After a year-long delay following the effects of Covid-19, the UK’s off-payroll updates were officially implemented on 6th April 2021. The legal changes could see up to 25% reductions in contractor take-home pay, additional legal responsibility for recruitment agencies, and extra administrative burdens for both groups.
However, the right payroll partner can prove all the difference in effectively navigating the new legislation. From compliant processes and increased efficiencies to personal protection for each and every individual, here are four ways that Generate can help recruitment agencies and their contractors through the IR35 payroll reforms.
4 Ways Generate Can Help Recruitment Agencies and Contractors Through IR35
1. Interpreting Legislation and Necessary Actions
The latest IR35 changes mean that in most cases, the responsibility for determining ‘Inside IR35’ and ‘Outside IR35’ status no longer lie with the contractor, but with the end client itself. Where recruitment companies are used and particularly where they operate as core suppliers, staffing agencies are likely to see rapidly increasing calls for help from their end client businesses, alongside requirements to mediate in status disagreements between employer and contractor.
Although HMRC provide extensive instructions and a dedicated tool, IR35 determinations are far from simple; Mutuality of Obligation, liability insurance, holiday and sickness pay, supervision and the relationship between contractor and end client are just some of many required considerations. With £millions in potential fines and the risk of elongated lawsuits, companies across the board are enlisting the close support of their suppliers.
With almost a decade of experience partnering 6,000 contractors and over 500 recruitment agencies, Generate are well versed in partnering staffing companies through UK and international legislation updates.
2. Transparent Processes and Collaborative Relationships
Transparent umbrella companies are vital in empowering contractors and temporary workers by ensuring they receive on-time payment, timely payslips and full breakdowns of pay calculation. Dishonest and disorganised payroll providers can create unnecessary stress and work duplication, cause rifts between contractors and their end clients, and threaten entire assignments for the recruitment agencies involved.
Transparent payroll processes are even more crucial to workers and their staffing agencies following the IR35 updates. Tens of thousands of the UK’s contractor workforce are expected to fall under the ‘Inside IR35’ category following status determination. To help these contractors navigate the subsequent fundamental changes to their lives and working practices, committed and honest partnerships between contractors, recruiters and all contractor management companies are the most effective way forward.
Generate are renowned for establishing close, honest partnerships with the recruitment agencies we support. In 2021 our exemplary client focus and service saw us named a Recruiter Awards Finalist in the Recruitment Industry Supplier of the Year category. We have proactively helped our recruitment partners drive their IR35 response strategies since the first announcement of the reform changes back in the UK Government’s Autumn 2016 statement. Transparency in any partnership ensures all parties are in the know as soon as an issue or opportunity arises, and involves continuous collaboration to anticipate and conquer new challenges for benefits all round.
3. Protecting Contractors – Even When the Law Doesn’t
In recent days the UK Government has stepped in to warn contractors against non-compliant payroll providers. This month the Loan Charge All-Party Parliamentary Group (APPG) released the findings of a new investigation evidencing that contractors have already been negatively impacted by some umbrella partnerships in the years leading up to the IR35 reforms.
Thousands of freelance and temporary workers have suffered reductions in holiday pay due to unscrupulous umbrella companies pocketing more than their fair share. Employers and contractors going through a loan scheme with non-compliant umbrellas risk significant liabilities and penalties later down the line. The problem is so widespread that MPs are urging HMRC to introduce additional legislation protecting contract workers in the case of malpractice, which could be exacerbated under the new IR35 reforms.
Generate have witnessed similar malpractice and contractor neglect in the payroll industry, and continually strive to lead industry change. Due to furlough pay miscalculations under the UK Government’s Coronavirus Job Retention Scheme (CJRS), thousands of supply teachers and IT contractors saw their take-home pay suddenly and unfairly reduced in spring 2020. Generate was one of the first umbrella companies in the UK to secure maximum salary payments for contractors under the furlough scheme. We fought on behalf of our contractors for fair furlough pay, paid the first set of backdated payments before funds from HMRC were allocated, and ensured every eligible contractor received the support they needed during an incredibly difficult time.
We are proud to fight for the rights and wellbeing of contractors, and strive to put contractor protection at the heart of payroll legislation and practices.
4. Guaranteeing Compliant Working and Payment Practices
HMRC recently estimated that only 10% of contractor assignments are compliant with payroll legislation. The news comes at the same time as rising reports of non-compliant companies posing as payroll and tax legislation experts. A growth in the number of umbrella company comparison sites offering suspiciously high take-home pay rates has raised concerns that the latest IR35 private sector reforms could impact unwitting IT contractors further down the line, with mammoth tax bills several years into the future.
Truly compliant payroll companies can be recognised by a Freelancer & Contractor Services Association (FCSA) accreditation. FCSA accredited members are audited by independent legal and accountancy professionals (and checked by HMRC itself) to ensure the highest standards of compliance in the recruitment and employment industry. FCSA accredited members like Generate follow a rigorous code of compliance that protects all recruitment agencies and contractors from risks associated with tax and employment.
The support of a payroll and contractor management company with an on-site compliance team can help ensure accurate IR35 status determination and significantly reduce compliance risk.
Ensure Your Agency and Your Contractors are IR35 Compliant
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