Now that Purplebricks has thrown in the towel on self-employed agents, how long will it be before others are forced to follow suit?
There’s long been speculation that HMRC has been breathing down Purplebricks’ necks, so why should this be any different for the likes of eXp, Keller Williams and Yopa and others who also use the self-employed model?
Some of these companies have international operations where self-employment is pretty tried and tested (though not in Purplebricks’ case after bombing in Australia and the U.S).
But over here in the UK, it’s simply not how things have been done traditionally. So as increasing numbers of estate agencies turn to self-employment, it’s inevitable that HMRC will go digging deeper into their tax affairs.
I don’t believe for a minute that anything underhand has been carried out by any of these estate agencies using the self-employed model and they have probably met the test of self-employment set by HMRC, but in the light of recent cases involving Pimlico Plumbers and Uber taxi drivers – both complex for different reasons – and changes to IR35, the tax affairs of self-employed agents have come under the spotlight.
Nor do I believe that this decision taken by Purplebricks will add millions to their ongoing cost base, as has been suggested by other commentators. The only real reason to disrupt your business model so much must surely to be to reduce your cost base to appease your shareholders.
In addition, the company is likely to reduce its headcount to cut costs. The Territory Owners and Local Property Experts are being forced to reapply for their positions and have no guarantee of getting them or of even being located in the patch where they previously worked.
Much as I’m an advocate of full employment and the benefits it brings, it’s not fair to pull the rug from under hardworking LPEs and TOs, many of whom have invested sizeable sums of their own money in building up their businesses and now face further costs. A key reason for the company’s cull on TOs last year was to give them bigger regions and more accountability, while LPEs had an increase in instruction fees, in both cases to increase their earning potential.
We haven’t seen the fallout yet but give it 10 or 12 weeks and I won’t be surprised to see a mass exodus of the best, when they realise they will not be able to earn the incomes they were used to. They will be expected to work twice as hard as everybody else in full employment to get their commission on their pile ‘em high, sell it cheap model. Commisery, well and truly. The current PR and LinkedIn campaign will drop away as we see high profile departures.
I believe what we’re really seeing is the last roll of the dice from CEO Vic Darvey, a man under immense pressure. Since he took over the helm two years ago, he has changed their senior management team, their advertising, their fee structure and now their employment model. Despite its massive and costly ad campaign for the Olympics, they’ve still managed to lose market share.
What must the shareholders be thinking? I wonder how many bought shares a few months ago when the price was rock bottom only to see it plunge even further? It’s gone down 10p in the last couple of months alone to 62p as I write, and from 525p in the summer of 2017.
With such a large marketing budget and low fees, what more can Purplebricks do now? They’ve changed the model to have more control over their sales force, slashed their pay and they are ‘outing’ the poor performers. Will these changes now stop the rot and reduce its huge debt mountain? I’m not convinced this will do the trick.
There’s a lot of uncertainty right now for agents, at a time when the housing market has started to cool down with the end of the stamp duty holiday, coronavirus cases are ramping back up and the furlough safety net will cease at the end of this month. It’s not a great time for anyone to be considering self-employment. It’s tough, it’s hard work and only the very few at the top make a decent living from it.
Paul Smith is chief executive officer of Spicerhaart.
Comments (15)
Curious. With the stress applied to the SE model and IR35. Why can’t bosses employ staff on zero hours. Or for 5 paid hours a week. The rest is on the 50% commission or whatever terms are agreed?
Where is the commitment, on both sides. Staff on zero hours, or 5 hours, will be free to do what ever they want in the hours not contracted to work. What is the benefit to the company and EA’s if they are not assured of consistent work patterns. Also, why would good EA’s be willing to work for a company that could ask them not to come in when it suited them; would you biffabear?
Yes I would of. When I was a NEG 70% of my salary was commision. I resented working hard for the lazy to earn off of me. If I was making 50% commission, I would of made a fortune.
if you’re from the Middle East I would not leave PB for SH no way!
If you’re working for a business, answering the phone in their name and have no other job, then you are employed by them. It’s just tax avoidance and by the way, it’s the employer that will be asked to repay the back dated tax and NI. If you’re employing people on a self-employed basis then it’s only a matter of time!
