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Testing times ahead for temp sector Recent months have seen some turbulent times for agencies involved in the supply of temporary workers. Barry Roback, director at Anderson Group, examines the current landscape and what lies ahead.


ue to untold pressures placed upon recruiters by the government in recent months, the temporary labour market now lies in a significant state of uncertainty. First, we saw the Onshore Intermediaries Legislation come in to force in April, along with its reporting demands. A considerable burden for recruiters, the new law demands agencies report quarterly to HMRC on all gross payments made to, or on behalf of, temporary workers. What this means in practice is that the last intermediary (in most cases an agency), has to submit a detailed quarterly return of all payments made, relating to every worker supplied to hirers, where PAYE has not been applied. The amount of confusion now rife amongst agencies implies the government could have done more to prepare the industry for the new guidelines, which were finally published in February this year, less than two months before the obligation to report became effective. At a recent industry event hosted by Anderson Group, many recruiters were in agreement that the new requirements meant several challenges lay ahead, including the short timescale in which they have to comply (caused by the delayed HMRC guidelines), sourcing supply chain data, data security, plus general doubts over completing the complex matrix report itself. For some agencies, completing the online reports will present a challenge, due to the nature of their supply chains and data that may not be forthcoming from some workers – especially those operating through their own personal services companies (PSCs). Recruiters making the return need to obtain the detailed information from all suppliers (including PSCs) in the supply chain. With only 30 days in which to consolidate the data and file reports, this may prove to be no easy task. HMRC had originally intended to reject incorrect or incomplete reports but after extensive lobbying, it has agreed that a report may be amended at any time until the following report is due. This at least gives three months in which agencies can correct any errors or source missing data. A factor that may ease the pain for some. To make the whole procedure easier going forward, recruiters need to implement the right processes to gain the details of every contractor they engage with and ensure umbrella organisations can supply them with data in the specific HMRC format. In addition to the new reporting burden came the disruptive HMRC proposal targeting travel & subsistence (T&S) expenses of umbrella workers. Which, it was revealed in the Budget,

looks set to have even deeper implications than first outlined. Particularly as HMRC has now stated its intent to include PSCs in its forthcoming legislation. What was incredibly encouraging to see was the powerful, collective industry response to HMRC and its T&S ‘discussion’ document published in December 2014, which I am proud to say, Anderson Group was heavily involved in. This involved 40 of the top umbrella companies presenting concrete, statistical evidence to the government, designed to help shape its’ view of the temporary worker sector for the better. For now, it is a case of waiting for an announcement on when the formal consultation period will be launched, presumably later this year. Events such as this demonstrate that by working together we can improve conditions within the industry to ensure it remains dynamic and resilient. And this is what the sector as a whole should welcome more of – the pulling together as a community, so we can present a stronger, more professional voice and engage with the government to help inform how the UK supplies its labour for the collective benefit of UK plc. Another area of debate is HMRC’s latest insight as to how it sees the future of allowable expenses for temporary workers overall, including its intention to make changes to the Salary Sacrifice legislation. This will not be subject to a consultation and is set to dramatically affect the way in which temporary workers are supplied to UK industry – even more so than any changes to the T&S regulations. The net effect of all this upheaval is a distinct atmosphere of ‘wait and see’ and therefore more uncertainty. But what remains clear is that the mounting pressure on the recruitment industry, at a time when the economic recovery is still delicately balanced, could run the risk of damaging future growth. The current proposals to restrict (and in some cases, remove) the ability to claim valid business expenses, will no doubt have a significant impact on the provision of a mobile and modern workforce. And the UK’s approach to using flexible labour must not be checked harshly or the healthy economic outlook may well start to waver. While we all applaud HMRC’s good intentions, what is needed is more effective use of current legislation together with some precise amendments to current law, sufficient to maintain the benefits of the UK’s temporary workforce. ●

+ Barry Roback, director, Anderson Group


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+ 21


flexible workforce is a key strength of the UK business environment. Not only does the flexible workforce framework allow contemporary workers to choose when and where they want to work, it gives employers the opportunity to ramp up when required, to bring in a specialist for a fixed-term project and to fill in workforce gaps for holiday cover — just a few of the possible scenarios. However, recruitment “You will find agencies and umbrella the views of leaders in the companies that join forces to ensure flexible umbrella and workforce needs are met contracting find themselves world about the current lay constantly under fire for doing so. In addition, of the land” umbrella companies in particular operate in grey zones without black-and-white clarity from the government about the fine points of compliance. In this edition of our Managing Agency Workers and Contractors supplement, you will find the views of leaders in the umbrella and contracting world about the current lay of the land. We also offer legal insight for direct employers/in-house recruiters about how to manage the business relationship with agency workers and contractors, plus a look at a rising trend within the self-employed world. We hope you find it useful — here’s a nod to compliant, business-worthy services and relationships across the board!

