Compliance Checklist For Contract Placements
Making a permanent placement can often be viewed as an easier option to a recruiter as the compliance required to make a placement is fairly minimal, with documents such as ID and references being the main requirements. However, when it comes to making a contract placement, there are more hoops that need to be jumped through to ensure that the candidate is compliant and that the agency is protected. Even though there is additional compliance required, contract placements can provide additional profitability, turnover and an increase in company value.
Below is a list of the compliance checks that we would recommend for each contract placement in order to minimise any risk to the agency:-
- Client Credit Check
Before starting to find potential candidates for a contract placement, it is ideal to ensure that the client is credit worthy either for funding or credit insurance purposes. Because this is a client where you may have to pay the candidate before the client makes payment to you, it is ideal to ensure that it passes a credit check to cover at least 3 months invoicing value.
- Agency Worker Regulation Audit
Every contract placement made needs to comply with the Agency Worker Regulations by paying the candidate more or the same as a new permanent member of staff. This means speaking to the client about the salary and benefits available to an equivalent permanent member of staff doing the same job, and then working this into a daily or hourly rate and ensuring any potential candidate is being paid this as a minimum.
- Candidate ID and Reference Checks
In order to ensure that a candidate you place in a position is who they say they are, it is advisable to obtain copies of their ID (Passport/Drivers Licence) and also get references from previous employers. You may also want to ask for proof of address from the last 3 months (bank statement/utility bill) as further confirmation of the candidate’s identity.
- Limited/Umbrella Company Documentation
If the candidate has decided to be paid for the contract placement through a limited or umbrella company then it is advisable to ensure that the company is registered before making payment. Asking for documentation such as copies of the Certificate of Incorporation (and checking the company status on Companies House), VAT certificate (if VAT is being charged) and company insurance certificates such as PI insurance is always advisable. You may also want to ask for proof of the bank details for the company to avoid paying to a candidate’s personal bank account.
- PAYE Candidate Requirements
If the candidate is being paid via a PAYE scheme, you will need to ensure that the candidate either provides a P45 from their previous employer or that they complete a Starter Checklist. If the candidate is exempt from Employers National Insurance (due to their age) then it is advisable to get a copy of their exemption certificate.
- Signed Contracts
It is important to have signed client/ candidate contracts prior to a placement starting in order to avoid any doubt around the dates, rates and details of the contract placement. It is advisable to not sign the candidate contract until the client has signed their contract in agreement so as to not obligate your agency in any way. It is also advisable to have a clause in your contract stating that if the candidate is allowed on site without the client contract being signed, this means the contract has been agreed to ensure that the client cannot regale on a contract after the candidate has started.
- Intermediary Reporting Information
If the candidate is being paid through a limited or umbrella company (or classed as self-employed) then you need to ensure you have the appropriate information to complete the quarterly Intermediary Reporting for HMRC. This report tells HMRC about the payments made to contractors whose information is not provided on your RTI submissions for PAYE candidates and shows HMRC how much was paid to these companies, for which candidate and their details. The information required is data such as National Insurance number, candidate’s home address and date of birth (normally information only required for PAYE candidates).
TBOS provides help and advice to agencies daily on how to make sure that their contract placements are compliant and keeps them up to date with current legislation and any expected changes. For contract placements made using the TBOS Freedom model, we ensure that the compliance is correctly followed and all documentation required is collected and stored to protect the agency and TBOS.