Indirect Tax Market Report Q2 2022

In what’s been another extremely busy quarter for hiring, indirect tax and customs professionals across Europe have still been able to enjoy a uniquely busy period – one that’s seen a huge amount of opportunities on offer.

Despite our caution from the end of Q1 that we may see a slight decline in activity this quarter (admittedly, areas of the market are more bearish than others), overall it feels that we’re still in the pre-pandemic ‘bounce’.

With that said, market conditions right now are not as joyful as one would think and are very much shaped by the lack of candidate movement. As employers continue to hone in on their staff retention measures, this quarter has seen added pressure on salaries as employers face intense scrutiny to reassess salaries in light of the sharp increase in the cost of living. In light of the UK’s (current) inflation rate of 9.1% and Europe’s 8.1%, candidates are unsurprisingly focused on salaries. As a result, this year has seen the professional services sector lead the way with mid-year pay rises in the battle to retain staff.

Typically, the Big 4 has been the catalyst for such salary increases, which have subsequently trickled down to the top and mid-tier who are starting to take action. While some measures from firms have looked parsimonious in light of the current climate, PwC has recently made the headlines by providing 70% of its UK staff with a 7% pay rise, while half of its 20,000+ employees are to get an increase of 9%. Equally, KPMG published in May that they’d be offering their 15,800 UK employees (excluding partners and associate partners) a flat salary increase of £2,000 and £4,000 – a measure that’s been designed so that junior employees feel the ‘greatest benefit’.

The next quarter – and the remainder of 2022 – will be a telling period over how companies navigate through such market pressures. Whilst wages are very much in the headlines today, employers are also juggling other key retention and engagement policies, namely diversity and inclusion which remains hot on the agenda[1]  (keep your eyes peeled for Harvey John’s D&I Report, to be published in July).

Recruitment in Professional Services is fiercer than ever

Most indirect tax and customs departments across the professional services realm have reported huge growth in revenue, so, increasing headcount remains firmly on the agenda.

Speaking to partners, it seems that there’s more than enough work to go around at the moment, with some teams not really conducting much business development but instead tapping into existing client relationships within the firm. However, the key issue here is delivery, so, the recruitment spotlight is on the search for professionals across the Associate to Manager grades. Although there have been some notable big moves to take place at the senior end of the market – and also many directors and partner discussions bubbling away that are likely to become clear in Q3 & Q4 – it is very much an opportunistic time for those at the Assistant Manager to Manager grades.

Customs & Global Trade searches have been noticeably high on the agenda in Q2. Again, with roles firmly pitched at the delivery grades, recruitment here is much about supporting these departments with delivery but also laying the foundations for future senior advisors.

A service line that’s feeling the pinch is the VAT compliance teams – but this is exclusive to the UK rather than mainland Europe. Historically, these UK-based departments have always been able to dip into the talent pools across Europe and lull them to London and Brighton (the hotbeds for VAT compliance) with the prospects of a career in the UK and an increased salary. However, since Brexit kicked in and such moves are now only possible with a sponsored tier 2 visa, firms are all battling it out in a much smaller domestic market. As such, the market value of those with cross-border VAT compliance expertise (primarily from a services background rather than in-house) and a European language has gone through the roof.

So what’s the solution to the VAT compliance crisis? Quite simply, employers must either deepen their pockets or start considering offering tier 2 visas.

The in-house market is beginning to change

The in-house market across the UK, BENELUX, and DACH markets has been extremely buoyant this quarter, most noticeably with an uptick in customs recruitment where we saw a combination of 246 vacancies (compared with 218 indirect tax jobs). In comparison, we also saw 18 tax technology jobs. 

Every customs and trade compliance team right now has been fully tied up with the Russian-Ukraine war and the subsequent sanctions on Russia and Belarus. However, this is merely the top of an already exhaustive to-do list for customs departments, so it’s no surprise that we’ve seen an uptick in recruitment. At Harvey John, we’re seeing two key trends:

Country specialists who can confidently navigate their employer through domestic issues. This demand is more widely evident in already established customs departments.

Global specialists who can work on a multi-jurisdictional basis. The demand for these profiles is primarily amongst businesses with very limited in-house customs capabilities or those making their first designated customs hire.

Across the indirect tax market, the demand for analysts has remained the dominant grade as it comprises 47.2% of the market, followed by 36.7% of this quarter’s activity being the drive for managers.

While little has changed in the activity of hiring for each grade, we are finding that in-house roles are becoming much harder to fill than in previous quarters. This is likely down to a combination of improved retention efforts and also caution amongst candidates in what’s still a delicate socio-economic climate, with ever-growing speculation of recession. At the same time, we’re speaking to more and more ‘managers’ who are patiently waiting for those purely advisory and strategic opportunities to surface. This is an interesting issue that prevails in today’s indirect tax market when we consider that the responsibilities of in-house teams are continuously dominated by more compliance, process, and technology projects, therefore making those ‘pure’ advisory positions much fewer and far between.

At Harvey John, we’ve always described the in-house market to be a more ‘job-driven’ style of recruitment[2]  whereas recruiting in professional services is more ‘candidate-driven’. As such, what we tend to see is that there are fewer in-house jobs released on the market but a larger proportion of candidates applying for these positions (thus making it a market that is driven by the number of jobs available). The current market, however, is beginning to resemble a more candidate-driven market that we are accustomed to seeing with professional services hiring. Increasingly, in-house teams are feeling the squeeze of the restricted candidate flow and are turning to Harvey John to seek specialist tax recruitment expertise.

It is worth noting that the most active sectors for indirect tax hiring remained unchanged with technology (19%), financial services (12%), manufacturing & engineering (9%), and retail (8%). In customs, hiring was most prevalent in manufacturing & engineering (20%), pharmaceuticals (12%), and retail (11%).

Conclusion

With candidate flow noticeably restricted, this quarter has certainly not been without challenges.

Employers must now weigh up whether they need to recruit quickly – and therefore be prepared to make compromises on their perfect hire – or ride it out until they find the right person, which could take many months. A prime example of where this has appeared to work well has been customs teams taking on in-house trained professionals or import/export officers from logistics companies. While it’s taken time to assimilate these profiles into the traditional advisory style of working, these teams have been able to bypass the ordeals of delayed recruitment processes. The same can be said by the indirect tax advisory teams who have opened the doors to VAT compliance specialists for junior consultancy roles.

As talks of a recession loom, it’s difficult to tell what is around the corner for the indirect tax and customs world. What we do know is that it remains a hugely opportunistic time for those who do wish to test the market so, if you’re tempted by the idea of a move, do reach out.

 —

Alex Mann is a Director at Harvey John

For expert advice on how to get the best out of your tax career, whether in a professional services firm or in-house, contact us today.