DeeDee Doke, Editor

Suppliers directory





Apprehension over future of sector

Teaching supply and demand

Working on the right side of the law

We ask key players in the contractor services market about their chief concerns and hopes for the industry

The rise of supply teaching as a career opens new doors for suppliers

Being up to date with the legalities of employing contractors and agency workers is imperative


Redactive Publishing Ltd 17 Britton Street, London EC1M 5TP 020 7880 6200

EDITORIAL 020 7880 7606 recruiter.editorial@redactive.co.uk Editor DeeDee Doke Contributor Sue Weekes Creative director Mark Parry Picture researcher Akin Falope Production editor Vanessa Townsend Production executive Rachel Young

PUBLISHING aaron.nicholls@redactive.co.uk Publishing director Aaron Nicholls

CIRCULATION and SUBSCRIPTIONS To receive a regular copy of Recruiter, the leading magazine for recruitment and resourcing professionals, telephone +44 (0)20 8950 9117 or email recruiter@abacusemedia.com

ADVERTISING 020 7880 7607 tom.culley@recruiter.co.uk Business development manager Tom Culley Senior sales executive Lisa-Jane Parker

Scan here to get your own copy of WWW.RECRUITER.CO.UK 5

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APPREHENSION OVER FUTURE OF SECTOR As the sector awaits the outcome of HM Revenue & Customs’ travel & subsistence review, Recruiter’s Sue Weekes asks key players in the contractor services market about their chief concerns for the future. Plus, what would they like to see the government do to support this group of workers who are vital to the UK economy?

LISA KEEBLE Managing director, ContractorUmbrella and co-founder of All Umbrella Companies Are Equal



What are your biggest concerns for the contractor market over the next 12 months? The lack of understanding by government of the sector and its workforce. As the costs of employment rise, more employers are appreciating the benefits of engaging temporary workers. But the government is introducing blanket legislation without appreciating the distinctions between low-paid workers forced into employment with an intermediary or via a personal service company (PSC), and true contractors — highly skilled, highly paid workers who choose to work on temporary assignments.

What could the government do to better support this group of workers? They could appreciate that genuine contractors work as they do for good reason, and treat them as a separate category. Also, the umbrella company industry is self-regulating, but there are many companies calling themselves umbrellas that are not operating compliantly and are damaging the industry as a result. By engaging with the industry bodies to a greater extent to introduce more formal regulation, government could legislate less yet still improve compliance. What would be the fairest outcome of the travel & subsistence review? The current rules seem to be fair and equitable and therefore the outcome should be that they are left alone, with HMRC focusing their attentions on those companies that break the existing rules by allowing expenses, via salary sacrifice, where no cost has been incurred.


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DAMIAN BROUGHTON DAM Founder and managing director, Danbro What are your biggest concerns for the contractor market over the next 12 months? My predominant concern is the impact of the consultation and eventual legislation that will result from the travel & subsistence review. The rest of the legislation relating to HMRC is positively affecting the market, because it is driving non-compliant companies out of the market. An example is the introduction of the reporting requirements for agencies. HMRC has more visibility for this market, and can see the trade put through non-compliant providers. That’s a positive for compliant providers with proper systems and processes. What could the government do to better support this group of workers? We would like to see more policing of the present legislation to help drive out non-compliant providers. What would be the fairest outcome of the travel & subsistence review? The fairest outcome would be a more equitable approach to contractors that are claiming travel & subsistence. Stopping that allowance will disrupt the marketplace, and it may take several years for that to dissipate. Contractors would have to be split between those who can claim travel & subsistence and those who cannot. For those who can’t, there will be a knock-on effect to end clients, as contractors would no doubt demand an increase in rates. Or they may simply stop travelling.


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BARRY ROBACK Director, Anderson Group What are your biggest concerns for the contractor market over the next 12 months? The greatest concern we have is over the ease of the supply chain. Whereas UK plc has enjoyed the benefits of a mobile and fluid temporary labour force, current proposals to restrict — in some cases remove — the ability for temporary workers to claim valid business expenses at source, and free of tax and National Insurance (NI), will have a detrimental effect on the supply chain. The only thing left to tempt temporary workers into the market will be to offer them significantly higher contract rates, which can only have an inflationary effect on the economy. What could the government do to better support this group of workers? Funnily enough, what I would like to see the government do to support freelancers and contractors is ‘nothing’. The recent track record of HMRC wielding a sledgehammer to crack a nut is doing so much harm. Better application of existing legislation,

coupled with carefully crafted changes, should be sufficient to retain the flexibility of a temporary workforce.     What would be the fairest outcome of the travel & subsistence review? Unfortunately, things have probably moved on so far that the outcome may prove too little, too late. HMRC’s declared intent to make changes to salary sacrifice legislation — not subject to consultation — will effectively mark the beginning of the end of umbrella companies as we know them. If temporary workers are unable to enjoy the benefit of tax and NI exemption for genuine business expenses at the point of expenditure, then they are bound to look for alternative ways in which to structure their affairs. 


“The recent track record of HMRC wielding a sledgehammer to crack a nut is doing so much harm”


JULIA KERMODE Chief executive, Freelancer & Contractor Services Association (FCSA) What are your biggest concerns for the contractor market over the next 12 months? My main concern is further legislative change without sufficient consideration of the impact on contractors and service providers — two examples are Intermediaries Reporting and the Finance Act 2015. What would you like to see the government do to better support this group of workers? Current legislation is robust, and should be better enforced rather than additional regulations being developed. More should be done to promote contracting as a viable career and positive choice, to counteract negative perceptions that being a contractor is second best. What would be the fairest outcome of the travel & subsistence review? I would prefer no changes to current rules. Contractors tend to travel further than people in permanent employment, so it is right that they are compensated. We do not expect special treatment; all employees are entitled to relief when travelling to a temporary workplace, and this rule should apply to everyone.


