We often see local authorities looking for staff and read about placements from our locums’ CVs showing hourly rates at levels rarely seen outside large London commercial practices.
So for example we quite often notice that childcare lawyers coming from a local authority background expect considerably more than childcare lawyers who have worked in private practice. The difference can be quite dramatic – in private practice, it is rare to see an hourly rate above £35 an hour for family solicitors of any length of experience or complexity of work to be covered. However, for local authority locum lawyers, it is very rare to see anyone earning less than £35 an hour, you’re more likely to see somebody working at £45 to £50 an hour for what is fairly similar work, but just from the other side.
Why is this?
Many years ago back in the good old days of local authorities trying to get out of doing any work, the HR departments signed up various councils to RPO’s, Recruitment Process Outsourcers. Some examples of names in this field included Commensura and Matrix, one of whom was partly funded by James Caan. These RPO’s basically took over the whole recruitment process from the council HR department of sourcing temporary staff. So if a local authority needed a locum property lawyer, they would log on to the system, add the vacancy and the RPO would send it out to all the agencies on their list, collate CV’s onto the system and basically deal with the whole recruitment process, including payment.
You may ask why would the HR department outsource their job to someone else? Good question! I attended a meeting with one of our local councils back in 2007 when the HR director was explaining the new system and how good it would be for everyone concerned. At the time the Department for Work and Pensions was running an executive coaching scheme for anyone who was recently made redundant, and I am aware that the HR person who spoke to us that day was in that coaching scheme within 12 months of giving that talk. I hope he got a good payout, but this is a classic example of the bizarre and wonderful world of local authorities. Why anyone would outsource their own job, knowing that they were likely to get made redundant is just beyond me. However, what has happened over time is that the RPO’s have operated an effectively ‘closed shop’ of recruitment agencies as only certain recruitment agencies are signed up with them to introduce staff. This is because you have to comply with a whole range of requirements including high levels of insurance, and also all locums have to be employed by the agency and through the RPO’s system. A lot of smaller agencies like ourselves are simply shut out.
As a result of this, there has been a national shortage in some areas of locums, and as a result of the national shortage of locums, their hourly rates have shot up, creating an artificial market. I’m not sure this will continue forever as new innovations like this tend to be cyclical, but as it stands this is partly why local authority rates are so high.
The other reason they are so high is because of IR35 legislation that has started to be applied by local authorities to all locum assignments. The new IR35 legislation basically says that if you are within the legislation you must pay the same tax as somebody who was in an employed position, even if you are working as a locum. Rather than the contractor or locum being responsible for determining whether they fall within the legislation, the onus is now on the local authority to make the decision. Furthermore, the local authority and/or any recruiters involved in the process have to agree to be liable for any unpaid tax that the contractor does not pay themselves. As a result, this has made the whole locum industry considerably more expensive for local authorities. Why? Because suddenly assignments that may have been covered at £35 an hour on a self-employed basis are now being covered at £50 an hour on an employed equivalent basis. The locum is suddenly needing to pay national insurance and PAYE on their earnings, and there are no ways around this. Virtually the only way to get paid for any roles that fall within the IR35 specifications is to use an umbrella company that employs the locum and pay PAYE & National Insurance. Some agencies also do the same job, although Interim Lawyers and TP Legal Recruitment do not. There seem to be no easy ways around this, and it is for this reason as well as the whole local authority limitation with RPO’s, that has led to an artificial market in the local authority sector, which simply does not exist in the private practice.