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Recruitment Matters Issue 24 April 2014

Trade Association of the Year

Your vote, your voice: what the REC Council can do for you What does the REC Council do for you, its members? It’s a good question to ask as you read this magazine and as nominations for this year’s council elections begin, on 16th April. It’s also a question with a good answer. “Being part of the REC Council means representing the industry in standards, professionalism and world class services,” says Neil Smith, REC Council chairman. “The range of recruiters we have on our council ensures that we are able to look at our industry from a variety of perspectives and I would encourage all members to seriously think about putting themselves or their colleagues forward.” There are four corporate director and two individual director positions open for nomination, and to be considered you must have your nomination in by 6 May. The online voting will then run between 26 May and 16 June. The results will be announced at the

What’s inside The Intelligence 2 -3 and REC Talk Pay rates for the year ahead, brand-building and the Good Recruitment Campaign

Big 4-5The Talking Point To be self-employed or not to be self-employed – that is the question we will be answering Members of the current REC Council I originally stood for the REC Council in 2013 after being recommended to do so by the head of the IRP, Richard Charnock. He suggested I get my voice on the council and help to drive certain initiatives or ideas through. The council is very open and gives you that opportunity, as well as being a great place to network with other senior recruitment folk in the UK Michael Bennett, who joined the council last year REC AGM on 18 June. “Our council does a terrific job leading the REC’s work to drive up professional standards in recruitment,” says the REC’s chief executive Kevin Green. “Our directors are a dynamic group of people who are really committed to our

organisation and to our industry. I would encourage people who haven’t stood before to put themselves forward this year. It’s a really rewarding and interesting job and we’re looking forward to welcoming some new faces onto our governing body.” https://www.rec.uk.com/2014agm

I would encourage any recruiter to play a part in the shape and focus of our industry if they are really passionate about it. By being on the REC Council it puts you in a position where you are able to drive forward your ideas for best practice and emphasise areas of focus which are important to you

6Business Matters

The legal lowdown and Business development: Branching out and franchising with Select

7

Institute of Recruitment Professionals We speak to Amoria Bond’s Daniel Daw and Network Recruitment Partnership’s Ken Wood

Best Events and Training 8 The City Conference Tours – they’re coming to you next!

Greg Latham, FIRP

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Leading the Industry

the intelligence Fig 1: Median recruiter turnover growth

Push versus pull

14

Nina Mguni, senior researcher at the REC, looks at pay rates for the year ahead

10

Pay pressures (KPMG/REC Report on Jobs)

65

Rate of growth

60 55 50 45

■ Permanent ■ Temporary

40 35 Jan 08

Jan 09

Jan 10

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Jan 11

Jan 12

Jan 13

Jan 14

8 6 %

In March 2014 the REC/KPMG Report on Jobs indicates that starting salaries and temp hourly pay rates continue to show month on month growth. There was an increase in the proportion of recruiters reporting that perm starting salaries are higher than the previous month. In August 2013, 16.2% of recruiters reported that perm starting salaries were higher than the previous month. This contrasts with 25.5% in February 2014. This trend is also evident for temp/contract pay rates, but is slightly more muted with 15.4% of respondents stating that they paid higher pay rates in February compared to the previous month, against 12.1% in August 2013. In REC’s recent JobsOutlook (March 2014), four in five employers stated that they planned to increase their perm workforce and just under half (48%) stated that their use of temp agency workers will increase in the medium term. And alongside this, Report on Jobs shows that staff availability for temp and perm staff has sharply declined (see the sharp acceleration of starting salaries in the last two quarters of last year, below). The question is whether this demand for workers will be reflected in higher negotiated pay rates – the pull factor.