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GRAHAM FISHER Chief executive, Orange Genie and chairman of the FCSA


What are your biggest concerns for the contractor market over the next 12 months? My biggest concern is the one the industry doesn’t talk about: the commoditisation of the contractor support sector. We have seen a huge growth in ‘rebates and rewards’ demanded by recruiters, as their margins have been squeezed through downward pressure from the supply chain. Hirers have to recognise that reductions in pay rates and margins are paid for either by the contractor or by a reduction in compliance activity. Commoditisation is a risk to brand reputation.

both umbrella companies and recruiters — who disregard current legislation and continue to profit. What would be the fairest outcome of the travel & subsistence review? I do not believe travel & subsistence changes should be introduced. The discussion document issued by HMRC was poorly argued and recognised only the practices taking place in the low-paid agency worker sector of the market. The responses to the document may encourage HMRC to recognise that a one-size-fits-all solution will inflict huge damage on the sector.

What would you like to see the government do to better support this group of workers? The government should ensure resources are made available for HMRC to vigorously enforce legislation already in place. Our industry is being tarnished by a small number of organisations —

MA MATTHEW HU HUDDLESTON Managing director, FPS Group Manag

What are your biggest concerns for the contractor market over the next 12 months? The government is layering legislation upon legislation, and there is a danger that the contractor market reacts to the latest change and forgets what has gone before. Meanwhile, the inevitable result to proposals to restrict travel & subsistence claims will be a push towards PSCs. My concern is that if PSCs are used inappropriately, HMRC will seek to invoke the managed service company legislation, which includes draconian powers to transfer the debts for any unpaid taxes and NI to anybody in the supply chain. What would you like to see the government do to better support this group of workers? I’d like the government to take the time to review and understand this marketplace before instigating what can feel like reactionary or politically motivated legislation. Critically, the contractor and freelancer arena can include workers on a vast spectrum — from minimum-wage shift workers to six-figure interim directors. The government needs to ensure that support and future legislation is tailored to the sub-sections within this marketplace. What would be the fairest outcome of the travel & subsistence review? Fairness to the sector and economy as a whole would be to accept assistance with travel & subsistence to a temporary workplace, as the relatively small cost to support a growing and essential aspect of the UK’s economy via the mechanism of employment. Removing this assistance risks motivating contractors out of employment (umbrella) and into other payment solutions where they are, arguably, less visible to HMRC.



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PHIL MCDONALD Managing director, Paraplus What are your biggest concerns for the contractor market over the next 12 months? The elephant in the room is always that one day umbrella companies will cease to exist, because a minority has tarred the perception and understanding of a whole industry. I doubt this will happen, as HMRC has acknowledged that umbrella companies can be used legitimately by workers, and there are many on the market that are fair and ethical. However, I do think increased legislation is inevitable. What would you like to see the government do to better support this group of workers? From an umbrella perspective, I would welcome any move by the government to support transparency and contractor choice, and to clamp down on the significant ‘on top’ margins that can be charged by some umbrella companies.

What would be the fairest outcome of the travel & subsistence review? The fairest outcome is one that truly has the contractor at its heart. As a country, contractors and temporary workers are our most vital weapon in terms of supplying ‘just-in-time talent’ to keep key services running. With the latest government plans for a seven-day NHS, this dependence on contractors is likely to increase.


“The fairest outcome is one that truly has the contractor at its heart”

CRAWFORD TEMPLE Chief executive, PRISM What are your biggest concerns for the contractor market over the next 12 months? The fine detail of planned consultations is still to be revealed. We know that there will be a consultation on travel & subsistence; we also know that the intention is to introduce a test to determine which workers will be able to reclaim tax relief on the allowable business expenses incurred. Ensuring this test is correctly aligned to genuine contractors is critical. What would you like to see the government do to better support this group of workers? Categorising these workers correctly and ensuring legislation recognises the significant differences within the sector’s diverse population are crucial. The government failed to achieve these steps in the changes made within the construction sector, with an attempt to address false self-employment resulting in many workers being forced into false employment.   What would be the fairest outcome of the travel & subsistence consultation for all sides? If the government grasps the differences within the sector, it will recognise that the underlying issue stems from a move of traditional agency workers into payment intermediaries, allowing them to claim expenses that were never intended to be available to them. This has happened as a direct result of a lack of visible enforcement by the authorities. Ensuring any new rules target the right category of worker within the sector will determine the overall impact: positive or negative.


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eaching isn’t generally considered a day-by-day existence but for some supply teachers, their place of work often isn’t known until the phone rings first thing in the morning. Then the next day they could find themselves in front of a new set of pupils at a completely different school. This is just one of the unique working patterns of teachers who, for whatever reason, have opted to be a temporary member of staff, rather than full-time. And while many professions have their peaks and troughs, another peculiarity teachers have to factor in are some very big dips in demand indeed: school holidays. As a sector of the contractor market, supply teaching is on the increase, according to many of the umbrella companies providing services in this arena. Analysis of giant group’s latest survey data reveals perceptions of job security among supply teachers have increased by 4% over the past year, while the percentage of supply teachers willing to consider taking a permanent role has dropped by 7%. Matthew Brown , managing director of giant group, attributes the trend in part to the growing number who choose to operate as contractors. The maturing of supply teaching as a career option is also a contributing factor. Key Portfolio also reports a continual increase in the number of supply teachers joining its umbrella service, and commercial manager Mark McNee

With the shortfall in the number umber of teachers entering g the profession, n,, the rise of supply teaching aching g as a career option tion is starting to become eag growing g trend, Sue e Weekes finds


