Pound Shop Umbrellas
We have all heard the expression “there ’s no such thing as a free lunch”. We can all be competitive when have to be and we all have to be experts in reducing costs wherever we can. It’s the nature of the business. It’s a very competitive market, as we all know. But sometimes this veers into the dangerously daft lane. There are some Umbrella companies out there who, we came across just this week, quoting as low as a couple of pounds for your business.
How can they do this? Well the blunt fact is that they can’t, at least not for long. Lets put this into perspective. There are some hard and fast rules all payment service companies have to operate under. This is laid down in black and white to ensure that we are doing the right thing in giving the right information and advice to contractors and to agencies too; and we have to do everything in the way HMRC would like us to do it.
Just take a simple part of the process like the phone call to qualify the contractor and to make sure you have all the details correct, probably to his or her mobile phone; that costs a few pounds in call charges and time for somebody. A couple of quid doesn’t even cover the postage and printing to make sure the correct procedures, contracts and paperwork are carried out properly. This compliance to procedure, while a bit painful for all concerned, is absolutely vital as it protects the contractor and agency as much as everything else. It’s all part of a weekly documentation system, verifying that the hours worked are correct, ensuring that the correct expenses are claimed, a process that carries on, and on and on., week in, week out. It is not an optional extra. It’s something that simply can’t be avoided. Even with the most sophisticated software systems you still have to stuff an envelope and input the correct data.
But why would they even try to operate with this business model? There are a couple of reasons for this. In most cases it’s because they are simply trying to buy your business; buying turnover and cashflow through the numbers of contractors they have in their system. To them its just about numbers. Unfortunately the economies of scale argument doesn’t work in our sector as every individual has to have an audit trail in effect. That requires human intervention at some point.
And why do they need the need to do this? Sadly it is often a temptation they need to resort to, somewhat understandably, if they faced with a cash flow problem themselves if they loose a key account or a client goes to the wall. Or sometimes they are victims of the rumour machine of HMRC inspection or loosing their Gross Payment Status. Most of us have been subject too these allegations by less than scrupulous competitors at some point. It’s an easy ploy but one that backfires once the rumors are proved to be groundless.
The problem is that although it seems to be great deal it is actually a major problem. And it’s your problem. The failures to carry out the correct procedures or the temptation to cut corners can come back and bite everyone. Investigation by HMRC inspectors will follow a trail and if the agency or worker is in the trail then everyone becomes involved. The new statutes regarding Transfer of Debt could mean a very nasty surprise lands at the door of directors of the recruitment agency. HMRC now has the right, from January 2009 to pursue the tax unpaid plus penalties if they cannot recover these from the Agency – for whatever reason. This is very scary! Not for those who are complaint though, just if you use anyone who may ( even slightly) bend the rules.
Simply put, if you are quoted anything less than £15 per week you can probably be pretty certain that you really can smell something slightly fishy. Something in the process has to be missing. It is like buying car that has no brakes.
So, until all temporary contract workers come with bar codes on their heads, DNA can be transferred over the phone and HMRC trusts everyone to be good boys and girls and pay their tax using an honesty box we all have these hoops to jump threw. If something is too good to be true, as your Granny used to say, it probably is.