4 2 0 -2 -4 Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec 12 13

Fig 2: RIB recruiter revenue growth and ONS vacancy growth 120 ■ RIB median revenue ■ ONS vacancies

15

10

%

Unemployment is falling, there are more vacancies but what about pay? According to the HM Treasury report, a series of independent forecasts suggest earnings growth could range from 4% to 1.5% for 2014, while the Office for Budget Responsibility (OBR) forecasts wage growth at 2.6% for 2014, and earnings to grow by 3.4% in 2015. The Office for National Statistics registers muted growth with a 1.1% average weekly earnings in the three months to December 2013. A blog by the Income Data Services (February 2014) suggests that including wage growth for those in discontinuous employment weakens overall earnings growth, suggesting that new starters have accepted lower pay or fewer hours. The Annual Survey of Hours and Earnings (ASHE) for April 2013 shows that wage growth for those in continuous employment in the private sector grew between 3.5% and 4% during 2010-13, and between 3% and 3.8% for public sector employees. When analysis includes those who have been in discontinuous employment, wage growth falls to 2.3% in 2013 for private sector employees and 1.6% for public sector employees. So behind the headline figure of muted wage growth there are two trends to watch: pay progression and wage settlements.

12

5

0

-5

-10 Jan 10

Jan 11

Jan 12

Jan 13

Jan 14

Revenues are booming Recruiters have suffered difficult times during the last few years as the tough economic environment has caused employers to be cautious about taking on new people until their confidence in the recovery was entrenched. But the latest information from Recruitment Industry Benchmarking (RIB) shows that the median recruiter revenue growth in January 2014 was over 11%, the highest seen in nearly three years (Figure 1). This rebound in recruiter revenues is supported by the strong growth reported by the Office for National Statistics for the number of vacancies in the economy. As can be seen in Figure 2 there has been steady and consistent increase in vacancy growth for two years – a statistic that gives us grounds for confidence that the sharp uptick in recruiter revenue growth in January will continue. Pleasingly this strong rebound in recruiter turnover growth is to be seen in each of the three areas of recruiters’ revenues – permanent, temporary and contract billings – the prospects for UK recruiters look better than they have for some time. • Chris Ansell is chief financial officer at Recruitment Industry Benchmarking (RIB) www.ribindex.com

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Leading the Industry

The View Come taste the brand Tom Hadley, REC director of Policy & Professional Services, considers how recruiters build their own identity ‘Building the brand’ has been a hot topic for a while in recruitment. The key is how. Speaking at the recent LinkedIn conference, Darren Ryemill, managing director of Opus Recruitment, underlined the clever use of social media as a means of ‘punching above your weight’ and as a ‘tool for good recruiters to engage with candidates’. Darren went on to argue that “you can’t fake your brand as clients will see through it and staff will not believe in the business”. This is a great point. It is not just about ‘talking a good game’, it is about having genuine insight and actually doing ‘stuff’. It is about substance. A great example of ‘doing’ is the REC Youth Employment Charter that encourages recruiters to build links with local schools and colleges. Over the past year more than 20,000 young people have received support and guidance from REC members, which is a good news story for participating agencies and for the industry as a whole. Also speaking at the recent LinkedIn event, media solutions consultant Alex Charraudeau made the point that “building your brand is about showcasing your business’s personality and being clear on your values”. What better demonstration is there than reaching out to young people and helping to address the challenge of youth unemployment? The recent REC Engineering meeting provided a further example with recruiters keen to sign up to other initiatives such as ‘STEM Ambassadors’, which is supported by over 3,000 employers. The fact that there has been a 36% increase in young people taking up GCSE science shows that these schemes are starting to make a difference. They are also providing participating employers and recruiters with something to take real pride in and shout about. Another topical ‘hook’ for our sector is compliance. Members are increasingly using our tests, codes and REC Audited products to showcase their credentials and to drive a USP around standards, ethics and compliance. Why not? I spoke recently at a breakfast seminar of one of our members on compliance and regulatory issues, which provided a great way to build relationships with current and potential clients. That’s content, that’s brandbuilding in action. • You can follow Tom on Twitter www.twitter.com/@hadleyscomment