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reckons they turn to umbrellas to better manage the unique working patterns and other inherent traits of the sector. “This makes them quite likely to sign up with more than one recruitment agency,” he says. “They’ll often work on different assignments with different agencies all in the same week, so being able to centralise their income simplifies things a fair bit.” McNee adds that, unlike other sectors, most supply teachers are paid weekly so they rely on the umbrella to turn their money around quickly. Access to benefits like sick pay and maternity pay during term time are an especially valued aspect of the service. Other factors fuelling the trend for temporary teachers is the growing number of people leaving full-time teaching positions due to increased workloads, says Pras Desai , director of Genie Education, part of Orange Genie. “Many have taken the opportunity of early retirement and supplement their teaching pension with working as a supply teacher,” he says. “Supply teaching allows them to concentrate on the key reasons why they became educators without having to worry about the increased administrative nature of full-time teaching.” Skills gaps in certain specialisms is another driver, according to Crawford Temple, CEO of PRISM, not-for profit trade association representing the service provision sector. This has resulted in teachers being recruited from territories that do not face the same shortages. He explains that while they may seek to be in the UK for a period, it may not be their long-term aim to remain. “As a direct result of all these factors, an umbrella provider offers a simple solution to address the issue,” he says. Geographically, it’s no surprise that London has the biggest demand for supply teachers. Desai reports that the recent School Census showed that Local Education Authorities (LEAs) in London and the South-East spent more on supply teachers than the next few regions aggregated. “This reflects where we have seen most growth, too,”

he says. “Irrespective of the region, we have seen an increase in the number of days worked per week by our supply teachers. This demonstrates that there is a strong national demand for supply teachers.” Service providers operating in this sector have to adapt to the “very different mechanics” of how supply teaching works compared to other industries and sectors, says giant’s Brown. “With supply teaching, the main thing to be aware of is that assignments can vary quite drastically in length,” he says. “Teachers may be required to fill in for an entire school term, or for as little as a single afternoon and often at very short notice, which can create additional challenges.” He adds that another factor to take into account are the “considerably onerous” onboarding processes which include vetting, Disclosure & Barring Service, and safety and background checks. That many supply teachers tend to register with more than one agency — and will work via different agencies within the same week — is another key consideration. This means that to ensure supply teachers get paid on time every week, the umbrella company must focus on ensuring that their processes are aligned with all the agencies they partner with, “regardless of how many different agencies they [teachers] are sourcing work from”, explains Desai. He adds that based on feedback from supply teachers, Genie Education extended their opening hours. Teachers with Genie Education also “constantly” tell the company how frustrating it is when a new agency they register with insists they have to use a specific umbrella company. “This ultimately means more hassle for the supply teacher, who now has multiple employers. It’s also not the most effective use of their tax code,” says Desai. It might be expected that teachers are less business-savvy than other contractors but this isn’t necessarily the case. Brown reports that the main difference is that as a group they are



“With supply teaching, the main thing to be aware of is that assignments can vary quite drastically in length”



“They want to make informed decisions about everything to do with their career, including their umbrella”



“Many have taken early retirement and supplement their teaching pension with working as a supply teacher” WWW.RECRUITER.CO.UK 13

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“Employment through an umbrella can be positive in terms of rights and support, as well as earning power”



“Recruiters can make a difference by explaining the concept of legitimate umbrella employment”


extremely “vocationally focused”, and Desai says that as a sector they assist and support each other in a way others don’t, especially in business-related matters. As you’d expect though, they are “teachers first and contractors second”, says McNee, adding that this can mean they’re not necessarily familiar with umbrella companies, so Key Portfolio aims to guide them through. “They want to make informed decisions about everything to do with their career, including their umbrella,” he says. Education is not currently a major sector for Parasol but chief executive Rob Crossland says his company is actively looking to move into it. He says the main challenge is reassuring supply teachers that employment through an umbrella can be a positive experience for them. “In terms of rights, benefits and support, as well as their earning power,” he says. “That’s because there are some disreputable umbrellas operating in the sector, including offshore providers and those that encourage teachers to submit inflated or dubious expenses claims.” Meanwhile, Parasol managing director Derek Kelly says recruiters can make a huge difference by taking a moment to explain the concept of legitimate umbrella employment before the individual is referred. Sadly, disreputable organisations have given umbrella companies a bad name within parts of the teaching profession. The National Union of Teachers (NUT) issued guidance for its members last October in which it made clear its stance on umbrella companies and “strongly advised against entering into such arrangements wherever possible”, adding that “many umbrella companies make unrealistic promises to teachers which do not translate into reality and can, in some cases, lead to penalties being incurred for breaches of HM Revenue & Customs rules”. On seeing the guidance, Julia Kermode, CEO of the Freelancer and Contractor Services Association (FCSA), contacted the NUT to point out the

