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The Importance of Using a Compliant Umbrella Company

You will no doubt have read about the substantial payroll fraud recently uncovered by Essex Police. The Copp family used their Umbrella Company Quality Premier Services (QPS) to pocket around £45 million of VAT money owed to HMRC. QPS were responsible for processing the umbrella payroll for thousands of candidates and were trusted by the Recruitment Agencies they engaged with, to make the required HMRC payments. HMRC will now be working with liquidators to maximise the recovery of the monies stolen and this will undoubtedly lead to conversations with the Agencies involved.

It is very easy to look at margins when choosing which umbrella providers you engage with, but the importance of choosing a compliant intermediary should not be underestimated. The Umbrella company you choose, is and will act as an employer which means they have a responsibility to check and provide certain information;

  • Right to work – they should be asking your candidate to provide evidence of their right to work in the UK
  • Welcome and Procedures – they should inform your candidate of the disciplinary procedure, expenses and general company guidelines
  • Every employee should be provided with a contract of services
  • Deductions – they should be making the candidates tax and NI contributions. This also includes pension contributions and holiday pay.

The following should also be questioned by an Agency before signing a contract for services with a new umbrella provider:

  • A non UK Company Registration number – if this is the case, check they aren’t an offshore provider using tax breaks from other countries
  • They cannot answer your questions – if you feel that your questions are being evaded or not fully answered, then do not give up. If you do not clearly understand the model being used, then you should not be allowing your candidates to use it. As part of the contractual chain, YOU are also responsible for ensuring compliancy.
  • How long have they been trading? This is always a good indication of the experience they have, you can find out this information free of charge on Companies House. Age of a company does not mean compliancy, but an established company with up to date filed accounts will always provide reassurance.

A compliant umbrella will always provide the following for your candidates as a minimum requirement:

  • National Minimum wage payments
  • Statutory payments such as maternity, paternity and sick pay
  • A contract that renders its employees legally eligible to claim expenses
  • Access to auto enrolment
  • Full employment rights.

Many Umbrella companies are accredited by a professional body such as the Freelancer & Contractor Services Association (FCSA) or Professional Passport which can be an indication of how compliant they are. There are always new products and schemes in place to try to ‘beat the system’. The latest currently being investigated by HMRC is the Job Board Tax Avoidance scheme where a candidate’s salary is reduced and bonuses are paid in loyalty points.

In order to remain compliant with HMRC legislation and avoid potential penalties, Recruitment Agencies should only be referring their candidates to compliant and trustworthy PAYE umbrella payroll companies. Outsauce Financing work closely with a number of such umbrella companies, so our clients are able to confidently pay their candidates each week without unnecessary risks. If you would like more information as to how we can help your Recruitment Agency please do not hesitate to give us a call.

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Holly Spiers

Sales & Marketing Executive

01925 873560