Contractor compliance concerns are growing: here’s what your agency should do

Contractor compliance concerns

14th May 2018

There’s no doubt that the world of international contractor recruitment is becoming ever more complex as compliance becomes an increasingly dominant challenge for agencies and professionals alike. However, at a time when freelance workers are finding themselves uncertain where to turn for advice, recruiters need to take control and ensure individuals are going to the right sources – not only for the sake of agency / contractor relationships, but also to reduce their firms’ compliance risk.

Contractor troubles

According to recent reports, almost 100,000 contractors are facing investigation and fines from HM Revenue & Customs for the use of schemes such as disguised remuneration in the last decade. While many of those involved claim that they were led to believe that their activity was within the law at the time, HMRC has made it clear that this will not deter it from taking action.

According to a spokesperson, “these schemes are, and were always, tax avoidance. They used contrived transactions to bend the rules of the tax system to gain a tax advantage that parliament never intended. In reality, the individual will never repay the loan from the third party so it is no different to normal income and is taxable.”

A huge impact

With professionals facing back payments, hefty penalties and interest rates – which in some cases are up to £900,000 – the individuals involved are understandably worried. For the contracting community as a whole, however, this latest news will cause greater concerns. With many freelance workers facing these fines stating that they believed the schemes they were involved in were compliant, fears are now being raised as to which sources of information can be trusted.

With recruiters playing such a crucial role in these contractors’ professional lives, it is certainly likely that individuals will be turning to their agency for advice – and firms need to capitalise on this now before people go elsewhere.

Agencies need to develop a stronger voice

While we certainly don’t advise recruiters to start offering compliance guidance, given the potential risks to an agency if a contractor is involved in fraudulent behaviour and the chance of losing professionals from your database as concerns grow and relationships fail, pointing individuals in the right direction is crucial.

As specialist hiring professionals, firms need to be providing contractors with guidance on where to turn for relevant, up-to-date compliance advice – and this needs to be someone the agency trusts as well. Our blogs on the top questions to ask a contractor management firm and how to create an efficient compliance programme can help recruiters ensure they are partnering with the right experts.

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