Covid-19: the impact on recruitment agencies

Covid-19 recruitment agencies

8th June 2020

If you’re a regular visitor to our blog we hope that the resources we’ve been adding recently have proven useful for your firm during these difficult times. There’s no doubt that we’ve all faced challenges and every business and sector has had to adapt in some form since the outbreak first began at the end of last year. We’ve seen economies worldwide hit and recruitment agencies have faced a wealth of Covid-19 related challenges.

Recruiters placing contractors overseas have without doubt dealt with situations they could never have predicted. Even the most seasoned of recruiters will have little to no experience of keeping stranded contract professionals safe overseas during a pandemic. But there are pockets of positivity beginning to emerge, as our CEO, Michelle Reilly, discussed in a recent feature for Global Recruiter.

Here’s an overview of the key information she shared with the magazine.

A world turned upside-down

As global governments implemented measures to contain the virus and keep citizens safe, the contracting market slowed. With borders closed and movement restricted, many opportunities that recruiters had lined up for contractors were postponed overnight. Since the first countries began shutting down travel, many expats were stranded overseas with the clock ticking on current assignments and very little idea as to where the next opportunity would be.

Encouragingly, though, in amongst this chaos, businesses began to adapt and, thankfully, gig workers were included in the evolution of resourcing strategies. We saw a promising increase in the extension of contracts for professionals as more end-clients sought to keep expert skills within the business and perhaps fill the gaps where planned new starters were no longer able to begin work. Where these extensions were occurring, many were for longer stretches than you’d normally see, clearly indicating that businesses were placing far greater value on retention of resources.

While this was certainly welcome news for contractors and the recruiters placing them, it also posed a real challenge for some, particularly when it comes to compliance with local legislation. With contracts being prolonged, many individuals faced an administrative headache in terms of visa extensions and tax requirements which was further exacerbated by the constantly changing situation globally. There was of course some relaxation of rules where necessary, but authorities have remained diligent regarding tax compliance laws. For recruiters, the endless queries regarding latest developments in specific countries have arguably been challenging, but that’s where our expert team at 6CATS have really come into the fore with those we engage with.

Contractors given greater flexibility

We’ve all seen a change in the way our business operates as remote working has had to be adopted quickly, but this flexibility appears to have been widely embraced by teams worldwide – and contract professionals have certainly been included in this new environment. Throughout the last few months, we’ve seen an increase in contractors being granted the opportunity to work remotely from their current place of residence or home country. This was certainly a move that recruiters and contractors alike welcomed – anything that helps keep these individuals in work is good news after all. But again, it creates a challenge when it comes to compliance.

As Michelle explained in her article, those contractors that are able to work in this way will have to choose what model they can invoice their services under and may opt to use their home country PSC. For recruitment agencies, where this differs to original agreements, they will be under greater commercial, administrative and time pressures to ensure assignments meet these new temporary solutions.

Recruiters also face the challenge of adapting contracts to reflect the current Covid-19 enforced locations of service, the change of contractual parties, and factor in that this is a fluid situation pending further clarification. This in itself is no easy task, but the fact that proofs and required documents often need to be submitted in local languages and formats creates further headaches for recruiters and contractors alike.

It’s important to add in this instance that place of service will usually define where taxes are due to be paid. The Criminal Finances Act 2017 (CFA), which is increasingly being used to target businesses that are non-compliant with tax requirements, will continue to apply wherever the worker delivers their services, regardless of the global crisis. Potential fines for any breaches are unlimited for the owners of the business – and there has been no change to this in light of the pandemic.

The future

The Covid-19 crisis has certainly tested even the best recruitment agencies and the world of work as we know it has changed, but that’s not always a negative. Yes, contractor recruitment enquiries are down. But we’ve certainly seen an uptick in conversion rates instead. Fewer employers appear to be using fake leads to gather information and are instead approaching recruiters with very serious, and very real, opportunities.

And while there are less opportunities for expats at the moment, as we’ve mentioned in earlier blogs, restrictions are beginning to ease across the globe. Movement is being allowed in some areas which may only indicate small progress, but is still a promising sign and we’re increasingly seeing recruitment agencies planning past Covid-19. There are already some pockets of activity that we’re noting: things appear to be picking up across Asia, and in China there are even some contractors able to return to offices again. Some parts of Europe as well are noting an uptick. Poland and the Ukraine have seen an increase in activity that is much higher than normal for these destinations.

Covid-19 has impacted recruitment agencies, but compliance is still key

There may be the odd signs of some normality returning across the globe, but we are certainly not out of the woods yet. It’s likely that we will see more countries slowly ease lockdown and freedom of movement restrictions which will almost definitely bolster contract opportunities worldwide. However, what we can absolutely say is that compliance remains a top priority for the world of contract recruitment. Authorities are not taking their foot off the pedal when it comes to cracking down on tax evasion and recruitment agencies need to ensure they stay on top of this in order to mitigate any potential risks to their firm.

At 6CATS International, we have the necessary expertise to navigate the current landscape, allowing your firm to do international business abroad throughout the coronavirus pandemic and beyond. We will continue to update firms should any new information arise, and there are plenty of Covid-19 related blogs and resources on our website for any recruitment agencies looking to understand the compliance situation in various contracting hotspots.

Please do not hesitate to contact us if you have any questions or would like more information.


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