New business critical risks for recruitment, staffing and payroll companies and platforms

Staffing supply chains and payment arrangements are under the spotlight. All companies in the current climate are now expected to comply with higher corporate standards and staffing companies are under intense scrutiny given their responsibility (whether perceived or actual) for contract workers and gig workers. 

There is new legislation and a more aggressive use of existing legislation against perceived rule breaking.  

Some companies have risk management systems and practices which worked in the past but in light of these changes now expose them to business critical problems and investigations. New types of platform are also exposed to these risks. Indeed innovative tech driven solutions cause uncertainty precisely because of their novel approach.

Even if you do not suffer an investigation or a claim, investors and clients increasingly want evidence and reassurance that recruitment, staffing and payroll companies are on top of these risks. 

Showing that you guard against these issues will also be part of your ESG programme, and is critical for the reputation of your business and dealing with client audits and RFP requests.  

What we are seeing in the market 

For recruitment, staffing and payroll companies and platforms, problems that lead to business critical losses and investigations, or serious investor and client concerns, include:

• Corporate Criminal Offence/Criminal Finance Act exposure from tax evasion in the supply chain such as unlawful umbrella schemes,
• Historic tax planning and accidental tax traps leaving staffing companies underwriting tax underpaid in the supply chain, for example HMRC's new enthusiasm for using the managed service company legislation when PSCs have been used and the agency legislation where sole traders have been used,
• Widespread IR35 non-compliance leading to serious contingent tax liability risk,
• Misuse of VAT exemptions and concessions,
• Individually small but collectively huge National Minimum Wage breaches relating to travel, training, uniforms, and prep time,
• Modern Slavery Act and Gangmaster licencing breaches, and enforcement of other labour market requirements, and 
• Cyber security and data security incidents.

Our team of tax investigation, supply chain compliance  and cyber and data security experts will deal with emergencies as they happen. We have lived through the investigations and court hearings on all of the issues above and more. We know what works and what does not, and will manage these business critical events as they unfold. Our experience dealing with business  critical risks for staffing companies includes the following:

• Dealing with three MSC claims each involving potential  multi million pound claims against intermediaries.
• Resolving IR35 process deficiencies at two staffing companies to enable sales to institutional investors.
• Advising staffing companies about how to deal with tax evasion in their supply chains.
• Managing the largest NMW investigation in the UK staffing sector.  
• Identifying and resolving NMW and tax risks arising from the operation of deductions for benefits schemes for a healthcare staffing company in order that it could complete a sale to institutional investors. 
• Advising on a digital contingent workforce platform's exposure to historic liabilities under the agency worker legislation.
• Advising on errors in a staffing company's historic tax planning, including appealing to the Tax Tribunal and settling with HMRC, to enable an  investment event to take place.
• Mitigating risks relating to use of VAT exemptions and the nursing concession.
• Dealing with GLAA  investigations.
• Termination of a major MSP arrangement a data breach.

Our solution

Our team  has developed a methodology to identify these issues before they become a problem for you. We identity key risk issues and remedies, and explain where your key risk management processes need to be updated. 

We can work with you to improve compliance and minimise your risks. We collaborate with you to develop a holistic approach to your compliance systems, based upon our deep understanding of tax and regulatory regimes and our experience in assessing and addressing regulatory risk. As an international legal practice specialising in the Workforce Solutions sector, we see first-hand how compliance systems actually play out in practice. 

Unlike consultancies, our services will generally be protected by legal privilege so that regulators cannot compel disclosure. 

Our preventative approach consists of  the following stages:

1. Risk analysis 
2. Solving historic risks
3. Identifying gaps in structure and policies 
4. New policies and structures to minimise new risks 
5. Periodic reviews to ensure that you are up to date