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We were delighted to launch a major new campaign earlier this month. The Good Recruitment Campaign has been a long time in gestation. The REC has been developing this initiative for over a year with the help of 20 high profile employers and an array of other business bodies. Its objective is simple: to promote good recruitment to organisations in the UK. At its core is an aspirational charter that defines what good recruitment looks like. We hope that many employers will sign up to the charter over the next few months and demonstrate that they aspire to good practice. Those that have already committed include Santander, Nandos, First group, FCA, G4S, Random House/Penguin, Arsenal and Dixons Retail. We are also delighted that the campaign has been endorsed by esteemed business bodies such as the Chartered Institute of Personnel and Development (CIPD), Chartered Business Institute (CBI), Institute of Leadership Management (ILM) and Chartered Institute of Purchasing and Supply (CIPS), as well as the Forum for In-house Recruitment Managers (FIRM). For our members this puts our work on standards at the centre of your clients’ agenda. Please visit the REC website at www.rec.uk.com/ goodrecruitment to find out more on the charter itself, the guidance we have provided to employers, and a comprehensive presentation so you can prepare yourself to promote good recruitment to your clients. You can also hear more about the GRC by attending our free city conferences in a city near you over the coming months (see page 8). I am really keen to engage with members directly and I am happy to come along to talk to your staff or clients. Contact me at Kevin.green@rec.uk.com • You can follow Kevin on Twitter www.twitter.com/@ kevingreenrec

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09/04/2014 14:27


The Big Talking Point

Self-employed or not self-employed – the new rules Rex Features

As HMRC introduces controversial new rules to tackle “false self-employment’, RM editor Francesca Steele considers the impact for recruiters

T

axation can be a thorny issue in most industries – not just because it can change the game financially speaking for companies and individuals alike, but because it can be a tricky thing for ordinary employees to get their heads around, even though it is often relevant to everyone from the reception desk to the CEO. Which is why this month Recruitment Matters is tackling the complex but critical changes to self-employment regulations this April, so that all our readers fully understand these important changes – and how and why they came about. What is the aim of the legislation? Following the consultation period ending in February, new regulations are being implemented this month by HMRC on ‘Onshore Employment Intermediaries: False Self-Employment’. At a very basic level, these new regulations aim to clamp down on false self-employment, arguing that many workers are falsely classed as self-employed, with resultant losses of tax and National Insurance Contributions (NICs) to the Exchequer. When employers class their workers as self-employed they avoid having to administer PAYE, and paying 13.8% National Insurance Contributions.

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What are the main concerns about the legislation? Lewina Farrell, solicitor and head of Professional Services at the REC, tells us the industry’s concerns. • Liability: Agencies will, in the main, be liable for a lot more tax and NICs, and there’s no guarantee clients will up the amount they are prepared to pay to account for this. There’s also the chance that clients will pressure agencies to continue supplying workers on a self-employed basis – someone will always be prepared to take that risk, and compliant agencies could lose out as a result. Difficulty of evidencing a lack of ‘control’ It’s already tough to prove a negative and clients are going to be very reticent to give firm assurances they won’t exercise control if it makes them potentially liable for a tax bill. HMRC haven’t given anything like the clarity the industry needs on putting in place the right processes to gather this evidence. Sector risks There will, without doubt, be a big impact in the construction sector. Most unskilled labourers currently working self-employed will have to move to PAYE, meaning cost increases of up to 25%. There will be real confusion for the skilled trades, the vast majority of whom are genuinely self-employed but who might struggle to prove a lack of control when sourcing work through an agency. New ‘solutions’ As ever, intermediary companies have been quick to market quick fix workarounds to the new legislation. This is always problematic for compliant agencies who have to navigate the minefield of what is and isn’t compliant. We need robust enforcement from HMRC to stop these new models springing up and to help level the playing field once and for all.

What is ‘false self-employment’? Martin Hesketh, CEO of contractor accountant specialist Brookson, says there are four main model ways of working and being paid for temporary workers: 1) You are on the agency payroll paid on a PAYE basis

2) You are employed by an umbrella organisation 3) You have set up your own personal service company 4) Self-employed model, where you are expected to pay your own taxes. False self-employment via onshore

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The supply chain changes: here’s what you need to know

Getty

David Kirk, director of David Kirk & Co, the chartered accountants and chartered tax advisers, talks us through the do’s and don’ts...

