The recruitment industry is competitive at the best of times, but now the Onshore Employment Intermediaries Legislation is in place, this could be an opportunity to stand out against the crowd and show off the best of your business. From carrying out due diligence checks on contractors to completing paperwork on time, here’s a guide to staying ahead of the game and remaining competitive, while still complying with the regulations.
Onshore Legislation recap
There hasn’t been a great deal of publicity surrounding this set of rules, so you may not be fully aware of what it involves.
It was introduced at the beginning of the financial year commencing in April 2014, with its main aim being to crack down on the issue of false self-employment, whereby contractors work with an intermediary service to avoid paying the amounts of income tax and national insurance contributions (NICs) associated with other full-time workers.
This means HM Revenue and Customs (HMRC) was not receiving all the tax it should be, which is the issue the legislation aims to remedy.
Stand out from the crowd
There are several ways you can ensure your recruitment firm stands out and remains in a competitive position with regard to the regulations.
One way in which you can do this is by making sure you carry out due diligence checks on all contractors on your books to determine their true employment status.
If a worker receives no instruction in their work at all and provides all their own tools and management, they are more than likely genuinely self-employed.
However, if a contractor does receive supervision and direction in their job and would be an employee if it weren’t for the presence of the intermediary service, they need to be classed as a regular worker and taxed in the corresponding manner.
The consequences of getting this wrong can include significant financial penalties – including liability for underpaid taxes and national insurance payments – which could put you in a less competitive market position, so take the time to carry out the task properly!
If a contractor is found to be falsely self-employed and their status changes to that of a regular worker, as a recruiter you will need to begin treating them a little differently.
For example, they will now be entitled to benefits such as statutory sick pay, maternity leave and the national minimum wage.
Make sure everyone at your agency is aware of this to prevent any problems from occurring and so your recruitment firm stays ahead of the game.
In addition, the Onshore Legislation includes rules relating to the completion of paperwork and tax returns, with records of these now being required should HMRC come calling.
Make sure you’re up to date with all your paperwork to stand out from other, less organised recruiters and to ensure you’re in a good position within the market, professionally, legally and financially.
If you’re a contractor carrying out short-term jobs with a recruitment agency or end client and you still aren’t quite sure where you comply with regard to the Onshore Legislation and the amount of income tax and national insurance you should be paying, an umbrella company may be able to help.
Such a service will deduct national insurance and pay-as-you-earn – more commonly referred to as PAYE – sums from your wages, while giving you legal employee status and rights.