Further to being able to break the news to you on Monday that PurpleBricks are drastically altering their business model to one that will now employ its 600+ LPEs, more information reaches me in an envelope left at my usual dead-drop site.
Yes, it’s confirmed that our scoop was 100% correct and that my numbers were also pretty accurate in that this move to employ rather than self-employ is going to cost PurpleBricks between £5m and £6m a year, plus the unquantifiable, inevitable costs of employment law related compensation as time goes by.
The PurpleBricks document I’ve been handed is from a ‘well placed insider’ entitled ‘Together FAQs’. It’s a question-and-answer sheet that seeks to answer some but definitely not all of the many questions from LPEs that have been unsettled by the shock pivot to push them into being employees.
Apart from the U-turn and the changed narrative that now seeks to sell the opposite benefits to those that the previous regime sold as beneficial to the self-employed, the document is telling. It’s telling in what it says and in what it does not say.
First, commission. It does state that a ‘competitive, benchmarked basic salary’ will now be offered. It does not say how much this will be – £10,000? £20,000?. Is it negotiable? Regionally variable? Who knows? But that’s a big question that surely needs answering and is blatantly missing from what is perhaps labelled a ‘Frequently asked questions sheet’.
On Monday I raised the spectre of a cut in commission and sources tell me that this will be the case. However, the ‘FAQ’ doc I have seen mentions a ‘fair commission’ being paid. Fair to whom, one wonders? Almost certainly, it will be less per listing than now and will no doubt prove a big disincentive to current LPE’s. Maybe it’ll transform into a commission per actual completed sale? No, that’s just silly.
But there’s also this revelation. LPEs will have to re-apply for their jobs and they are not guaranteed to be accepted. So, this is as much about a cull of listing staff as it is a move to, potentially, ward off the prying eyes of HMRC over IR35 rules. Further, LPEs and TOs that have admin staff on THEIR payroll may have to make them redundant – at the LPE/TO’s cost, of course. Not Purplebricks’.
Oh, and any that are accepted will be on 6 months’ probation. Ouch.
Vic Darvey wonders why, as he speculates in the document, some on social media may make some negative noise for a few days? Well Vic, you’ve just taken away the job security and a chunk of potential net earnings from 600 families – so that’s why you’ll get some stick. And no amount of press release gloss will distract from that.
As to timelines, LPEs and TOs have a maximum of 20 days to make the lifechanging decision – acquiesce to an employed status with all of the additional controls and management scrutiny that PB have planned? Or be unemployed.
There are benefits though. 25 days’ holiday. A pension. And paid maternity and paternity leave – just as I set out would have to be the case. However, whilst it’s spun as benevolence from Solihull, it’s actually all statutory. But, Vic will be allowing you to take a day off here and there. ‘Birthdays and your wedding day’ he says. Very gracious.
This sorry saga is being painted as a benefit to LPE’s. Largely, and on balance, it is not. And it’s also being sold as a means to achieve the 10% market share that is ever more distant from Vic Darvey’s grasp and now a goal that has just been realigned to 2025.
Quite how disincentivising 600 people with a pay cut and laying some off will help to do that, is a mystery to me.
Russell Quirk is co-founder of property PR specialist ProperPR and regular commentator on the industry and the housing market for broadcast media. The opinions expressed are his own.
It is now a broken model and it’s almost impossible to see where its profits will ever come from. Imagine the cost of the “upper pyramid” of managers needed to manage this new cohort of employees?
PURP’s share price fell by almost 6% yesterday after he news broke and it has the capacity to fall much further.
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I agree it’s a broken model at the moment.
What if PB:
1. Had a proper no sale no fee without any confusion.
2. They paid employed staff a competitive salary.
3. Opened up local hubs
4. Sold local Franchises
5. The fixed fee was no longer around the £1000 Mark and was slightly below the normal local fee in an area.
Then I think it would be able to take maximum market share.
If you was a investor would you invest in the company if the above took place?
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How much would that cost them to get there ? The three/four months of virtually no income would see them off.
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we can all live in hope
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This is exactly what I feel will happen. Raise fees, nationwide no sale no fee and use their war chest to support it for a few months of transition. Maybe a blend of upfront fee/s and also a sep NSNF offering?
