In the aftermath of the conviction of Umbrella Company Quality Premier Services for a £45 million tax fraud, the Freelancer and Contractor Services Association (FCSA) has advised recruiters to take care when choosing an Umbrella Service to partner with.

The FCSA’s advice to recruiters aims to ensure that they are partnering with compliant Umbrella Companies by adhering to the following guidance:

  1. Select an Umbrella that belongs to a recognised professional body that includes compliance testing as a prerequisite for membership. Recruiters should also ensure that they understand what the accreditation and membership type means in practice because standards may vary. For example, to become fully FCSA accredited, all applicants are required to demonstrate compliance with the organisation’s published code as well as pass an independent assessment regulated by solicitors and accountants.
  2. Make sure that the Umbrella under consideration is operating within the law by providing the following for its employees:
  • National Minimum Wage payments in accordance with legislation as well as expenses that conform to HMRC guidance and legislation (if expenses and allowances appear “too good to be true,” then they almost certainly are, and recruiters should be concerned)
  • Holiday and statutory payments such as maternity, paternity and sick pay
  • An overarching contract of employment that renders its employees legally eligible to claim travel and subsistence (T&S) expenses
  • Guaranteed hours
  • Access to a workplace pension
  • Full employment rights

All compliant Umbrella Companies provide each of these as a minimum requirement and will be pleased to provide recruiters with evidence that they are indeed doing so.

The FCSA’s CEO, Julia Kermode, said: “While there are some cases of bad practice amongst a minority of businesses which have grabbed the headlines, there are also a large number of highly compliant organisations working ethically and correctly to provide a high level of service for its clients and contractors. The challenge comes in identifying a compliant company you can trust, sound in the knowledge that it continues to work within the rules. In this case, recruitment firms could have requested evidence of VAT returns for this company to confirm that they were indeed paying it appropriately.”

She urged recruiters not to underestimate the importance of exercising due diligence over their supply chains, as failure to do so could result in significant reputational and financial damage. An alarming number of recruitment companies, she noted, seem not to have time to perform even the most elementary checks. Yet, companies such as Quality Premier Services highlight the importance of ringfencing time for compliance.

The FCSA, in conjunction with recruiters performing proper compliance checks, can rid the industry of such “cowboys,” Ms Kermode added.

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