employment intermediaries was initially a construction sector issue but it has spread to other sectors, with the consultation highlighting catering, driving Ben Farber and the security industry as potential problem areas. Once these changes are enacted agencies will have to move any workers they supply directly that are subject to the supervision, direction or control of clients onto PAYE, and report payments made to individuals paid via intermediaries to HMRC. This way, the taxman should end up receiving the correct amount due. How will the legislation enforce change? The recruiter will now be responsible for determining whether the worker should be employed or self-employed for tax purposes. Recruiters will have to be able to prove that any worker classed as self-employed is in fact not under control, direction or supervision. If workers supply their services via a personal service company, they will generally be out of scope of these changes, but still might be caught by the Managed Service Company legislation or IR35. You can see our box (right) for further

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details on the supply chain issue, but in essence what the new regulations mean is that recruiters – rather than end-users – will be liable for ensuring the tax gets paid, unless they can prove that they were intentionally defrauded by an intermediary or client. Are people happy about it? The reaction from workers themselves has been mixed. Many of those who currently work self-employed get a higher rate of take home pay as a result, and these individuals will be facing tax increases and pay cuts as agencies and employers adjust to the changes. There is a risk that some workers may find themselves drifting to rogue agencies offering higher rates of pay by trying to circumvent the new regulations. The process has not so far been popular with recruiters. “This is one of the biggest changes facing the sector that we’ve seen since AWR,” says Ben Farber, senior policy adviser at the REC. “Eliminating false selfemployment is a commendable goal and one that compliant recruitment businesses are keen to help achieve, but false selfemployment is a whole supply chain issue and any legislation to address the problem must reflect that fact.” He added: “While we’ve had a win on this fraudulent document protection, there is still a lack of real end-user liability – this leaves significant scope for avoidance and sets this piece of legislation up to fail.”

HMRC essentially wants the labour supply chain to be self-policing, so the new regulations will make recruiters responsible for checking that umbrella organisations and other companies they use to source labour are paying the requisite taxes. If HMRC discovers that the taxes have not been paid, it will be able to hold the recruitment agency liable. The only instances in which this will not be the case are where it can be proven that false documents were provided further down the supply chain. The recruiter would have to make a case showing that it was provided with fraudulent documents – for example, documents that suggest the umbrella organisation had taxed the workers itself at source even though it had not. Realistically, HMRC will not want to take on complicated borderline cases where there is lots of paperwork, so the clearer the evidence you have, the easier it will be to state your claim. However, it’s simply best for recruiters to ensure from the outset that they fully understand how and when candidates are being taxed in the supply chain, since from now on they are ultimately responsible.

Find out more at www.gov.uk/government/ consultations/ onshore-employmentintermediaries-falseself-employment and also at www.rec.uk.com/ taxandregulation

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09/04/2014 14:28


Legal Update

Rehabilitation of offenders and taxation Lewina Farrell, solicitor and head of Professional Services, discusses two different but important legislative changes which recently came into effect 1. Changes to rehabilitation periods: On 10 March 2014 changes were made to the rehabilitation periods set out in the Rehabilitation of Offenders Act 1974. This allows ex-offenders to withhold information on ‘spent’ convictions when looking for work. Some occupations, however, are ‘excepted’ in that all convictions have to be declared. The list of excepted occupations has grown over the years and the government was concerned that this was making it more difficult for ex-offenders to find work. To tackle this the rehabilitation periods have been amended – they now comprise the period of the sentence plus a specified additional period. See the table below for some examples: The Ministry of Justice has produced guidance on the changes which is available here: www.gov.uk/ government/publications/new-

guidance-on-the-rehabilitationof-offenders-act-1974 For further detail on criminal records checks, see the REC legal guide at: www.rec. uk.com/legal-resources/legal-guide/ criminalrecords 2. Changes to personal taxation: Changes to the Income Tax (Pensions and Earnings) Act 2003 came into effect on 6 April 2014. These deal with the taxation of temps working through both onshore and offshore intermediaries, similar changes were also made to National Insurance legislation. So here are the key points: From 6 April 2014 • onshore intermediaries: where the temp worker is subject to (or to the right of) supervision, direction or control by any person, they must be subject to PAYE and NICs. Employer’s NICs will also be due.

