Many agencies follow compliance processes they have internally to review the PSL of umbrella companies. However, do you really know what your workers are being charged and understand the payslip and calculations behind the figures?
With the key information document, being issued to contractors from April 2020 by recruitment agencies now would be the time to check what is actually being deducted.
We review payslips from competitors on a regular basis from contractors who are not happy with the deductions they see and some of the calculation we see are dramatically different. For example National Insurances should only be deducted from earnings over £166 (current tax year), however, one payslip we reviewed had NI deducted from earnings over £100 which meant there was an additional £30 deduction on top of the regular £10 fee.
This is not compliant. All deductions need to be notified to workers following their registration and deductions need to be deducted at the correct rate. There should be some leeway, however, where thresholds change as sometimes it may take a week or so to update, depending on when the workers worked etc as pay period should be taken into consideration.
Would you as a compliance officer at an agency be able to spot this or is the relationship you have with your payroll provider clouding your judgement when conducting spot audits?
Umbrella providers do deduct a margin fee for services and a number of providers charge for deductions such as insurances and additional services, which should be available for a contractor to see within the information provided to a worker in the Key Information Document from April 2020.
Our advice would be if you are reviewing your PSL or conducting spot audits to check the following with their provider:
- Ni is being calculated over £166 per week for both employers (13.08%) and employees (12%)
- Tax is being deducted at the correct amount based on the contractor’s tax code.
- The payslip includes the gross pay (agency rate) not just a gross for tax amount or basic pay.
- There are no additional deductions you or the worker are unaware of.
- The holiday pay is being calculated at the correct rate of 12.07% for non-education and 14.36% for education workers.
- Pension contributions are being deducted at the correct amount.
- Check your providers accreditation – we would recommend CIPP, FCSA or Professional Passport.