Hi, that is not the legal test for employment/self employment, it is more complex than that which is why there are grey areas. You have to look at how the person operates and what controls and flexibility they are allowed to have. One of the main tests is substitution/delegation. Can the SE person substitute/delegate to someone else to do the work if they cannot come in to work. If you instructed a plumber to repair a tap you would not be able to dictate who did the work, they would send someone who was available and that may be a different person the next day. If the answer is no then this is a good indicator that they are employed. Many agencies don’t allow this for obvious reasons.
Factors indicating that individuals are self-employed include that they:
· have control over what work they do and how they do it;
· can delegate the work to someone else, rather than being required to do it in person;
· are responsible for providing their own equipment; and
· can work for more than one client.
Remember the old adage if something looks like a duck, walks like a duck and quacks like a duck, you can call it a swan, but it is still a duck!
iain Lock
Q&A HR
The issue with some self-employed models and the IR35 HMRC regs is that although certain companies said they are umbrella orgs for self-employed, they weren’t really self-employed. You can’t be self employed when you receive targets from the umbrella org and then are told you could lose your license if you failed to achieve them.
Self-employed will only suit about 5 to 10% of the people working in EA. And not all of these will wish to become self employed. You can’t succeed if you are a jack of all trades and master of just one or two (a good lister does not necessarily mean they will be suited to being self employed). There are so many things to master as a business-owner in general, not just being an outstanding, all-round estate agent, including lead generator.
That said, those models that are truly self-employed offer the top performers something the previous models didn’t, and that is low-cost entry into the business arena.
If there are 20,000 branches out there, each with 3 members of staff (min), that is 60,000 people. 10% is 6,000 and 5% is 3,000. Having 3,000 self-employed top performers in EA will shake up the industry. And Paul is right, those who are truly self-employed, as we are in eXp have taken the HMRC IR35 test and been approved.
I do disagree that now is not the time to go self-employed. As all the business gurus out there will always say, there IS NO ‘best time’ – there will always be an excuse for those who are not committed, but the transaction levels to make a good income and be your own boss are far fewer than if starting your own high street branch and in any business, it is simply about commitment and puting the work in.
Hi John, are self employed agents who work with eXp permitted to work with other similar businesses?
Hi Bosky
I honestly am unsure of what you mean – other similar EA businesses or business suppliers to EA?
If business suppliers we can use whoever we wish – There are preferential rates with some suppliers but no-one is mandated to use anyone. We can pick and choose whoever we wish.
Hope that was the question?
Regards
John
John,
“those who are truly self-employed, as we are in eXp have taken the HMRC IR35 test and been approved.”
I am referring to the Agents eXp use. Are they permitted to do the same work elsewhere? If not, I cannot see how they can be treated as self-employed.
By the way, the video link on your home page does not work.
Sorry
This video does not exist.
It’s a really fine balance on both sides.
Can a business sustain the model and can the SE agent sustain it also.
I worked SE for 4.5 years prior to buying the business we have now and I have to say it worked well.
As said above the income to effort ratio is difficult to mentally get past which is why many fail.
But there were/are lots of other benefits that came with it. That box of flex when you needed it for example.
One thing I am seeing though in my local market where PB were prominent, probably too 7 listing agents in a market with 70+ agents is that since the model changed they are nowhere to be seen.
Has that drive and hunger gone now the pay heck is guaranteed. Possibly
Time will tell. .
Try Paul’s lateral thinking. Scare the top performers to leave PB and They will fall off the cliff faster than the shareholders can sell. He is right though!
I have to agree with all that Mr Smith has said here. I’d also add that whilst PB took a low fee strategy to a different level most SE operatives also work on a low fee basis – many less than 1% – which only makes the chances of achieving a decent income to effort result harder to achieve. The staff attrition rates being seen in KW and EXP speaks volumes! I am convinced that the PB model is yet to change further and we will soon find ourselves in the place where it will become accepted that a SE model is not truly viable in the UK market – it pays the senior leadership well but the troops are fighting to make it work for them.
We can always expect two things from Mr Smith’s articles;
1. Slagging off another agent
2. Bolstering his own
He actually didn’t do the latter for a change, but didn’t disappoint with the former.
He might well be right in his comments but change the record Smithy.
Also seems to have forgotten that the self-employed model is one that is actively promoted within other parts of the SpicerHaart family.
Pot / Kettle springs to mind with JustMortgages pushing their self-employed model, although not sure this line features in their recruitment materials…‘It’s not a great time for anyone to be considering self-employment. It’s tough, it’s hard work and only the very few at the top make a decent living from it’