Over the last few months we have posted a few criticisms in relation to recruitment agencies’ preferred supplier lists of umbrellas, which restrict a worker’s choice of umbrella. In particular we are concerned about the obscene financial incentives underpinning some PSLs, and it seems that the person most affected by the decision is the one person that has no say in it.
Our posts have sparked some controversy, and we have received some friendly counter arguments against our point of view. There are two sides to every story so here we outline some of the rationale in favour of PSLs.
Dubious umbrellas can be difficult to spot
We know that some tax schemes can appear to be legitimate umbrellas whereas in fact they are anything but, and could result in workers ending up with a very large future tax bill from HMRC. We only have to look at the disastrous financial consequences of the loan charge on innocent victims to understand how serious this can be. The argument that dubious so-called ‘umbrellas’ are difficult to spot is true, and PSLs can play a role in protecting workers from unwittingly entering into schemes that will cost them dearly in future.
PSLs can ensure compliance
When operated properly, preferred supplier lists can protect workers by ensuring that they only have fully vetted and compliant umbrellas to choose from. For contractors and workers this is probably the only reason in favour of having PSLs, and it’s a very important and compelling reason. We believe recruitment agencies have a duty of care to ensure that any umbrella they recommend to their workers has been fully compliance-checked and vetted. This is particularly important for any jobseekers who are choosing an umbrella for the first time.
Criminal Finances Act
In addition to ensuring a compliant umbrella for their candidates, a PSL can help recruitment businesses meet their obligations in relation to the Criminal Finances Act, which carries a corporate criminal offence of failing to prevent tax evasion. If agencies undertake proper due diligence regarding the umbrellas on their PSL, then they could have a defence of reasonable preventative measures being in place to prevent tax evasion.
There are too many umbrellas for agencies to vet them all
Doing proper due diligence on umbrellas can be complicated and time-consuming for recruitment businesses, so if all workers had freedom to select whichever umbrella they wished then it could become an impossible task for agencies to vet them all. A recently retired senior recruitment director told us that for a large agency this could be dozens of umbrellas to be checked every week.
The debate will continue…