With so many umbrella companies in the market and many more emerging since the announcement of IR35 reforms in the private sector, choosing the right provider for your agency business might seem like a daunting task. It’s also one you need to get right as the Criminal Finances Act 2017 makes recruitment business directors potentially criminally liable for failing to prevent tax evasion.
Due to unscrupulous players in the umbrella market, many agencies and indeed contractors have been duped into engaging in schemes that more commonly are resulting in prosecutions and, in some tragic cases, suicides of former contractors.
The government and HMRC are now very active in pursuing anyone connected to these schemes, and the FCSA is engaged in helping the government create regulation within the sector as well as assisting HMRC in identifying increasingly sophisticated ‘shop fronts.’
So how do recruitment businesses protect themselves in what is a very rapidly evolving marketplace?
An excellent place to start would be choosing an umbrella company accredited by a reputable professional body, the Freelancer & Contractor Services Association (FCSA), for example.
FCSA is the UK’s leading membership body dedicated to raising standards and promoting supply chain compliance for the temporary labour market since 2008.
FCSA accreditation is recognised as the industry’s compliance gold standard. Accreditation is awarded to umbrella employers and contractor accountants (PSC) and CIS payroll providers, who can demonstrate the highest industry standards.
Here we explain why choosing to partner exclusively with FCSA Accredited Umbrella companies is essential for recruitment agencies:
Before any potential member can be considered for membership and go through the tests set out below, they are required to prove that they are an established (minimum two years) and financially viable operator. All directors are required to be resident in the UK.
Those directors and the company are then put under a due diligence test to ensure they are not associated with other questionable companies or have any adverse findings against them.
Once these factors are satisfied, then they can move onto the independent assessment set out below:
Demonstrating the highest compliance standards within the industry
The FCSA operates a set of best practice Codes of Compliance to help ensure that its members provide services, advice, and solutions to the highest level of professional and ethical standards.
These Codes were developed by Ernst and Young, in consultation with HMRC, and form the basis on which all FCSA Accredited Members are tested annually. They are continually updated to reflect the latest legislation, with non-compliance resulting in the member’s accreditation termination.
By only using FCSA Accredited umbrella companies, you can rest assured that workers are paid in-line with the correct UK legislation, and all the appropriate deductions have been made. As a recruiter, you can limit your liability and ensure you do not facilitate any form of tax evasion that could come from using an unknown, unregulated umbrella company.
Trusted and independently vetted supply chain partners
Each FCSA member is audited against the Codes of Compliance by one of the FCSA’s independent assessors, all top-tier accountants, and solicitors with specialist sector knowledge, bound by their own industry professional standards.
This independent assessment of each member guarantees transparency in their accreditation. It is one of the main reasons that the FCSA brand is recognised and trusted by the recruitment industry and your end-clients alike.
FCSA members provide a ‘ready-made’ umbrella company Preferred Supplier List (PSL) that you can implement easily across your recruitment business, safe in the knowledge you have eliminated as much risk as possible in the payment of your contingent workers, protecting the future of your company at no cost to your business.
As a recruiter, you can demonstrate your commitment to compliance with your supply chain by partnering with FCSA Accredited Members. In fact, many end-client PSL tenders will require you to demonstrate your compliance processes; using an FCSA accredited umbrella company is a great way to do this.
Financially stable and competently run umbrella companies
The term ‘umbrella company’ encompasses many types of payment solutions, some of which are promoted by unscrupulous operators whose directors have a less than convincing history of running their businesses.
As part of the FCSA’s rigorous compliance audit, its member organisations’ financial strength is assessed; you can be assured an FCSA member has been assessed independently to assure the supply chain that they have strong financial liquidity to ensure that workers’ pay is protected.
The director’s backgrounds are also checked annually. The FCSA’s recent code of conduct addition of a ‘Fit & Proper person test’ for all member organisation directors builds on the existing checks to ensure only the most competently run and compliant businesses can display the FCSA logo.
FCSA Accreditation is the only compliance standard recognised and endorsed by all of the major recruitment industry bodies, including the REC, APSCo, and TEAM
For the reasons outlined above, the FCSA Accreditation is seen as the gold standard in umbrella company compliance. It’s for this reason that these recruitment industry bodies, along with many large end-clients, will put their name against a recommendation to only allow FCSA Accredited Members as part of any umbrella Preferred Supplier List.
For more information about FCSA Accreditation:
- What makes FCSA Accreditation unique? – Click here
- Why is supply chain compliance important for agencies? – Click here
- Find an FCSA Accredited Umbrella Company – Click here
This article was written by Rob Wilks, Director at Clipper Contracting Group (FCSA Accredited Member firm)
Disclaimer: We have taken care to ensure that all information is provided is accurate and valid at the time of publication. Legal advice should always be sought before implementing any changes to processes and practices.