many benefits of umbrella employment and to address their concerns. “All of the points they raise within their advice document can be mitigated by choosing to work with an FCSA member, which by definition is a fully compliant firm that does not operate dubious practices,” she says. “Many workers choose umbrella employment as it provides all statutory benefits of permanent employment, while enabling the worker to fulfil a series of supply positions and have their tax affairs managed centrally.” PRISM’s Temple says he has seen a number of statements made by unions where they “clearly fail” to understand the benefits that responsibly-run umbrella providers bring to the market and workers. “Many of these reactions are uninformed and misperceptions fuelled by a growth in non-compliant solutions specifically aimed at lowpaid workers,” he says. “The numbers of these solutions have grown over recent years due to a lack of visible compliance enforcement activity by the authorities.” Hopefully, the hard work put in by the good umbrellas specialising in the sector will start to be recognised, as well as their commitment to broader education matters such as skills shortages. Desai believes that agencies may be able to assist schools to plug a skills gap when it comes to the new computing curriculum. “The feedback we have received is that within the primary sector, permanent teachers do not have the time to learn all the skills required to teach the new curriculum, in particular the special coding skills required,” he says. Meanwhile, while the skills shortages are providing opportunities for supply teachers now, McNee is vocal about the worrying shortfall of teachers in the long term. “It comes down to the fact that there aren’t enough new teachers entering the profession and for those that do, a significant number leave within five years,” he says. “It’s something that can only be addressed by significant government investment into attracting, training and retaining talented teachers.” ●


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10/06/2015 12:14


We are all aware that the temporary recruitment industry is in the midst of considerable change in the face of yet more 'ŽǀĞƌŶŵĞŶƚůĞŐŝƐůĂƟŽŶ͘EĞǁƌĞƉŽƌƟŶŐĂŶĚƌĞĐŽƌĚͲŬĞĞƉŝŶŐ requirements were introduced on 6th April and a proposed ĐŽŶƐƵůƚĂƟŽŶƉĞƌŝŽĚƌĞŐĂƌĚŝŶŐƚŚĞƉŽƚĞŶƟĂůƌĞŵŽǀĂůŽĨƚĂdž ƌĞůŝĞĨĨŽƌĐŽŶƚƌĂĐƚŽƌƐŝƐŝŵŵŝŶĞŶƚ͘dŚĞ'ĞŶĞƌĂůůĞĐƟŽŶŽŶ ϳƚŚDĂLJŽīĞƌĞĚĂďƌŝĞĨƌĞƐƉŝƚĞĨƌŽŵƚŚĞŝŶĞǀŝƚĂďůĞĐŽŶĨƵƐŝŽŶ ƐƵƌƌŽƵŶĚŝŶŐƚŚĞŝŶƚĞŶƟŽŶƐŽĨ,DZĞǀĞŶƵĞΘƵƐƚŽŵƐ͕ďƵƚŝƚ remains indisputable that the whole sector will have to adapt ƋƵŝĐŬůLJƚŽƚŚĞŶĞǁĐŽŵŵĞƌĐŝĂůůĂŶĚƐĐĂƉĞ͘ KĨĐŽƵƌƐĞ͕ĐŽŶũĞĐƚƵƌĞĂŵŽŶŐůĞĂĚŝŶŐĐŽŵŵĞŶƚĂƚŽƌƐŝŶƚŚĞ ŝŶĚƵƐƚƌLJŝƐƌŝĨĞĂƐƚŚĞLJƚƌLJƚŽƐĞĐŽŶĚͲŐƵĞƐƐƚŚĞdƌĞĂƐƵƌLJ͛Ɛ ŝŶƚĞŶƟŽŶƐ͘,ŽǁĞǀĞƌ͕ŶŽďŽĚLJŚĂƐĂƉƌŽǀĞƌďŝĂůĐƌLJƐƚĂůďĂůůƐŽ Z^'ƌŽƵƉŚĂƐĂĚŽƉƚĞĚĂĐŽŶƐĐŝŽƵƐĚĞĐŝƐŝŽŶƚŽĨŽĐƵƐŽŶ ǁŚĂƚǁĞĚŽŬŶŽǁĂƐŽƉƉŽƐĞĚƚŽǁŚĂƚǁĞĚŽŶ͛ƚ͘dŚĞƐƚĂƌŬĨĂĐƚ ƌĞŵĂŝŶƐƚŚĂƚƚŚĞh<ĐŽŶƚƌĂĐƟŶŐŝŶĚƵƐƚƌLJĐŽŶƟŶƵĞƐƚŽŐƌŽǁ ŝŶĂĐĐŽƌĚǁŝƚŚĞǀŽůǀŝŶŐǁŽƌŬƉĂƩĞƌŶƐĂŶĚƚŚĞƐĞĐƚŽƌĂůƌĞĂĚLJ ŵĂŬĞƐĂŶŝŶǀĂůƵĂďůĞĐŽŶƚƌŝďƵƟŽŶƚŽƚŚĞŶĂƟŽŶ͛ƐĞĐŽŶŽŵLJŽŶ ĂůůůĞǀĞůƐ͘/ƌƌĞƐƉĞĐƟǀĞŽĨƉŽůŝƟĐĂůƉŽƐƚƵƌŝŶŐĂŶĚƚŚĞƚŚƌĞĂƚƚŽ ƚĂdžƌĞůŝĞĨŽŶĞdžƉĞŶƐĞƐ͕ŵŝůůŝŽŶƐŽĨĐŽŶƚƌĂĐƚŽƌƐǁŝůůƐƟůůƌĞƋƵŝƌĞĂ ŵĞĐŚĂŶŝƐŵďLJǁŚŝĐŚƚŽƵŶĚĞƌƚĂŬĞĂƐƐŝŐŶŵĞŶƚƐĂŶĚŐĞƚƉĂŝĚ͘ dĞƌƌLJ,ŝůůŝĞƌ͕DĂŶĂŐŝŶŐŝƌĞĐƚŽƌŽĨZ^'ƌŽƵƉ͕ĂĚŽƉƚƐĂ philosophical approach to the winds of change sweeping the industry and encourages everyone to remain calm when he comments: “I understand that there have been some almost hysterical ƌĞĂĐƟŽŶƐƚŽƚŚĞŶĞǁůĞŐŝƐůĂƟŽŶĂŶĚŝŶĚĞĞĚĂĚĞŐƌĞĞŽĨƐĐĂƌĞͲ ŵŽŶŐĞƌŝŶŐ͘,ŽǁĞǀĞƌ͕ƚŚĞŝŶĚƵƐƚƌLJŚĂƐďĞĞŶƐƵďũĞĐƚƚŽĐŽŶƐƚĂŶƚ ĞǀŽůƵƟŽŶĨŽƌƚŚĞƉĂƐƚĚĞĐĂĚĞĂŶĚǁĞŚĂǀĞĂůůŵŽĚŝĮĞĚŽƵƌ ƉƌŽĐĞƐƐĞƐĂŶĚƉƌŽĐĞĚƵƌĞƐƚŽĐŽŵƉůLJ͘Z^'ƌŽƵƉĐŽŶƟŶƵĞƐ ƚŽŵĞĞƚƚŚĞĚĞŵĂŶĚƐŽĨƚŚĞŶĞǁĞƌĂďLJƉůĂĐŝŶŐĐŽŵƉůŝĂŶĐĞĂƚ ƚŚĞƚŽƉŽĨŽƵƌĂŐĞŶĚĂ͖ďŽƚŚƌĞĐƌƵŝƚĞƌƐĂŶĚĐŽŶƚƌĂĐƚŽƌƐĐĂŶďĞ ĂƐƐƵƌĞĚƚŚĂƚZ^'ƌŽƵƉǁŝůůĂůǁĂLJƐƌĞƉƌĞƐĞŶƚĂŶĚƉƌŽƚĞĐƚƚŚĞ ŝŶƚĞƌĞƐƚƐŽĨŽƵƌĐůŝĞŶƚƐĂƐĂƉƌŝŽƌŝƚLJ͘͟ ĐĐŽƌĚŝŶŐůLJ͕Z^'ƌŽƵƉŝƐĨŽĐƵƐŝŶŐŽŶƚŚĞŚĞƌĞĂŶĚŶŽǁĂŶĚ has introduced a variety of new measures to help agencies ĐŽŵƉůLJǁŝƚŚƚŚĞŶĞǁZĞƉŽƌƟŶŐĂŶĚZĞĐŽƌĚ<ĞĞƉŝŶŐŐƵŝĚĞůŝŶĞƐ͘

