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Businesses are urged to get to know their supply chain when hiring.

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Given the existing climate and a raft of media exposure around ethics, exploitation, and non-compliance in the recruitment and contingent workforce industry, it has never been more important that everyone in the supply chain works together to develop good working practices. We all know that there are cases of bad practice amongst a community of businesses that have grabbed the headlines. Still, many highly compliant organizations are also working ethically and correctly to offer a high-level quality service for clients and contractors. Knowing who you work with and knowing that your supply chain is operating compliantly is never to be ignored, says Crawford Temple, CEO of Professional Passport, the UK’s largest independent assessor of intermediary payment compliance.

The brand new Off-Payroll reforms that came into effect in the private sector in April 2021 now mean that the end hirer becomes accountable for assessing a contractor’s IR35 status. It has additionally generated an increasing amount of contractors working through umbrella firms. And some of these are not what they purport to be but are posing an umbrella firms. They are tax avoidance schemes duping unwitting contractors into signing up for them, often promising more take-home pay.

And HMRC is not clamping down on the dodgy schemes fast enough or concertedly enough, despite obtaining the relevant data and information to help them identify such schemes. However, HMRC recently sent out their tax avoidance warning letters to workers suggesting they could be in a disguised remuneration or tax avoidance scheme.

In some ways, this is good news. However, as we’ve said often, we believe that HMRC’s focus on pursuing workers is the wrong strategy and simply serves to incentivize the promoters of those arrangements. HMRC should be chasing up the tax recovery from the promoters, not the innocent workers.

Confronted with a proliferation of non-compliant schemes, it has never been more important than hiring firms get to understand their partners throughout the supply chain and take steps to understand that their recruitment partners and the umbrella firms that they work with are operating to the absolute most robust compliant standards that will stand up to rigorous interrogation and investigation.

There are several steps to take to check the credibility and compliance of other parties in the supply chain. You can add specific requirements to your contracts with your recruiters to secure assurances and reassurances. You can start by checking out your recruiters. Are they in an excellent financial position? At a minimum, you need to manage a credit check, and it’s also advisable to investigate their accounts – if independently audited, you can certainly feel reassured that the figures given are true. It’s also wise to check for issues such as conflicting business interests, previously failed businesses, financial difficulties, and offshore connections.

You will even want to check their contracts of employment (umbrella), insurance, and quantities of cover. You are well within your rights to request to visit a copy of the insurance certificates, VAT certificate, and certificate of incorporation. Don’t forget you’re trusting your partners with large sums of money, which means you have to rest assured that they are genuine and have appropriate cover in place. And ask your recruiters to verify the names of the intermediaries they work with and run similar checks on those.

Such an audit would identify a high-risk provider, an additional likely to be a disguised remuneration scheme where malpractice and unethical behavior is occurring, and a moderate-risk provider, which will be one where there is no proof of non-compliance but no evidence that their services have already been verified for compliance either and a low-risk umbrella provider, one which holds a recognized compliance accreditation certificate and is unlikely to pose any type of threat to the supply chain. An increasing number of recruiters work only with approved providers, but end clients must do their particular checks and put processes on the spot to ascertain compliance.

Compliant umbrella firms provide a legitimate contractor management solution that offers individuals all the benefits of employment while taking care of various assignments. Good umbrella firms are open and transparent inside their dealings with workers and provide a definite contract of employment that explains how they will be paid, what deductions they will have and for what, how their expenses are paid, and how their holiday pay is worked out. Open, transparent communication is key throughout the supply chain. End clients must educate themselves about how exactly umbrellas work to feel assured that they are an element of a compliant chain.

Brian Santiago

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