Are you a recruitment agency? Make sure you know what legislation is coming up in April
Spring is coming, and accompanying it are the usual budding flowers, lambs…and a whole load of legislative changes.
Undoubtedly, the biggest topic currently dominating the marketplace is IR35, however, we wanted shine a light on the other key reforms coming into play in April to ensure they are equally understood and implemented.
How ready are you and your supply chain for the below?
Key Information Documents (KID’s)
As a result of the Good Work Plan’s recommendation, from April, all new agency workers need to be issued a Key Information Document (KID) before agreeing terms with a new recruitment business. This written statement will outline key pay related information and is intended to provide more transparency for the agency worker – outlining what deductions will be made on their pay and giving a better understanding regarding work arrangements.
As the worker's primary interaction is with the recruitment business, that business is responsible for issuing the KID upon worker registration, usually prior to them choosing to register with an intermediary for payment. However, we are intending to support agencies by;
· Issuing our KID Communication Pack with information and templates that the agency can use.
· Advising recruitment business to speak to their software providers - how can they provide the solutions required to issue these new documents?
· Installing a backup system via our CRM (Zest) that can issue a KID to workers in tandem with the agency's, or on agency request
· Providing breakdown and pay information for agencies requesting the information - margins, models, and how pay is calculated, ensuring supply chain compliance.
If you haven’t started to gather this information already and formulate your plan – now is the time. It’s a vital opportunity to revisit and review the compliance of your business’s’ supply chain.
The Good Work Plan has not only inspired the creation of the Key Information Documents but has also had a hand in abolishing the Swedish Derogation model. Commonly known as the ‘pay between assignments’ model, workers currently engaged on these contracts with an agency (or intermediary) give up the right to pay parity with comparable permanent staff, in return for a guarantee to receive pay when they have gaps between assignments. As part of the agreement, the worker needs only to be paid the National Minimum Wage, so workers may not be paid the same as a worker in a similar role earns.
However, as of the 6th of April, the contracts are being repealed and Swedish Derogation will cease to exist. This means that all agency workers will be entitled to equal pay after the 12 week qualifying period, including those currently employed on these contracts – as many as 130,000 people according to government figures.
Therefore, for any recruitment businesses that currently operate this model, client terms and pay rates will need to be reviewed, as well as contracts, and written statements are required to be issued to any current workers informing them that as of April these provisions will no longer apply.
Like clockwork, the government is again increasing the National Living Wage (NLW) and the National Minimum Wage (NMW) in April, and so our minimum contract rates to pay a PAYE worker are also increasing to accommodate the rise.
· The NLW is rising from £8.21 to £8.72
· The NMW is increasing from £7.70 to £8.20
If you haven’t been contacted already, please contact your dedicated contact at Clipper Contracting Group to discuss what our new minimums will be so that you can implement these in your supply chain.
Last but most certainly not least…
In very simple terms, IR35 was introduced in 2000 to examine the relationship between the contractor and the end user to establish whether it was one of ‘disguised employment’ or a genuine business relationship. Since its introduction, it was the director of the limited company that was responsible for determining their IR35 status (and therefore liable for tax) but as of April in the private sector, it will be the hirer (end-client) who will now be responsible for determining the IR35 status of the contractor, following the public sector’s roll out of this in 2017.
Determining the IR35 status of a limited company is complicated as there are many factors to consider; this is already causing headaches in the supply chain as companies consider their options – there have been discussions of blanket bans on LTD Companies for example.
Additionally, if a company is found to be inside IR35, then the fee-payer (entity that pays the limited company) will be responsible for deducting employment costs such as Employer’s NI and tax and national insurance from the limited company. The fee-payer could be the end-client (if they engage a limited company directly) or a recruitment agency should they have introduced the contractor.
The good news is;
• If the Limited company is found to be outside IR35/if end client is classified as a ‘small business’ – continue being paid as a limited company with no change
However, if the Limited Company is found to be inside of IR35, many may choose to shut down their limited companies and engage in other ways.
• Choose to go PAYE with the agency or PAYE Umbrella for full employment benefits.
As an FCSA accredited company, Clipper Contracting Group take all legislation seriously and are here to help you implement it. Call our team on 01305 233170 to discuss any of the above.