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WORKING ON THE RIGHT SIDE OF THE LAW Internal recruiters need to know the legal aspects of recruiting and managing contractors and agency workers


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t is important for anyone involved in the hiring and management of agency workers and contractors to understand the distinction between the various classes of employment status and the legal consequences. If these arrangements are not carefully managed, agency workers and contractors can inadvertently acquire employment rights. The three main classifications of employment status are employee, worker and self-employed.

Employment v contractor status An employee is someone who works under a contract of employment. The contract of employment can be express (oral or written) or implied. To avoid potential disputes, businesses should document the terms of employment and provide the minimum particulars required by statute. Employees have an extensive range of rights and protections that include statutory sick pay, statutory maternity and paternity pay, statutory redundancy payments and the right to claim unfair dismissal. By contrast, self-employed contractors have no such rights. If the arrangement is not properly considered at the outset of the relationship, there is a risk that workers and contractors may later seek to argue that they are in fact employees. For example, they may do this in order to mount a claim that they have been unfairly dismissed. When the Courts and Tribunals are asked to determine an individual’s employment status, several tests have been used and a number of factors taken into account. The wording of any contract or the label that the parties have ascribed to the individual are often helpful indicators but are certainly not determinative. The objective of the employment status test is to determine the reality of the employment relationship between the parties.

The three core requirements for employment status are:

Factors that indicate that an individual may be a contractor are:

CONTROL There must be a sufficient degree of control exercisable by the company over the individual in relation to what the individual does, how they do it and when they do it. The greater the degree of control, the more likely the individual is an employee.

● a finite period of engagement for work ● the fact that they are able to dictate how their business is run ● the provision of their own equipment ● freedom to work for another organisation ● the undertaking of financial responsibility and risk, and the ability to benefit from the profits that are generated as a result of the individual’s work


PERSONAL SERVICE The individual will need to have undertaken to provide their services personally to the company. Generally, an employee is not able to appoint someone else to carry out their work.


MUTUAL OBLIGATIONS The company is obliged to provide work and the individual is obliged to do that work. It is important to consider whether an individual is able to decide whether or not to do a particular piece of work.


A contract of employment cannot exist if any of these elements are not present. However, even if they are all present, this alone is not determinative of an employer/employee relationship. It will also be necessary to consider other indicators to determine whether the relationship is consistent with a contract of employment.

Factors indicating that an individual may be an employee are: ● a long period of service ● contractual provisions such as restrictive covenants ● contractual provisions relating to sick pay and holiday entitlements ● a high degree of integration into the business and its infrastructure ● deduction of National Insurance and tax by the employer ● set working hours at a location dictated by the company, eg. its offices

Whether an individual has employment or contractor status can have significant implications for a business. For example, an employer is vicariously liable for acts carried out by an employee during the course of their employment that have caused loss to third parties. Businesses are less likely to be found liable for similar acts if they are committed by a contractor. The question of employment status has been blurred in recent years by the evolution of the status of the ‘worker’. A ‘worker’ is either an employee or is an individual who personally works for another party and that other party is not a client or customer of the individual’s business or profession. Although a worker is entitled to some protections such as National Minimum Wage, paid annual leave and protection against discrimination, workers do not share all of the rights afforded to employees.

