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Supply chain compliance: one step forward, two back?

Supply chain compliance: one step forward, two back?

The results of Outsauce’s Compliance Barometer are in, and show a mixed commitment from agencies to managing risk through the recruitment supply chain.

The positive news 65% of respondents to the industry-wide survey now take steps to manage and assess risk throughout the supply chain, with half suggesting that it should be up to agencies themselves to perform risk and compliance audits of service providers.

But though they’re keen to take responsibility, it appears that this commitment is yet to lead to action for most, with fewer than a third of those running PSLs for service providers currently insisting on Service Level Agreements.

The focus has of course fallen overseas in recent months, with offshored intermediaries coming under particular scrutiny from the Treasury, but issues closer to home, including pay-day models, continue to place contractors and agencies at risk.

The news just this week that a major UK payroll provider is suspending its umbrella service following HMRC investigation, serves as a stark reminder of the importance of working with compliant operators, says Steve Wortley, managing director of Outsauce Contracting and Accounting:

“’Umbrella’ businesses have suffered from reputational issues over recent years due to the practices of some unscrupulous operators. A compliant employment solution however, can be an excellent option for agencies and contractors to ensure payment is handled correctly and contractors receive the benefits of full employment.

“All too often it takes a situation like this week for the industry to sit up and take notice. But the fact remains, refer to a non-compliant service provider, and your business is at risk as much as your provider’s should anything go wrong.

“This is a business critical issue,” he adds. “Be sure of the financial and operational stability of your service providers and understand to whom your front line consultants are referring. After all, should the very worst happen and they go under, not only could your reputation be damaged, but you may find yourself in the unfortunate position of paying your contractors twice to avoid issues with your end client.”

The Compliance Barometer was intended by Outsauce to assess how agencies are handling the compliance challenge on the ground. In questions around AWR, pensions auto-enrolment and IR35 amongst other regulatory issues, HMRC came in for particular criticism, with a perceived lack of action and a shortage of publicity around successful prosecutions highlighted as key concerns.

In two examples, just 26% of recruiters were revealed to have faith that HMRC will be able to clamp down on unscrupulous practices within the industry under its renewed powers, while only 18% believe the Regulator is doing enough to combat non-compliant expense claiming.

Overall, the findings indicate that many recruiters consider compliance a double edged sword: “Increased regulation puts a drain on compliant agencies’ resources,” says Steve Wortley. “Exploitation of the system by rogue operators then compounds the problem by forcing everyone else to compete at a disadvantage.

“Agencies committed to compliance effectively feel penalised for remaining on the right side of the law. Policy makers should take heed.” he added.

Download a free copy of Outsauce’s Compliance Barometer report here:


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