What does compliance mean?

In our industry it is generally accepted that 'compliance' means compliance with laws, particularly tax laws. Of course laws can be interpreted in different ways. This keeps lawyers and tax advisers in a job but can give Legal and Compliance teams in agencies huge headaches. Providers can produce counsel's opinions that say 'this scheme works' - the trouble is these opinions are often procured because HMRC does not agree.

At PayStream we take a low risk approach so our starting point is always 'what would HMRC consider to be compliant?' For example HMRC has made it very clear that it will pursue offshore schemes and 'pay day by pay day' models so even the most robust counsel's opinion would not persuade us down those routes. We regularly engage with tax advisers, lawyers and most importantly HMRC to keep up with changes in legislation or HMRC's approach.

Why should agencies be concerned about service provider compliance?

Financial risk - here is risk of debt transfer under MSC legislation if agencies work with a service provider who is 'involved' with its clients. If the contractors are using offshore schemes HMRC can use host employer regulations to pursue UK hirers for unpaid tax. In addition, as announced in the budget, there is currently a consultation in respect of new legislation to formalise the automatic transfer of liabilities to third parties which would include recruitment companies and their clients where offshore schemes are used.

Reputational risk - agencies spend time and money on building their brand so being associated with a non-compliant provider makes little sense particularly since clients are becoming more and more interested in a compliant supply chain. The public sector and the banks now look for assurance that contractors are paying the right amount of tax.

Culture - if you are trying to embed a culture of doing the right thing for contractors it makes sense to look at the culture and values of your suppliers.

Value - if you are looking for an exit you will need to demonstrate to a purchaser that your earnings are sustainable. For example if you work with a partner using a 'pay day by pay day' model a purchaser will undoubtedly look to discount your earnings on the basis that HMRC will challenge the model. Similarly the multiple attached to business profitability is easily discounted if noncompliance is identified.

Personal responsibility - the directors of companies are responsible for determining the risks the business is willing to take. If trying to build risk resilience into a business it would be hard to explain the use of offshore schemes in the current market.

What is the best way to determine a service provider's compliance?

Agencies have differing approaches:

  • Send out a questionnaire with a series of compliance related questions- this is a good starting point but the difficulty is how to validate the answers given. Everybody says they are compliant.
  • Rely on third party audits - generally these give more comfort than a simple questionnaire provided the auditor has visited the service provider to examine working practices (which would be HMRC's approach). You should check this point. We are audited annually for general compliance by Professional Passport and six monthly for MSC compliance by BDO.
  • Carry out a site visit and review working practices yourself. Obviously if you can manage all three approaches it gives you the best chance of assessing a provider. For agencies with large PSLs this can be extremely time-consuming. The solution - reduce the size of your PSL.


Ensuring compliance internally

At PayStream we have a compliance team of 6 people who understand exactly how the business should operate. The key is to ensure that the rest of the business has the same understanding. To that end we have:

  • process mapped our key processes
  • scripted key conversations
  • automated key communications. Our in house IT development team allows us to do this
  • held regular training sessions for staff
  • acquired call recording software which allows calls to be recorded and assessed.

This allows the internal compliance team to monitor and assess the rest of the business against our compliance templates. This happens on a monthly basis and the sales team commissions are contingent on passing these compliance audits which is a powerful motivator.

Very importantly we get external auditors (BDO and Professional Passport) to vet our processes and to audit the audits. We get a certificate of compliance from both parties and their comments are fed back to the business by the compliance team.

By focussing, from a compliance perspective, on our interaction with contractors and agencies we identified areas where we can improve our customer service and again part of the compliance team's job is to feed this back to the business.

Conclusion

We believe that our stance on compliance puts us in a strong position to grow our business. Clients, now more than ever before, are keen to ensure a compliant supply chain. This means that agencies are looking more closely at what service providers actually do and are gravitating to those that can demonstrate that they are operating compliantly.

Agency - find out more?
Want to speak to an expert?
Find out more
What is your contractor's pay rate?
Above Below £16 per hour or £128 per day
How long do their contracts tend to last?
More Less than 3 months
Are they working in the construction industry and genuinely self employed?
Yes No
Your contractor might want to look at My PSC
Our limited company service.

With My PSC, your contractors can set up and run their own limited company in the most tax-efficient way possible, with minimum fuss. Not only that but if they sign up now they'll get three months completely free. Find out more.

If you or your contractors would like to talk about My PSC in more detail and find out their IR35 status, please call us on 0800 197 6516, or fill in the form below and we'll be in touch whenever suits you.

Full name
Please enter your name
Email address
Phone number
Please enter a valid phone number
Call me on a
at
Have you been referred to us by an agency?
Yes No
Please Select an Option

By completing and sending this form you agree to receive a telephone call, postal communication or email from us. If you do not wish to receive future news about our products, services and offers, please uncheck this box.
Your contractor might want to look at My CIS
Our special service for the construction industry.

My CIS lets your contractors enjoy all of the benefits of their CIS card whilst cutting down on all of that annoying paperwork - leaving your contractors to get on with their job. Find out more.

If you or your contractors would like to talk about My CIS in more detail, please call us on 0800 197 6516, or fill in the form below and we'll be in touch whenever suits you.

Full name
Please enter your name
Email address
Phone number
Please enter a valid phone number
Call me on a
at
Have you been referred to us by an agency?
Yes No
Please Select an Option

By completing and sending this form you agree to receive a telephone call, postal communication or email from us. If you do not wish to receive future news about our products, services and offers, please uncheck this box.
Your contractor might want to look at My Max
Our umbrella service.

With My Max, your contractors can balance the benefits of continuous employment with the advantages of being a contractor. Find out more.

If you or your contractors would like to talk about My Max in more detail, please call us on 0800 197 6516, or fill in the form below and we'll be in touch whenever suits you.

Full name
Please enter your name
Email address
Phone number
Please enter a valid phone number
Call me on a
at
Have you been referred to us by an agency?
Yes No
Please Select an Option

By completing and sending this form you agree to receive a telephone call, postal communication or email from us. If you do not wish to receive future news about our products, services and offers, please uncheck this box.
Request a callback
Request a call back...
Full name
Please enter your name
Email address
Phone number
Please enter a valid phone number
Your enquiry
Please enter your enquiry
Call me on a
at
Have you been referred to us by an agency?
Yes No
Please Select an Option

By completing and sending this form you agree to receive a telephone call, postal communication or email from us. If you do not wish to receive future news about our products, services and offers, please uncheck this box.
What our clients think
I must say that I am really impressed with the service and accessing my account from the web portal (my paystream) is not only convenient but well detailed. I have not been too concerned with taxes & tax timeline in the past but after joining PayStream, I have a clear understanding of how the system works (thanks to my accountant), my income statement is well laid out and detailed and the news feed is very informative. It is comforting to know that PayStream strives to work within the law and ensure it's clients are also well covered - I recently did an IR35 evaluation and valuable advice has been passed on.

Finally, queries and or complaints are handled swiftly which makes it more reliable.

I would definitely recommend to friends and colleagues - have done so already.
- B. Ekpe, Document Controller
PayStream explain the set-up of a Limited company to contractors in a clear and understandable way. This is why contractors are happy to go with PayStream. Contractors find it easy to speak with you about any query.
- R. Thomson – Infinity Resources
Best umbrella service on our PSL - they always deliver!
- A. Tattum - Computer Futures
What does compliance mean to PayStream?