Agency workers A significant number of atypical workers are ‘agency’ workers and dealing with this set of workers presents its own unique set of challenges. Agency workers are often referred to as ‘temps’. The complexities arise due to the tripartite relationship between agency workers, their agencies and the hirer — for example, the business in which they are working. It is not always


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straightforward to ascertain the extent of an agency worker’s rights; different pieces of legislation which give rise to those rights use different tests of employment status. An agency worker may be an employee, a worker or ‘in employment’, depending on the legislation in question. It is also possible for an Employment Tribunal to find that there is an implied contract for employment between an agency worker and the hirer. However, this will normally only occur when it is necessary to reflect the actual relationship between the parties. In addition to any protections that agency workers may have by virtue of their status as employees or workers, they also have certain rights that apply specifically to them as agency workers. For example, from the first day of their assignment, an agency worker is entitled to access collective facilities


and amenities in the same way that a comparable worker does. These include canteen or other similar facilities, child-care facilities, transport services, parking and staff common rooms. Agency workers are also entitled to be informed of any relevant vacancies within the hirer to give them the same opportunity as a comparable worker to find permanent employment with the hirer. This entitlement also runs from the first day of the agency worker’s assignment. Once an agency worker has been on an assignment in the same role with a hirer for 12 continuous weeks, they are entitled to the same basic working and employment conditions as they would have been entitled to for the same job had they been recruited directly by the hirer. This important change in status means that an agency worker will be entitled to the same pay (including

performance bonuses, commission and overtime), duration of working time, night work terms, rest periods, rest breaks and annual leave as a comparable employee. The legal status of atypical workers is rarely straightforward and there are many forms covering agency workers, consultants and casual staff. The rights of such individuals depend on the correct status being decided and this should be carefully considered with each new recruit. Thereafter, the longevity of the relationship and the individual’s integration into the business are among the facts which should be carefully monitored to ensure employment rights are not inadvertently acquired. AUTHORS: Mark Levine is a partner in the Employment Department and John Sendama is a solicitor in the Litigation Department at law firm Mishcon de Reya

Top tips for internal recruiters dealing with contractors and agency workers


Keep the status of agency workers and contractors (especially those who have been engaged for long periods) under review. Although they may have started out their assignment as a contractor, the relationship may have evolved over time, meaning that they have become an employee.

Avoid using agency workers and contractors in a way that is inconsistent with their status as temporary members of staff. Contractors and agency workers should generally be used for specific projects or specified terms.

Ensure that agreements with contractors expressly state that the contractor is not an employee. This will not be determinative but will assist in any arguments about employment status.



Be cautious of arrangements with agency workers that involve multiple assignments for the same worker, rotating workers between roles or transferring workers to a connected business. If it appears that these arrangements are designed to prevent an agency worker from acquiring equal rights, the arrangements may fall foul of anti-avoidance legislation.

Ensure that your relationships with employment agencies are properly documented and that the all documents are consistent with an agency worker/ hirer relationship.

Avoid responsibility for disciplinary and performancerelated matters for agency workers. These matters should be dealt with by the agency.




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T: 033 8000 800 E: enquiries@andersongroup.uk.com W: www.andersongroup.uk.com

As the UK’s leading provider of support services to the recruitment and contracting sector, Anderson Group offers a wide range of flexible employment management solutions and back office services. We offer expert advice on changes within the industry, on legislative impacts and best practice. Our experience, capabilities and scale mean that we deliver best value to our clients and contractors. Clients come to us because we bring together the right people with the right skills to streamline their services and improve their profitability. Find out more at www.andersongroup.uk.com


T: 01925 839825 F: 0845 388 3002 W: www.candor.co.uk E: contact@candor.co.uk

Candor is one of the UK’s leading payroll providers for recruitment agencies across the UK. As one of only four companies in the UK to receive the prestigious seal of approval by tax specialist consultants, Accountax, you can be 100% confident that your business and contractors will be fully compliant and in line with all HMRC legislation and regulations. Our knowledgeable and experienced team, which includes bilingual speakers, will ensure they provide the best service to you and your contractors each and every day. Our bespoke service is tailored around the needs of your organisation, and our streamlined processes will mean you can spend more time focusing on your business. We deliver a range of payroll solutions including umbrella PAYE, PAYE payroll, limited companies, sole trader, payroll factoring and a complete outsourcing service.


