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Recruitment industry needs better advice on legislation changes and how to adapt, survey finds

The 2015 Budget announcement includes proposals that could eliminate “umbrella” as a viable payment structure, significantly increasing costs for recruitment agencies and eliminating rebate revenues. In response to the announcement, Ship Shape Pay, a payroll specialist, conducted a survey of recruitment professionals to establish the understanding of proposed and current legislation.

The Onshore Intermediaries Legislation came into force on the 6th April 2014, affecting agency workers under supervision, direction and control, as well as introducing new reporting requirements for all workers not paid PAYE directly by their agency. Although the first of the new reports is due in August 2015 with agency fines for non-compliance, more than 42% of those surveyed stated they only had little or some knowledge of the reporting, and 18% claimed they had no knowledge at all. This was reflected in the overall understanding of the legislation for which 30% of respondents felt they had little or no knowledge.

Results around knowledge of proposed legislation ending tax relief on travel and subsistence paint a similar picture. For example, only 33% of respondents had a good or very good knowledge of the proposed withdrawal of the right for an agency worker to claim relief, thereby reducing take home pay unless agency rates are increased.

“Agencies should be making contingency plans for the dramatic impact that the withdrawal of tax relief on travel and subsistence will have on their business, their workers and even clients where charge rates increase. The findings from the survey show an industry not yet prepared for the impending changes,” says Howard Hughes, Chief Executive of Ship Shape Pay.

Looking to the future, respondents were asked to consider the alternatives to using umbrella contracts for their agency workers. The majority believed that either direct employment through the agency or contracting under a limited company structure would be the most likely outcomes.  Hughes commented “This has many knock-on effects&hellip.I wonder for instance how many agencies have calculated the loss of associated rebate revenue these changes entail?”  

When considering penalty liability following a breach of the Onshore Intermediaries Legislation 64% of respondents correctly identified that the agency is responsible for any HMRC penalties arising from non-compliance. However, 22% incorrectly stated that the payroll, end hirer or temp workers were responsible and 14% simply had no knowledge.

Howard Hughes concludes: “A sense of urgency to ensure compliance and minimise the impact from upcoming legislation is somewhat missing. Umbrella providers should already have provided agencies with sample reports for intermediaries’ reporting back to April 2015.  They should be informing agencies and setting out alternative payroll provisions to minimise commercial impact and exposure to new liabilities well in advance of April 2016. ”



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