Does your Agency supplier utilise an Umbrella company or scheme? What are the risks?

Does your Agency supplier utilise an Umbrella company or scheme? What are the risks?

Lots of Recruitment Agencies (and their Clients) are awaiting the release of the Autumn Statement  just in case there are changes to the legislation surrounding control, supervision and direction of temporary workers.

Using a compliant Umbrella company is extremely important, and if your Agency Supplier are using an umbrella that is cutting important corners, and raising the risks; how certain are you that you are protected?

There’s a variety of reasons why an Agency maybe utilising a non-compliant umbrella which opens them and  you up to all sorts of risks both ethically and financially.

  • Does your current provider(s) tell you the risks of utilising an Umbrella?
  • Do they tell you how that risk is mitigated?
  • Do they tell you where and how the liability can come back to you as a Hirer if due diligence is not carried out and paperwork isn’t adhering to legislation?
  • Do they explain how their expenses procedure is utilised and what happens if there aren’t enough expenses? Not everybody will be better off using an umbrella – and in the low paid sector this means NMW is contravened and you will be named and shamed by HMRC?
  • Do they inflate expenses? This is a huge risk in the sector and there are many intermediaries doing this.
  • Do you know what happens when expenses are inflated and the risks this puts on the temporary workers?
  • Did you check out their contracts? Are they falsifying employment meaning?
  • Do they offer a compliant contract of services and protection from IR35/MSC?
  • Do they pay Tax/NIC/Vat over monthly/quarterly?
  • Do they have a set margin they deduct? Do you know the weekly expenses incurred because if it isn’t enough to offset ENIC and a set amount is deducted, NMW could be contravened. For example a £15 flat margin with £30 expenses for a temporary worker earning £6.70 will break NMW because there isn’t enough relief to pay ENIC and a margin.
  • Have you ever requested a list of what expenses are claimed?

All eyes are on the Umbrella market, and the Agencies that utilise them ahead of the Autumn Statement on 25th November, when legislation is possibly amended.

Sitting down and looking at your Agency Supplier and their payroll practices, performing due diligence on and if the umbrella they utilise is based on performing a number of tasks, and speaking to those companies that know the technicalities of the models, and not just the savings!

Signing up with Recruitment Agency is all based on compliance, trust and honesty – and that includes their service suppliers also!

HEADS Recruitment has and continues to believe that the use of Travel & Substance schemes in and around National Minimum wage to be both unethical and illegal. We hope the Autumn statement will have a significant affect on the ongoing abuse of such schemes, and the Agencies that profit from them.


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