T: 0800 731 3178 E: enquiries@danbro.co.uk

Danbro is an award winning, cutting edge supplier of accountancy and payroll services to contractors, freelancers and temporary workers. Working in partnership with the recruitment and talent management sector, we use our expert knowledge to deliver a service which continually exceeds expectations. Our regional account managers are on hand to attend service reviews, hold training workshops and present seminars on a wide range of topics including compliance, legislation and tax. PAYE umbrella services: • Outstanding value • Daily margin available • Agency specific care teams • All business insurances, personal accident cover and death in service cover included • Bespoke online portal for easy submission of timesheets and expenses • Financial advice • Childcare voucher scheme Limited company services: • Tailored accountancy services • Limited company formations within 24 hours • Direct access to a personal accountant • Business insurances • Our team of accountants are regulated by the Chartered Institute of Management Accounts (CIMA)


EdenGroup, Tuscam House, Trafalgar Way, Camberley, Surrey, GU15 3BN T: 01276 688 010 W: www.edenoutsource.co.uk

EdenGroup is a leading specialist provider of umbrella services, outsourced back office support services and software to the recruitment sector. Our services and cloud-based software Evertime are designed to maximise efficiency to reduce both cost and time spent on back office functions, as well as increasing the accuracy and speed of invoicing to reduce debtor days and finance costs. EdenGroup adopts a flexible approach to tailor services for each client. Using Eden Umbrella or outsourcing your back office to us means you have your own dedicated account manager who treats your business like their own – or you can choose to buy our software, should you decide to manage the back office function yourself. EdenGroup’s services include: • 3rd Party Integrations, Front Office to Back Office seamless end to end approach • Payment of contractors – Ltd and PAYE • Timesheet methods: Full Online, Online fax back, batch input • Sales Invoicing • Document Management • Management Reporting • Online access to reports


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T: 0800 634 4848 F: 01624 818 524 E: recruiters@fpsgroup.com W: www.fpsgroup.com

FPS Group is a regulated UK umbrella company provider and firmly believe that compliance and security are of paramount importance. At FPS Group, we are committed to delivering a seamless service to recruitment agencies, easing the administrative burden of payroll and the enquiries associated whilst offering an exemplary service to candidates. We provide a cost-effective solution to contractor payroll through our innovative and industry leading umbrella solutions. Our many years of working alongside agencies have helped us develop an approach that seamlessly integrates with your business. All of our agencies are provided with a dedicated account manager to act as a direct point of contact for any queries. Working with FPS Group will not only give you more time to place candidates and win new contracts, it will also give you complete peace of mind from working with a reliable and trusted industry partner. As well as our standard umbrella solution, we can also provide a unique product, the Personal Service Umbrella (PSU). Safer for both the contractor and agency, the PSU offers all of the traditional features of umbrella with added layers of monetary protection for agencies and contractors. Speak to us today to find out more.


T: 0161 713 1732 W: www.originem.co.uk

Originem has become established as the leading ‘Start your own Umbrella’ provider and for its fully serviced umbrella and PAYE payroll businesses – its award winning operation was recognised in both the 2014 and 2015 Recruiter Awards for Excellence. An own brand umbrella company with the back office outsourced to Originem’s trained and dedicated specialists can be up and running in just one month. Typically its agency owners can expect to earn an additional £100k p.a. from every 100 existing contractors. In addition, Originem can significantly improve your agency cash flow, enable you to retain the cost of VAT within your group and reduce the need for invoice discounting. • • •

Build a long-term second income stream Gain control of your supplier chain 100% HMRC compliant

To find out how Originem can add profit to your bottom line contact Dan Crossland today


T: 0800 197 6516 F: 0161 601 7842 E: info@paystream.co.uk W: www.paystream.co.uk

When you and your contractors are looking for real choice, innovative services and expert advice, you can count on PayStream. Our service offering means that we can support all your contractors, regardless of industry and circumstance by delivering appropriate solutions rather than offering a ‘one-size-fits-all’ service. We believe in offering real choice and a first class service, which is why over 90% of contractors asked, said that they would refer our services to a friend. Our team have extensive accounting, payroll, tax and legal knowledge and experience. This in-house knowledge, together with external support from our tax advisors on legislative changes, means that we pride ourselves on providing pro-active support to agencies. This ensures that you and your contractors receive the best and most compliant services in the market, which is why we work closely with many different agencies every week, including most of the top 20. For a friendly, straightforward approach that delivers maximum returns for minimum effort, you can count on PayStream.


T: 0845 604 0571 E: info@racsgroup.com W: www.racsgroup.com

RACS Group is one of the leading payroll providers with a comprehensive product portfolio (umbrella, PSC & PAYE), plus an unrivalled reputation for compliance. The company specialises in the education, medical, construction, logistics and financial sectors, offering agencies and contractors competitive rates and a raft of additional benefits. Protecting the commercial interests of both agencies and contractors is central to the RACS Group ethos, underpinned by our ‘compliance without compromise’ strapline. Lowest daily margin, industry-leading rebates and subsidised marketing initiatives are just three of the many benefits available to our roster of recruitment agencies. Audited by Professional Passport, APSCo and Lawspeed among others, RACS Group also features on the PSL of many leading agencies in the UK and has been acknowledged as one of the most rapidly growing companies in the UK, appearing in The Sunday Times Virgin Fast Track 100 table published in December 2014. RACS Group supports the new world of compliance and welcomes enquiries from progressive recruiters committed to compliance.


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Increase revenue by £100,000 for every 100 workers... You can achieve this by starting your own umbrella company. • Drive revenue from your existing workforce • Recover VAT on contractors expenses • Become more attractive for exit and acquisition with a second profit centre • Dramatically Improve cash flow • Reduce the need for invoice discounting/factoring • Peace of mind by ensuring your own compliance

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this exciting opportunity call Originem today on:

0161 713 1732 or visit our website www.originem.co.uk

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Profile for Redactive Media Group

Recruiter supplement: Managing Agency Workers & Contractors - July 2015  

Recruiter supplement: Managing Agency Workers & Contractors - July 2015  

Profile for redactive