Should you do paid work for employees rather than employers?

Many HR consultants find themselves being asked for support by private individuals, employees who have an issue at work and want some advice but perhaps don’t want to instruct a solicitor. Perhaps it’s a friend of the family, or perhaps you’re keen to build your consultancy and it seems a good way to start.

It can be tempting to take this work, particularly at the beginning of your consultancy when you perhaps don’t have many clients. But there are three really good reasons why, in the vast majority of circumstances, you should absolutely not do this!

It’s against the law

The biggest reason not to work with private clients is because you could be committing a criminal offence by doing it. Advising private individuals in circumstances where there could be a potential claim against their employer is what is known as ‘regulated activity’. You would be effectively acting as a claims management company so would need to be regulated by the Financial Conduct Authority. The definition of ‘regulated activity’ in terms of whether there could be a potential claim is a wide one, it’s not just when someone is actually bringing a claim, it’s any dispute or issue that may lead to some kind of claim.

It is possible to become regulated and therefore be authorised to conduct work with private individuals, however there is a significant one-off application fee and then annual fees as well, and for most HR consultants, this will simply not be worthwhile doing.

Obviously if you get lots of work from private individuals it could be a worthwhile investment, but in most cases this is unlikely to happen. You don’t need to be regulated to advise if you’re not charging a fee, but that doesn’t pay the mortgage!

Financial viability

Private clients are generally far less valuable than business clients. They don’t usually involve repeat business – hopefully most people don’t have multiple disputes with employers and if they do, you may wonder whether they are the common denominator, so recruiting one client will usually lead to one piece of work and that’s it. A business client you get because of one issue they have will frequently become regular clients and bring you lots more business over a sustained period.

Private clients tend to spend a lot less than corporate clients when they do come along – they are less likely to have disposable income particularly if they have just lost their job, so the amount you net from a private client will be lower than most business clients.

They are also less likely to be in a position to refer you to other clients, whereas business clients might be well-connected and able to recommend you to lots of other business owners.

This means that overall private clients are far less lucrative, both immediately and on an ongoing basis, so your time and money spent marketing is probably far more effectively spent aiming at corporate clients instead.

Different dynamic

Someone who is involved in a dispute or potential dispute with their employer is likely to be feeling incredibly stressed and taking it extremely personally. Which is of course absolutely understandable. Their livelihood might be at stake, and they might personally be going through an incredibly difficult and challenging time at work which has undoubtedly had a huge impact on them personally.

Whilst you will of course have huge sympathy with that, it can mean your client is demanding, emotional, angry, frustrated and not necessarily rational. That isn’t a fault on their part, it’s just the reality of these types of situations, but it can make your job as professional adviser extremely challenging and draining at times.

Whilst business owners can and do take employment challenges personally, it’s still business to them, and the likelihood of that type of extremely challenging dynamic with a client is less.

So think very carefully before you take on private individuals as clients. Make sure you have met the regulatory requirements and set clear boundaries with those you work with. And being able to say that you can’t help because you’d need to be regulated can be a very handy way of refusing those requests from friends-of-friends looking for help with their employment issues!

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