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There are better options of full employment and there are better options of self employment. Not sure why anyone would want to work or continue to work for PB, when there are much better alternatives at the moment.
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Nail on the head!
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One minor correction on the unemployed bit – 20 days to make a decision to be employed by PB. Or be unemployed.
Thats a mistake as they will remain Self Employed. ….as they always have been. Wink wink….
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I would be keen to understand how Mr Quirk would have addressed a similar scenario in relation to his agents at Tepemove, had it still been operating; and he too was feeling the force of HMRC. If indeed HMRC are, as many assume, to be the reason behind this realignment in approach by PB for their staff.
Perhaps tomorrows article from him, will be the answer to this very poser?
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Ah but the LPEs at Emoov were all employed with company cars actually. Sorry to burst your bile bubble!
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Some of them never received their cars and petrol expenses, commissions and salary were rarely paid on time.
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I stand corrected. So is that why that particular model did not work? Too expensive to run given the low fees charged.
Genuine question.
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Best ask that of the man supposedly at the helm when the ship sunk, taking with it the hopes of some 2500 paid-up customers…
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This really begs the question why would an LPE decide to join or stay with PB ? It is obviously a model that is stressed with a very uncertain future. Compared to traditional agency or the new breed of self employed options and the own your own franchise models, PB comes in a distant 4th choice from what i can see. retention and attraction of employees could easily kill them if they get this transition wrong . They have to juggle a low income per transaction & high cost of customer acquisition model with keeping a workforce on board paid well and happy with the legalities that brings and all the HR implications moving forward. The task ahead looks very difficult for PB as I see it .
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“This really begs the question why would an LPE decide to join or stay with PB ?”
It also raises a lot of questions about the Bruces and the legacy issues they have left behind to be addressed by others. There must be some very disgruntled employees .
The T/O s contracts were only amended last year.
This is what they were promised by the Bruces “!
We offer our LPEs the support & flexibility to grow a successful business, chance to reap the rewards of their hard work”
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The Bruce brothers are to blame for the current position at PB ?
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Not solely but the way PB was set up, run and financed has (in my opinion) made this situation all but inevitable sooner or later.
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I agree to an extent , but by the same logic traditional agents allowing service standards to drop made disruption by newcomer models also inevitable and easy to achieve .
PBs current problem position started when the BBs were pushed out of their own empire .
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PBs current problems started when they decided that rather than employ LPEs and TOs and have the associated costs they would make them all self employed. Remind me again who made that desicion ?
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At the time that was a perfectly valid decision and like it or not By many measurements it worked but it’s a bit like listing with RM all those years ago was a good idea at the time.
Everyone’s a genius with hindsight .
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I think you will find LOTS of people pointed out that they were essentially employed and it was a way of getting around the associated costs.
LOTS of people pointed out the lack of control and accountabilty this method of employment gave.
You are trying to rewrite history by pretending otherwise.
These chickens have been coming home to roost for a long time.
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“The Bruces are to blame for the current position”
Yes certainly contributory The whole system of territory ownership and employment structures were created by the Bruces .
It’s been under stress since the very beginning. Question marks raised over the employment status have been the subject of debate well before their departure
Scroll back to the archives and the comments made by disgruntled TOs and LPEs
Investors suckered in by the spiel at the placing must be shaking their heads Their initial investment sunk by 30% + ,no dividends received and the Bruces slink away with their pockets full
No wonder Foxtons activists shareholders are questioning their BODS decisions A big question mark about their £3m “investment” in Boomin. No mention of any positive leads in their latest trading update
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PB and there top chiefs will be in battle station mode. other than a pretty good booking platform and brand awareness there most valuable asset is the field. stand strong LPEs you all hold the cards however PB and the brass will spin it another way. I am being told that poor pressure is being applied by the mid level DSD and MD team, it’s shocking how they are behaving. LPEs I say again without you there is no business so stand strong
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I’d agree with you there. No LPE’s no business…
I dont know much about PB internals but since the LPE’s are self employed they could presumably change loyalties as a group ….and switch to another ‘self employed’ model agency in a given area.
Must be nervy times for both LPE’s and brass alike.
What will the brass have left?
