Compliance and legislation within the recruitment industry has become more and more stringent over the years with the government and HMRC ensuring that candidates are treated fairly and taxed correctly. This means that agencies have to complete additional checks in order to ensure that they are remaining compliant, especially when it comes to contract placements where the responsibility of paying the contractors falls to the agency.
Below is a list of compliance checks that we would recommend all agencies consider before allowing a contractor on a client’s site:-
AWR Placement Check
The Agency Workers Regulations ensure that a candidate working on a contract or temporary placement is paid the same or equivalent to a full-time, permanent member of staff. In order to ensure that the agency complies with these regulations, the agency needs to ask the client what package the candidate would receive if they were taken on as a new permanent placement instead of as a contractor. As long as the candidate is being paid the same or more than this package (including cash equivalents for any additional benefits and perks) then the agency is remaining compliant. It is a good idea to have this information documented and held on file.
ID and Right to Work Verification
Ensuring that the candidate who you are placing on site is a real person and has the right to work within the country is vitally important to protect both the client and you as the agency. Getting copies of a candidate’s identification documents and if they are overseas candidates details of any right to work documents (visa, work permits, etc.) Will ensure that you have ticked this box. You may also wish to complete other checks such as DBS’, taking references and/or credit checks to add further levels of protection.
Limited/Umbrella Company Documents
If the candidate decides to be paid via an umbrella or limited company then it is vital to ensure that the company is active and correctly registered to ensure that there is no liability back to your agency. Getting copies of the Certificate of Incorporation, VAT Certificate (if applicable) and copies of insurances (EL, PL and PI insurance) along with checking the companies house website to ensure the company is still registered are all good practice. You may also decide to get some official documentation to verify the company bank details. (TBOS never recommends agencies paying contractors as a sole trader/self-employed worker as the agency may be liable for the candidates taxes if they are paid gross).
IR35 Placement Check (Public Sector Placements)
In April this year, new legislation was passed which said that any candidate working within the public sector had to have their placements assessed as to whether they were classed as “employed” or “self-employed” placements by the client. If they were classed as “employees” then they would need to be paid either PAYE or via an umbrella company and if they were classed as “self-employed” then they could also decide to be paid via a limited company. In order to find out if the client is within the public sector then you need to check the freedom of information register and if so, you need to find out from the client if the placement is classed as “employed” or “self-employed” workers so you know your options when it comes to paying the contractors compliantly.
CIS Deduction Check (Construction Industry Placements)
If the placements being made by your agency are within the construction sector providing trades and labour services then the placement may be subject to CIS deductions. The Construction Industry Scheme was introduced to ensure that payments made to contractors were assessed as to whether taxes should be deducted prior to making payment. In order to check if a contractor is subject to any deductions under the construction industry scheme then the agency will need to check the UTR (unique tax reference) with HMRC to see if the payment should be “under deduction” (20% is taken from the Gross Amount) or “Gross Status” (payment is made in full) – this is referred to as ‘verifying the candidate’.
Most of the agencies managed by TBOS are in the contractor market and TBOS provide help and support to ensure that the agencies are remaining compliant and paying contractors correctly. Some of the agencies managed by TBOS are within the construction sector and public sectors so additional checks and compliance is provided as part of our service. TBOS also has the capability of providing back office services on international contract placements which require additional compliance checks to ensure that there is minimal risk to the agency, the client and the candidate.
For more information on how TBOS can help provide back office services for your contract placements, please contact our office.