Engaging with an Umbrella Company?
Do you engage with umbrella companies? Are you aware of the risk that you could be putting the business at if you have not done your due diligence on the companies you engage with? Do you understand umbrella company compliance?
All Umbrella Companies Are Equal have been passed information from one of their members. This demonstrates the lengths that some avoidance scheme promoters will go to to convince recruiters that they are compliant. The umbrella company was asked to assist a recruitment agency, with whom they work closely. They carried out an investigation into another umbrella company. This company had been on their PSL and their suspicions had been raised as to their standards of umbrella company compliance.
Agency PSL checks on umbrella companies
The results of the investigation were shocking:
The company was based in the Isle of Man prior to the disclosure agreement being signed with the UK Government. They subsequently relocated to Panama.
They operated ‘mirror’ companies which were registered in the UK and that had UK bank accounts. That way the recruiters would believe that they were dealing with a UK registered company. Monies collected in the UK are then transferred offshore without any terms of agreement being in place.
Workers are issued employment contracts which are not written in English and are replaced each year.
Workers are paid National Minimum Wage with the rest of their contract income being paid as an employment loan.
The business actively target contractors working onsite, incentivising them to use the service they offer, rather than engaging with recruiters
They also maintain that their business model means that contractors do not fall within scope of the AWR. The company seem to be relying on the ‘professional exemption’ contained within the legislation; it’s a common misconception that professionals are excluded. UK legislation actually says that the agency or hirer must be a ‘client’ of someone carrying on a profession.
UK Umbrella or Offshore?
The umbrella company under investigation had provided the recruiter with, what appeared to be, an over-arching contract of employment. All communication came from their UK address which turned out to be serviced offices; their trading offices were offshore.
On the face of it the company appeared to be a compliant, UK based umbrella company; the reality was something else entirely. The recruiter in question acted on the information received. They terminated all associations with the umbrella company immediately thereby protecting their business.
Offshore Employment Intermediaries Legislation
Legislation relating to offshore employment intermediaries is changing in April 2014. Recruitment agencies that engage with offshore umbrella companies will have absolute responsibility for the contractors’ PAYE tax liabilities.
In light of recent enquiries, and we assure you that this is not the first, AUCAE are offering recruitment consultancies a review service of their existing PSL. We have vast experience in the industry, and in light of the legislation change we offering a service to help agencies perform due diligence on any companies that they are looking to engage with. Find out why some of the largest recruitment agencies in the UK have used us for help with their PSL:
Help with your PSL?
Andy Hallett of SThree Group commented: “The SThree Group considers compliance to be of the utmost importance for both in terms of its own protection and that of its customers. The quality of the tender process we follow to select the intermediaries we work with is paramount. SThree has an Approved Supplier List (ASL) and we were delighted to discover AUCAE could provide useful information and support for our business.
It is great to see a group of companies that are working towards creating a level playing field for umbrella companies. To educate recruiters and contractors on the benefits of working with compliant employment businesses and generally seeking to raise the standard of the industry. With no official regulatory body or standard within the industry, AUCAE will become a trusted information source for recruiters and contractors who recognise the importance of due diligence.“
Claire Gibson from Max20 stated; “I have recently become the Compliancy Manager at Max20 (an agency that recruits purely for the NHS across the Country). I have found the All Umbrella Companies Are Equal site invaluable when researching Umbrella Companies for our PSL. The website is easy to use and explains everything in “user friendly” English! The 11 point charter gives all the requirements needed for a reputable Umbrella Company to adhere to. From the point of view of an agency it shows the in-depth detail that AUCAE has gone into with each and every Company to ensure they are reputable and compliant and safe for us to work with.”
Umbrella company compliance is crucial to make sure that you, the agency, remain protected against any debt transfer. If you have any queries with regards to compliance, let us know and we will see if we can help!