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I cannot get my head round the fact that it appears Purplebricks can simply rip up the contract/agreement between it and its (so-called) self employed workers.
Surely any such contract/agreement would have suitably tight provisions over how the thing could be terminated? Anyone signing up to such a seemingly loose and ill defined arrangement must have been nuts.
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There can’t be too many options. Take what’s on offer or leave it, litigate breach of contract and negotiate with HMRC why PB should be treated differently to every other company in the country.
It might not be a 1st class lifeboat but at least it floats!
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PB licensee/ franchise agreement dated 2015:
https://drive.google.com/file/d/0B3oqJKVfbDXJQXdWV2RhbHlXLUU/view?usp=sharing note section 12.
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PB changed the contracts a few years ago so the LPEs were contracted to the Territory Owners, they removed themselves from the responsibility at that point to defend against IR35. Having spoken to a former director TO’s could have their contract cancelled on a whim basically under the terms they signed up to. So PB only has to deal with the TO issue themselves.
I would imagine there’s a raft of paperwork being prepared to be thrown at To’s from LPEs and TO’s to PB. Particularly once the agents realise that if they were £50k plus last year they’re now about to pay 5-10 £10k more annually in tax if they were as tax efficient as possible previously.
How many actually land successfully will be interesting, as will the LPEs and TO’s who are now seeking advice about their previous unpaid leave etc.
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I’m not a fan of Purple Bricks at all.
However, here we are reading an ‘opinion piece’ from the man with a squeaky clean history…
Mental. Lol.
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If I was an LPE I’d be talking to a good lawyer or Citizens Advice. Possible breach of contract (as a franchisee. PB published that they abide by the franchise associations rules).
PB franchise agreement 2015. Note section 12. https://drive.google.com/file/d/0B3oqJKVfbDXJQXdWV2RhbHlXLUU/view?usp=sharing
And/ or.. Breach of contract and employment law as ‘workers’ (see Uber and Pimlico Plumbers case law). And that’s just for starters. Amongst others, I’d also be talking to HMRC to protect myself from possible prosecution over VAT and other possible tax implications.
Heartily recommend Louise Mankau at Doughty Street Chambers
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The point Q makes about the effects this has on the hardworking people- who perhaps gave up long stable careers with more traditional agencies -is a good one. I imagine the majority were top performers looking to effectively have their own business. This has now been taken away from them after what I also imagine has been a number of hard years graft to get the PB brand to where it is. I don’t think many of the LPEs with real integrity will remain as how on earth can you work for an organization that has basically taken away your dream job.
Is it really the top man’s fault? I’m sure if he could have avoided going down this route he would -or is it just that the model was never going to work anyway.
I note a few agents are now offering an employed Partnership model already and many of these firms are highly profitable- so if I were at PB today I know what Id do-some are actively recruiting-all over Linkedin- so I imagine if you are one of the good guys at PB you could walk into a better far more secure environment by the weekend-so all is not lost.
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Most definitely an interesting article from Russell Quirk, especially for those offended and insulted over recent years by a group whose original intention was the put ‘traditional’ estate agents out of business. They now appear to have set sail on a course to put themselves out of business. Hoorah!
You may have a somewhat chequered background Russell but I for one appreciate your debate stimulating and always interesting posts in Eye, which is a very helpful and worthwhile forum for our industry.
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I looked into the Self Employed model with our advisors last year.
My understanding is this will be an issue for any such structure where the client is invoiced from the parent brand
and where the self employed agent invoices the parent brand for commissions.
and where the self employed agent draws the majority of their income from that parent brand.
Possible headaches from HMRC for both the parent brand and the self employed agent.
The way around it is to have the Self Employed Agent’s company invoice the client directly, have the correct memberships (TPO) in place with insurance etc and that that the self employed agents company is also responsible for AML (Which can be outsourced) but done for the LPEs Limited company. Then pay the parent organisation the franchise fee as agreed.
Of course you have less control
and while I am told by Rightmove this is acceptable under their membership agreement I question if that wouldn’t change if enough traditional agents kicked off as the parent is reselling the portal access as a discounted rate to a different legal entity.
Ultimately I think the partners program at Spicer is the correct approach, employ them, pay them well and have them hang off branches for credibility.
