Q&A for Webinar: Sheltering from the rain: using umbrella employees and agency workers: their rights, your obligations and how best to mitigate supply chain risk
Published on 15th Jul 2021
When you say "contingent worker" is this just a general term for additional third party personnel?
Yes, it's a term used to describe anyone who works in or for a business but who is not employed by that business or on their payroll.
Please can you confirm if there any accompanying slides - or just a view of the speakers?
Please see the detailed briefing we sent out to you last week. [attach]
In supply chain with umbrella/management consultant/client who is the End User for comparable rate calculation?
This is a good question and one that can be difficult to answer with certainty in practice. Comparable pay applies only where a worker is an "agency worker" as defined under the Agency Workers Regulations 2010. Under that legislation the entity that uses an agency worker's services is called a "hirer". A "hirer" is defined as the person "..to whom individuals are supplied to work temporarily for and under the supervision and direction of that person". In the example you have given the key question is who supervises and directs the worker? If it is the management consultant then the management consultant will be the hirer. If the management consultancy on-supplies consultants to work under its client's supervision and direction then the end user will be the hirer for comparable rate purposes. If the consultants genuinely work independently (i.e. not under anyone's supervision and direction) then arguably they are not agency workers but consultants engaged via umbrella companies often contract through an umbrella company because they work under the end user's control or have not/would not meet the test of being outside IR35.
In response to IR35 some end users have moved their contracting model to engaging services of a contractor via an umbrella via an agency. What are your views of this arrangement?
This can provide a compliant solution provided the agency deals only with compliant PAYE umbrella companies. If the umbrella company is, in fact, a tax avoidance or, worse, a tax evasion scheme, then this could present more serious tax and reputational risk for end users and agencies. Any business that supplies or relies on contingent workers and which is planning to sell should ensure that such workers are paid in compliance with tax legislation. Failure to do so could have an adverse effect on valuation or even de-rail a sale.
If the umbrella is a member of FCSA can we be sure they are compliant?
The FCSA have codes of compliance for the payroll services their members provide. The member firms are audited annually against these code by independent assessors to ensure they are operating compliantly. FCSA membership is a good place to start and as discussed on the webinar I would recommend it is good practice to also conduct your own due diligence and perhaps have an RFP/questionnaire you can issue to a prospective supplier, rather than only relying upon FCSA membership.
Why doesn't the FCSA audit umbrella companies similar to how REC and APSCO have accreditation schemes?
The FCSA is a trade association of payroll intermediaries. It publishes codes which are audited independently by solicitors and accountants https://www.fcsa.org.uk/the-association/code-of-compliance/
Does the FCSA badge not deal with these issues? Why would further investigation be needed? I thought FCSA took a regulator standing.
As above the FCSA is not a regulator, they are a membership association of payroll intermediaries formed to increase compliance in the industry in the absence of government regulation. The FCSA have and continue to lobby for regulation of the sector by government.
What are the liabilities, responsibilities and risks for a consultancy providing Umbrella employed consultants to its client.
Where a consultancy "provides" umbrella employed consultants to its clients it is advisable for the consultancy to carry out checks to ensure that the umbrella company pays consultants on a full PAYE basis and at rates that comply with the Agency Workers Regulations, National Minimum Wage, Working Time Regulations (in relation to holiday pay), etc (see the briefing we sent to you last week for more detail). If the umbrella company operates a tax avoidance scheme or becomes insolvent as a result of a large tax assessment liability for any unpaid PAYE tax and NICs could, in certain circumstances, transfer to the consultancy and possibly also to its client.
Would you expect an employment businesses to wrap the risk of temp workers' data protection or confidentiality breaches when working for the hirer?
In most cases this is what hirers expect because they do not have a contract with the workers. So, as a matter of contract, hirers usually require employment businesses to take responsibility for temp workers' processing of client-controlled personal data.
As an intermediary what are the risks of recommending umbrella companies to contingent workers?
Given what we have said about the need to deal with compliant umbrella companies it's often sensible to limit contingent workers' choice to a list of umbrella companies that you have checked and are satisfied are compliant. We'd normally advice having 4 or 5 on a preferred supplier list and to adopt a policy of dealing only with those umbrella companies. You should refer: not recommend and avoid getting into any sales pitch to contingent workers on behalf of the umbrella company. If an umbrella company on your preferred list goes into insolvency or operates tax avoidance which results in non-payment or an unexpected tax bill for the worker then that work might argue that you had a duty of care to them so it's important to ensure that you carry our regular compliance checks on any umbrella list you operate.
…but if you recommend one and they have fooled you and are not compliant what is the risk for the agency?
It depends what they've done. If they have been paying workers on a gross of tax and NICs basis then HMRC could bring an assessment under the Agency worker tax legislation – if the umbrella can't pay then HMRC can transfer the liability to the top agency in the supply chain. This is a particular risk in supply chain involving the payment of workers under the CIS or other sole trader arrangements.