The KIDs Are Going Off The Rails
Whilst COVID-19 saw a delay to the incoming Off-Payroll legislation until April 2021, the introduction of Key Information Documents (KIDs) did become law in April 2020, as recommended by Matthew Taylor as part of his Good Work Plan and Review of Modern Working Practices in 2017. It was a move welcomed at the time by Crawford Temple, CEO and founder of Professional Passport, the UK’s leading assessor of intermediary compliance, who saw the increased focus on compliance and transparency as a positive development for workers. Nine months on, he reflects on some common mistakes and misunderstandings circulating in the industry around KIDs and recaps on how KIDs work and what they need to contain.
KIDs were designed to provide transparency on how a candidate is to be paid, whether directly to their personal service company, via agency PAYE, or via an umbrella employer. The regulation does not require new KIDs to be produced for each and every assignment worked through any agency, simply at the sign-up stage, and in the event of a later change to the information in it. The new requirement means that recruitment businesses need to work closely with their umbrella partners to ensure that accurate information is given to their candidates, particularly when it comes to explaining how the payment structure works.
Nine months on, Professional Passport has become aware of critical errors in the application of the legislation which include:
- Many examples of the deductions being used are covering every eventuality, probably as a just in case approach. However, this then renders the pay summary unrepresentative and meaningless for the worker.
- Conversely many are not including the required deductions within the example pay statement which once again would mean that it fails the requirements.
- Failure to provide revised documents where a material change occurs, for example where a specific umbrella is engaged after issuing a generic KID at the outset.
- Umbrella companies failing to provide the correct and complete information to the recruitment company so the revised document remains incomplete. It is the recruitment company’s responsibility to provide this information and ensure its accuracy.
- Where recruitment companies are editing the templates available on .gov.uk they are wrongly amending them and removing either required paragraphs or required fields in the summary.
Moreover, a recent survey carried out by IR35 Shield amongst some 3000 contractors found that 86% of contractors said they weren’t provided with a KID for their last contract with 67% of respondents saying that they aren’t even aware of what a KID is.
So, what should a KID contain when it comes to a worker’s pay?
- The figures given within them do not have to fully reflect the precise figure that workers will make on an assignment-by-assignment basis. They must, though, clearly reflect the minimum amount an employment business expects to achieve for an agency worker (for example, not less than national minimum wage).
- They must also include a description of all deductions to be made to a worker’s pay. For statutory deductions (e.g. Income tax), this can just be an explanation that the deduction will be made. For non-statutory deduction and fees (e.g. an umbrella company’s margin), the key information document must EITHER state the amounts to be deducted OR explain how they are calculated.
- Key facts pages must also include representative example statements to demonstrate how the listed deductions will be made to a rate of pay. Real numbers must be used in the example statement: actual figures must be given as opposed to simply listing the types of deductions made and their method of calculation, as is acceptable in the rest of the key information document. These figures may be estimated and do not need to exactly reflect the specific rate of pay subsequently received by the agency worker, but they should demonstrate in a realistic way the deductions made to a proposed rate of pay and how these affect a worker’s take-home pay.
- Where employment businesses have multiple ways of paying an agency worker (e.g. subject to PAYE or through different umbrella companies) it is expected that the business will have a standard key facts page corresponding to each payment method. Ultimately, an individual worker must at least receive a key information document that reflects the payment method that they are to be contracted under.
What is clear is that clients must make accurate assessments of status for the purposes of Chapter 10 to avoid challenges and potential liabilities, in order for the KID to be correctly completed.
- Because the figures in a key information document do not need to be precise final figures, they do not necessarily need to be revised for every assignment. They only need to be updated as and when the information contained within them changes.
- Where there is an intermediary or umbrella company involved, the key information document must be given both to that organisation and to the individual agency worker. Many providers are already working on how they can support recruitment companies to deliver these new obligations.
We are living and working in precarious times, so it is more important than ever that workers throughout the supply chain are protected and fully understand the terms under which they are working. Making sure the KIDs are all right should be a key priority.
For further information:
Crawford Temple, CEO, Professional Passport