Although I know Spicer have had somewhat of a bumpy ride with staff retention but I do think its the right way to do it.
Ultimately we decided against going down the self employed approach.
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Hi Paul
Hope you and the team are well.
I remember you raising this before, but at eXp we have all undertaken the HMRC IR35 test, placed the correct information in and we get a receipt of submission and answer from HMRC and it shows were are not liable for IR35, even though as you say, the eXp company invoices the client and we then invoice eXp.
The great news is that HMRC also advises that the result of the submission as we receive it will always be adhered to by HMRC, so great news all round.
The SH Partner model is a very good middle ground for those who want the security of employment and the flexibility of working from home and enhanced bonuses.
So there is great choice for all – full traditional EA, Partnership and fully self employed, for those that want the full freedom of running their own business at low entry fee costs. The other way is to go truly high street independent and start from scratch of course but very costly and deep pockets and long term commitments required.
Room for all, but I don’t see the attraction of a PB fully employed model – there are far more stable offerings out there and it is really strange, when the trend is moving away from generic traditional, to give more freedom and flexibility, and PB is going back to fully employed.
More to do with that particular ship hitting rocks and trying to rescue the ship, more than the crew and the passengers perhaps.
Keep well and safe and please say hi to the team!
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Or put another way, employ your employees and stop trying to get around legislation and responsibilities as ‘self employed’ or pay the price. Oh shock horror, your business model cannot support employed people and pay the overtime necessary that LPE’s had been working?
There more of a strong whiff they have being forced to do this.
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FOR ALL THE LPES
I would suggest you all band together and threaten going on strike << while you negotiate the best terms and a guarantee commission for a period, Winter is coming and without you PB is knackered.
If you have been there longer than 6 months I would want the 6 months probation in the bin. Minimum Notice of 2-3 months in the new contract otherwise they only have to give you 1 weeks notice and you are gone.
If you have been there longer than 6 months and been doing a good job that shouldn’t be an issue for them and if it is they don’t value you.
[Sentence removed as it breached posting rules]
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Contract changes is the PB way to do its dirty work. The Bruce’s set up PB as a its your business model, but then after a year or two they forced all TOs to resign their contracts minus the protection and rights that they originally had. Many people still believe the suns shines out of them, but they are the ones who originally shafted the TOs many of which had spent years building their businesses.
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As I posted yesterday…
The Bruce brothers knew what they were doing didn’t they!
Use other people’s money to build a brand. Walk away with millions and then leave others to pick up the ‘brown stuff’ that they were either…
1) not interested in dealing with or
2) couldn’t care less about, knowing they would be well out of the way when it all came home to roost.
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They made money – I would never use PB but good luck to them
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Purple Bricks seems to have been struggling with its identity, pretty much since the Bruce’s left and even a little bit before. The fee models have been changed and prices increased, overseas operations sacked off, senior management positions coming and going and now changing LPE from self employed to employed with all the implications this brings. Not sure what makes them unique anymore and if the sales management service remains as bad as it has pretty much always been, I am not sure the future is all that rosy for them. I guess only time will tell.
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Squeaky bum time for Yopa/Keller Williams etc. 😉
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I don’t see why it would affect either of them. Yopa sell their agents a franchise area and then service it and KW, like eXp, don’t fit the majority of the criteria for IR35, and the individual franchises at this point are miles away from breaking the small business exemption rules.
Yopa possibly have a bigger concern, but as I said they are effectively selling an asset to their agents. Because they are tied to using their software and management tools I would say they have a larger amount of uncertainty but it’s certainly a more creative answer to the IR35 problem.
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Interesting – how much do Yopa Agents pay for their franchise?
PB seemed to be going down this route (changes to role descriptions/titles indicated so) and have suddenly stopped – why?
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I’ve never been part of Yopa so can’t go into intricate details but after successful interviews the franchise is awarded for x amount, say £10k. Each instruction from there deducts a proportion off the total cost, and once paid off it belongs to the franchisee. Yopa is much more aimed at self gen than PB is and even suggests hiring sales negs. Etc.
outwardly it is a franchise model, being sold a crm system to use.
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Two years is a long time to wait for a bus…
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