so they feel obliged to say as little as possible and to keep it very bland.  Additionally, many do not trust their managers to give references as they might inadvertently say something which may cause a problem for the Company.

Yet references should be a really powerful tool in the recruitment process. They should tell an employer whether the person is qualified to do the job and what experience they have; they should tell about any performance issues, or triumphs; they should tell of any misconduct or grievance; they should give an idea of the attendance record and any patterns of absence;  they should tell about the relationships and whether the person is a good fit for the new role and the team they will be working with.

How  can you write a “safe” reference, which also helps the new employer?

  1. References must be truthful and factual.  The manager or colleagues may have an opinion – good or bad – about the individual, but this should not be included, unless it is based on fact which can be backed up with evidence. So an opinion that “he was always late, never arrived in work at the right time” would need to be backed up with a record of occasions of lateness, plus evidence of a conversation (or even formal action) with the individual pointing out their lateness and exploring the reasons for it and giving targets for improvement.   Equally, if your opinion is that “she is the best sales person we have ever employed” then you should really be able to back that up with evidence of meeting high sales targets, or great customer feedback.  You don’t have to share any evidence with the new employer, but it must exist so you could produce it if anybody questioned the truth of your reference
  2. Contrary to popular belief, references can include “bad” things – but again, they must be backed up by evidence. So if the person  has a day off sick every other Monday, then it is fine to say so, as long as the attendance records exist which back this up.  It would also be helpful if you could show that you have taken this up with the individual and made them aware it is not acceptable and have agreed a way forward to improve things.
  3. There should be no surprises. You cannot say that the person was not very good at dealing with customers, unless you have had a conversation (or even a formal meeting) with the individual and told them about this problem and a record has been kept, with a copy given to the employee.  If dealing with customers is a critical part of their job, you would again need to show an agreed improvement plan.
  4. The employee may well get to see the reference. It is not unusual for a potential or new employer to show the reference they have received to the individual or even to ask their opinion of what has been said.  Indeed, I suggest this is a good idea for an employer to do.
  5. If you follow all these rules the individual will not be able to show it is not fair.  You might find it helpful to share a copy of the reference with them so they can see what has been said.  They may ask you to change it, but you don’t have to do that.  At least they will have seen you have been honest and they can take the opportunity to consider how to address any negatives with the new employer.
  6. These rules apply to verbal references as well as written ones. Employers sometimes feel they can get round the “difficult” issues by making  a quick ‘phone call to the previous employer, rather than getting a written reference.  This is risky as the person on the receiving end of the reference may well write notes or write the conversation down and it becomes as much of a liability as a written reference would have been.  In any event, is is unfair on the individual to say something which they are not able to be party to or to answer.
  7. Some employers get round the problem by allowing managers to give “personal character references” but not official work sanctioned references. This is also risky as the receiving manager is likely to think it is an “official” reference and to treat it as such, so the risks are still there.  It is better for the employer to produce the reference centrally, with input from the individual’s line manager – or to spend a small amount of time in training managers to write proper references (or show them this video!).

In a nutshell

Please produce and send meaningful references, following the above guidelines.  It will be helpful for the employee, helpful for the new employer – and you may be grateful for the same courtesy when you are next recruiting. It could help save an expensive mistake.

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