Sentences length

Previous rehabilitation (applied from date of conviction)

New rehabilitation period – when over 18 at the date of the conviction

New rehabilitation period when under 18 at the date of the conviction

0 – 6 months

7 years

2 years

18 months

6 – 30 months

10 years

4 years

2 years

30 months – 4 years

Never spent

7 years

3½ years

Over 4 years

Never spent

Never spent

Never spent

• offshore intermediaries: where the temp works in the UK, the business with the contract with the client (rather than the offshore intermediary) will be responsible for PAYE and NICs, and will be required to pay employers’ NICs. • PSCs (personal service companies) are excluded from the liability provisions. Employment businesses (EBs) will have to check that it is a true PSC. • Clients and ‘relevant persons’ will be liable where they have supplied fraudulent documents to the EB or vendor regarding (a) control (clients) or (b) the manner in which the temp is paid (relevant persons). From 6 April 2015 – EBs and vendors will have to report on payments made to intermediaries within the supply chain. HMRC is currently working on the reporting requirements but we expect them to include (a) the name of the intermediary, (b) the names of any temps supplied through them and (c) gross sums paid. Different models – REC is aware of different ‘solutions’ being promoted in response to the changes. We will look at these as they come to our attention. For more details see Edition 61 of the REC Legal Bulletin and the detailed guidance available at www.rec.uk.com/ legal-resources

Business development: Branching Out Setting up a new business – or growing your current business – can be a daunting task. For REC members who would like a little help, the leading recruitment franchise business Select Appointments is now an REC business partner and can provide detailed mapping and demographic information for each territory, helpting them to target employers and job candidates more accurately. David Buist, director of Franchise Development at Select, says: “If you think about all the hats a new business owner has to wear, it can be rather overwhelming. Often you have to

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be managing director, an accountant, a financier and marketer all at the same time.” Select was established in 1980 and has been involved in franchising since 1992. Currently there are 27 Select franchise offices operating throughout the UK. The company aims to expand the network to 100 franchise locations during the next five years. “The recruitment industry is so buoyant again now,” says Buist. “What we do is give people the opportunity to get into the recruitment industry at the ground floor and feel positive about growing the business, not afraid.”

www.rec.uk.com 09/04/2014 14:28


Inspiration

Behind the scenes at the Institute of Recruitment Professionals

Community come-back Things I Know Daniel Daw, director and cofounder at Amoria Bond, winner of Best Contribution to the Community and Best People Development at the IRP awards Congratulations. How did it feel to win and why do you think you did? It was amazing. Both the awards are about how you treat people and about what you give back, I think, which is incredibly rewarding because we try very hard in that regard, both internally, which I think relates to the People Development award, and externally, which of course is more to do with the community. How so, specifically? Community-wise, the Amoria Bond Charitable Trust is funded by employees and directors. We select partners to fund houses in shanty towns in Peru and then we allow emloyees to go out there and help without having to take that time as holiday. We’ve built 60 houses so far and 100% of the funds we raise go directly to the people on the ground. It’s been going for about three years now. And how about your internal development? We get individuals to write business plans and we do vision sessions where we ask our staff to identify how they’d like to progress and what behaviours and skills they need to get there. We have a lot of training, about 16 sessions for each person per month, and we also have a very cohesive strategic vision and work hard to make sure that’s understood throughout the company. What is that vision? We have a five-year plan to grow from 100 people across four offices globally to 300 across eight. That creates opportunities for staff. For example, might they like to go abroad? Do they want to be a manager? And so on. If you don’t give people motivation and proper guidance they can get flatlined and disillusioned. We work hard to have high retention rates. What was the biggest thing you’ve learnt from setting up your own company? I really think it’s about how you treat your people. We three directors were a management team previously and we’re really focused on incentives. And finally, tell us something about yourself that your clients might not know! I used to be a professional DJ. In fact, so did one of the other directors. I still do the odd party now and again.

