As the years have passed, recruitment-industry compliance and legislation have become increasingly strict, with the government and HMRC seeking to ensure the fair treatment and correct taxation of candidates. This has necessitated agencies undertaking additional checks to ensure they remain compliant, particularly with regard to contract placements, given that it is the agency’s responsibility to pay contractors.
We would therefore suggest that before permitting a contractor to work on a client’s site, all agencies consider the following compliance checks.
ID and Right to Work Verification
It is crucial to ensure that you only place candidates on-site who are real people with the right to work in the country, if you are to protect both your client and you as an agency.
This makes it vital to obtain copies of the candidate’s identification documents and – in the case of overseas candidates – details of right-to-work documents such as visas or work permits. Such other checks as DBS, credit checks and the taking of references may help to give you further protection.
Limited/Umbrella Company Documents
In the event of the candidate deciding to be paid via an umbrella or limited company, you will need to check that the company is active and correctly registered – otherwise, your agency may be liable. It’s good practice to obtain copies of the Certificate of Incorporation and – if applicable – the VAT certificate, as well as copies of insurance policies such as EL, PL and PI cover. You should also check the company’s website to ascertain that the company is still registered.
It’s also often a good idea to obtain some official documentation to verify the bank details of the company. TBOS advises against agencies paying contractors as sole traders or self-employed workers, given that this may render the agency liable for the candidates’ taxes if they are paid gross.
AWR Placement Check
The Agency Workers Regulations dictate that a candidate working on a contract or temporary placement receives the same level of pay – or equivalent – as a full-time, permanent staff member. These are regulations with which your agency needs to comply, so you will have to ask your client what package the candidate would receive if the placement was permanent, rather than contract.
Provided that the candidate is paid the same or more than this package – also taking into account cash equivalents for any additional benefits and perks – then your agency will be playing by the rules. You should also document this information and hold it on file.
CIS Deduction Check (Construction Industry Placements)
Construction-industry placements providing trades and labour services may be subject to CIS deductions. The aim of the Construction Industry Scheme is to ensure that payments contractors receive are assessed to determine whether taxes should be deducted prior to the payment taking place.
Your agency can check whether a given contractor is subject to any deductions under the scheme by checking the UTR (unique tax reference) with HMRC. The payment should be either “under deduction” – meaning that 20% is subtracted from the Gross Amount – or “Gross Status”, whereby the payment should be made in full. This process is known as ‘verifying the candidate’.
IR35 Placement Check (Public Sector Placements)
April this year saw the passage of new legislation dictating that the client should assess the placement of any candidate working within the public sector as to whether it is classed as an “employed” or “self-employed” placement. In the event of being classed as an “employee”, the candidate must be paid via PAYE or an umbrella company, whereas those categorised as “self-employed” also have the option of being paid via a limited company.
You can determine whether the client is a public-sector one by checking the freedom of information register. If they are indeed in the public sector, you will then need to ask the client whether the placement is classed as “employed” or “self-employed”, so that you know how the contractors can be paid compliantly.
Here at TBOS, the agencies that we cater for are generally within the contractor market, and we provide assistance and support to ensure that these agencies are complying with the law, including by paying contractors correctly. We manage some agencies that are within the construction and public sectors, so further checks and compliance are provided within our service.
We are also able to provide back-office services on international placements, for which further compliance checks are needed to minimise the agency, client and candidate’s risk. Contact TBOS today to learn more about our contract staffing back-office service.
