What is it?
Accreditation is defined in the Oxford Dictionary as ‘the action or process of officially recognising someone as having a particular status or being qualified to perform a particular activity’.
At present, umbrella companies are not subject to any additional regulation other than that to which any other company and/or employer is subject, such as the Companies Act 2006. As a consequence, there is no official independent regulator of umbrella companies and therefore no official independent regulator backed accreditation scheme.
As a result, a few businesses exist who have looked to fulfil this role by creating their own accreditation schemes.
Umbrellas looking to be accredited by these businesses are required to pay a fee for their compliance testing and membership of the business providing that accreditation. Assuming they meet the minimum entry criteria, the applicants will be tested against the standards required by the accrediting business.
However, as such accreditations are not administered by an government regulator, it is important to understand the standards being tested, how the accreditations are administered and why some umbrella companies may be accredited and some may not.
How does it work?
To begin with, an accreditation scheme needs to identify and communicate the standards against which it will measure the performance of the applicant business. Their requirements and criteria should generally displayed on the website of the accreditation provider to provide transparency as to what they test their members against.
You should also consider the content of the criteria. There are different offerings in the market and some accreditation providers will not award an accreditation on the basis that they disagree with the business model operated by a potential applicant business. In addition, there are often prerequisites that an applicant business must demonstrate they meet prior to applying, and not all businesses will be able to do so.
The accreditation provider will decide and set out how it will test the applicant business against it’s criteria. This could be by way of assessing information provided by the applicant, however you might want to consider how such information is provided. If the information is simply requested from the applicant business and they are free to decide which information to provide, this could undermine the robustness of the process. A better approach might be to attend the applicant’s business in person and request information there and then, minimising the opportunity to sanitise or prepare information by making it ‘audit ready’, in advance.
The accreditation provider needs to decide who will assess the performance of the applicant business against their criteria. Some accreditation providers use regulated accountants and lawyers as assessors which should provide an independent perspective. Whoever the assessors are, they should verify the credibility of the applicant’s information by for example, conducting a site visit and testing how the standards are implemented in practice. Without this practical element, any assessment finding could be of limited value and might make an accreditation awarded on the basis of it, unreliable.
Ultimately, decisions about whether to award accreditation or not should rest within the accrediting body itself, and should not be decided by other accredited members of that awarding body – as they are competitors of the applicant businesses, and therefore would have a conflict of interest.
What does it mean?
The costs of applying for accreditations vary, and might be prohibitive for some firms. The accreditation standards and assessment mechanics also vary so it is important to understand exactly what a particular accreditation means in practice. It is also essential to check that any purported accreditation is genuinely held, and this can usually be done simply by checking the accrediting body’s website.
There is no doubt that the presence of accreditation awards does create standards within the industry. However, it is important to be aware and to understand that the absence of an accreditation award, does not automatically mean that a business is not achieving those standards.