You’ll know as well as I do that compliance is crucial when it comes to hiring a contractor or freelancer. But understanding who needs to audit what can be a minefield, and the buck often gets passed around, triggering various issues.
Ultimately, everyone in the supply chain needs to be compliant throughout their processes – from end clients, to recruiters, to the self-employed. Join me as I detail a few examples that demonstrate the importance of supply chain compliance across the market.
The IR35 public and private sector reforms came into force in 2017 and 2021 respectively, causing a significant headache for those involved. They passed the responsibility of determining IR35 status to end hirers, which led to blanket decisions and much worry in the industry. Under the legislation, those hirers are liable for underpaid tax if they’ve failed to:
- Provide a Status Determination Statement (SDS)
- Employ reasonable care to prepare an SDS
- Handle an appeal to an SDS
- Pay the tax owed
Yet it’s important to note that they’re not necessarily the fee payer. It can be a consultancy, a managed service provider, a master service provider, or another party. So compliance doesn’t rest solely on the end client – it spans the whole supply chain.
HMRC therefore expects end clients to audit their labour supply chain, and for it to be credible and legitimate. That doesn’t just apply to the IR35 legislation either. Whilst it’s the one that’s been making headlines, there needs to be checks for other legislation too, such as the Criminal Finances Act and the Modern Slavery Act.
The Agency Worker Regulations (AWR) are another big issue, despite the fact they were introduced over a decade ago. Put simply: once a 12-week qualifying period passes, agency workers are legally required to be treated equally to employees i.e. with the same standard employment and working conditions. The temporary worker agency (TWA) must ensure the hirer has the right information to enable them to do this.
Specifically, they need to gain relevant comparator information (e.g. how much an employee in the same position earns). In addition, the TWA is required to reasonably resolve what the agency worker’s basic working and employment conditions should be, then apply these where it lies within their responsibilities.
A real-life case is Stevens (the agency worker) vs Northolt High School (the end hirer). At an employment tribunal, Stevens was awarded £10,878 compensation – the total amount she’d been paid less than her counterpart. Northolt High School had to pay it, because the agency could demonstrate their multiple attempts to gain comparator information, yet the end hirer never fulfilled this obligatory request.
You can learn more about this case, and the AWR, in the latest FCSA webinar.
How to ensure supply chain compliance
These are just two examples of the importance of supply chain compliance. There are numerous liabilities across the chain – from checking the right parties are updated, to taking reasonable care to carry out an action.
As for how to address compliance in your own supply chain, here’s where I can tell you about FCSA: the website you’re on, and the company I’m the CEO at. Transparency and compliance are incredibly important to us, as is being effectively equipped to achieve this.
That’s why our panel of expert independent assessors undertake rigorous and regular testing of FCSA members and new applicants to make sure they meet the required standards for FCSA accreditation. As a result, our members can reassure their agency and worker clients that they’re a fully compliant provider.
Take the Supply Chain Partner badge – it’s specifically for recruitment agencies who solely use FCSA companies. By joining the FCSA and acquiring this, it shows your compliance to end hirers, and demonstrates that the risk is mitigated for all parties in the supply chain. Find out more here, or enquire with the team using this form.