Ken Wood, managing director of Network Recruitment Partnership Always treat the client today in a manner that he’ll want to do business with you tomorrow I’ve been in recruitment since 1988 and this is still the most important thing I’ve learnt. Be honest, be upfront and do your job properly. If you can’t supply the right candidate, just tell your client you’re struggling. We want to be seen as recruitment consultants, so consult. Offering advice is just as important as supplying the right workers. Take risks – as long as you learn from them it’s fine When the recession started to hit the automotive industry there was a drastic shortage of candidates in food manufacturing. We went in and said we’ve got the guys with right technical skills – they just haven’t done put them to this exact use. Why don’t you try using them. We adapted to new circumstances and unlike very specialist agencies we built up new networks. People are coming back to Britain A few years ago a lot of companies shifted business over to Eastern Europe but recently it has been refreshing to see a lot of them come back to the UK. I think they have found it easier to manage people back home, to source the right skills and so on. For instance, the new Jaguar Land Rover plant in Wolverhampton, which will aim to produce one engine every 36 seconds from 2015. They are global but decided to build in Britain. The government’s apprenticeship focus is paramount So many technical industries have skills shortages so it’s great to see the powers that be trying to do something about it, since that helps business and jobseekers. The Birmingham Local Enterprise Partnership is going out and talking to colleges and universities, asking them to encourage courses that the companies in the area need. I think that’s going to be a huge advantage.

To keep up to date with everything the Institute of Recruitment Professionals is doing, please visit www.rec-irp.uk.com

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09/04/2014 14:29


Events and training

City Conference Tours:

bringing the Good Recruitment Campaign to Life!

Wendy Cartright

Kevin Green

The first REC city conference tour took place at the REC offices in London at the end of March. Delegates from the REC’s Office Professionals and Life Sciences sector groups both held individual meetings before coming together for a series of informative presentations on the industry. Wendy Cartwright, former HR director at the Olympic Delivery Authority, talked about the issues that clients face when hiring and how the Good Recruitment Campaign can have a positive impact. www.rec.uk.com/goodrecruitment After lunch, REC chief executive Kevin Green gave a rundown on what’s hot, what’s not and what’s growing in the recruitment industry. This was followed by a legal update from Lewina Farrell, head of REC legal services, who explained how some of the latest changes in the tax regime were having an impact on recruiters around the UK. After a day of discussions and debate the delegates got down to the all-important business of networking at the drinks reception. The city tour is hitting the road and will be coming to a destination near you soon so don’t miss out and make sure your book your place today.

When and Where Cardiff

9 April

Half day, pm

Welsh Policy Forum and Education Sector

Birmingham 13 May

Full day

Education and Healthcare Sectors

Edinburgh

10 June

Half day, pm

Scottish Policy Forum, Accounting & Financial Services Sectors

Aberdeen

11 June

Half day, am

Scottish Policy Forum, Engineering (Oil & Gas) Sector

Manchester

9 July

Full day

Technology and Construction Sectors

Bristol

10 September

Half day, pm

General Sector update

Newcastle

7 October

Half day, pm

General Sector update

Birmingham 21 October

Half day, pm

Drivers & Industrial Sectors

Leeds

5 November

Half day, pm

Healthcare, Retail & Hospitality Sectors

London

25 November

Full day

Diversity Forum, Engineering & ‘Exec pay’ Sectors (AER, A&FS, Legal & HR and R2R)

Recruitment Matters The official magazine of The Recruitment & Employment Confederation Dorset House, 1st Floor, 27-45 Stamford Street, London SE1 9NT Tel: 020 7009 2100 www.rec.uk.com

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Membership Department: Membership: 020 7009 2100, Customer Services: 020 7009 2100 Publishers: Redactive Publishing Ltd, 17 Britton Street, London EC1M 5TP. Tel: 020 7880 6200. www.redactive.co.uk Publisher: Aaron Nicholls aaron.nicholls@redactive.co.uk Tel: 020 7880 8547 Consulting Editor: Ed Sexton ed.sexton@rec.uk.com Editorial: Editor: Francesca Steele francesca.steele@redactive.co.uk. Production Editor: Vanessa Townsend Production: Deputy Production Manager: Kieran Tobin. kieran.tobin@redactive.co.uk Tel: 020 7880 6240 Printing: Printed by Woodford Litho © 2014 Recruitment Matters. Although every effort is made to ensure accuracy, neither REC, Redactive Publishing Ltd nor the authors can accept liability for errors or omissions. Views expressed in the magazine are not necessarily those of the REC or Redactive Publishing Ltd. No responsibility can be accepted for unsolicited manuscripts or transparencies. No reproduction in whole or part without written permission.

www.rec.uk.com 09/04/2014 14:29


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Recruitment Matters April 2014