Supply Chain Compliance – The power of choice and the importance of informed choice
FCSA, the UK’s leading professional membership body for compliant professional employment services providers, looks at the increased responsibility being passed on to end hirers using non-permanent staff and explains how to mitigate risk by choosing compliant supply chain partners.
Self-employment in the UK is booming, growing from 3.3 million people (12.0% of the labour force) in 2001 to 4.8 million (15.1% of the labour force) in 2017 (Source: ONS).
The demand by employers for non-permanent staff is increasing, and more and more people are choosing this flexible way of working.
However, the growth in the use of contractors, temporary workers and freelancers brings with it risk and complexity.
The legal landscape
There is a clear appetite to rid our sector of poor practice.
Given the raft of legislative changes and extensive media exposure around ethics and exploitation of workers, it will come as no surprise that supply chain compliance is set to get tougher as the Government looks to clamp down on bad practice.
The Criminal Finances Act makes companies criminally liable if they fail to prevent tax evasion by a member of staff or an associate, even if they were unaware of it. Prosecution could lead to criminal conviction and unlimited fines. In order to protect themselves, end hirers must ensure that their supply chain is not facilitating tax evasion, and should be particularly concerned given the increase in tax avoidance schemes that are capitalising on the IR35 reforms in the public sector. All businesses will ultimately be affected by IR35 reform as the Chancellor recently used his budget statement to announce that reforms will extend to the private sector from April 2020. This is a significant change which effectively makes hiring businesses responsible for ensuring that their contingent workforce pays appropriate tax for their employment status. The detail of the 2020 reforms is not yet known but is likely to mirror the 2017 public sector changes.
The Government is also considering 50+ recommendations made in Matthew Taylor’s Review of Modern Employment Practices covering a raft of different issues which aim to give all workers clarity as well as minimise possible exploitation. In addition, the Director of Labour Market Enforcement, Sir David Metcalf, is keen to put some shared responsibility for supply chain compliance on end hirers as he outlined in his recently published strategy.
Now more than ever there needs to be greater transparency and openness throughout the entire supply chain, particularly where the contingent workforce is concerned. We must work together so that we benefit from the value of using non-permanent staff whilst mitigating risk.
Making the right choice
The greatest risk to your supply chain is the choices you make.
As a hirer of non-permanent staff, your company’s good name could be dragged through the mud if a supplier is not operating within the law. Not only could this damage your relationship with clients and contractors in the process, you could also face legal prosecution and hefty fines, as recently seen in high profile cases such as Addison Lee, Deliveroo, Hermes and Pimlico Plumbers.
We understand that HR need to strike a balance between reducing time, cost and complexity when using non-permanent staff, with ensuring compliance. This, however, can be achieved by checking that your agency partners are a member of an accredited professional body where compliance checks will have been undertaken.
Remember, however, that sometimes things aren’t always quite what they seem, so we suggest that you check what the accreditation means in practice, as standards may vary so that you can make an informed choice about your agency partners.
For example, FCSA Accreditation is recognised as the compliance gold standard for umbrella employers, limited company accountants and self-employed/CIS payroll providers. From the feedback we are receiving from our members and recruitment agency partners, more and more agencies are making a strategic decision to partner with FCSA Accredited Members in order to provide reassurance that they will be protected from financial and reputation risk.
Why recruitment agencies choose FCSA Accredited Members for their PSL
- Independently tested by regulated accountants and solicitors.
- Adhere to rigorous standards.
- Are assessed against a published Code of Compliance (drafted and updated with input from HMRC).
- Have their FCSA audit disclosed to HMRC.
- Prove their compliance annually.
The benefit for end hirers, therefore, is by choosing to engage the services of a recruitment agency who has a PSL comprising exclusively of FCSA Accredited Members, will be the assurance that your supply chain is as robust as it can be and peace of mind that every one of our members on an agencies PSL operates to the highest industry compliance standards for your benefit and protection.
When it comes to supply chain compliance, our advice for end hirers is simple; mitigate the risk of using non-permanent staff by choosing to partner with agencies who only work with FCSA Accredited Members. You have the power to make the decision, we’ve made it easier for you to make an informed choice.