On 6th April new legislation came into force requiring agencies to ensure that any self-employed workers they supply are indeed, self-employed; i.e. that they are not under direction, supervision or control of the end client, and therefore liable for national insurance (NI) and PAYE.
Under the regulations, the agency is responsible for administering NI and PAYE, which, if their contractors aren’t operating compliantly, could mean hefty and unexpected bills from HMRC.
The recruitment industry is heavily regulated, and as with any new legislation, some agencies are already looking into models which side step the rules to minimise their liabilities.
One such model which is gathering headlines is the Elective Deduction Model.
The Elective Deduction Model (EDM) is being marketed in various forms as a method of classifying workers as self-employed for employment law purposes, but employed for tax purposes.
By creating a ‘combination status’, the model can effectively side-step National Minimum Wage requirements, Agency Workers Regulations and Pensions Auto-Enrolment, as well as Onshore Employment Intermediaries legislation.
Given the Government and HMRC’s clear commitment to clamping down on tax avoidance, the model, like others that will no doubt appear over the coming months to ‘assist’ agencies in handling their obligations, certainly doesn’t support the spirit of the legislation, which is designed to protect the interests of workers.
It’s important for contractors to understand their agency’s attitude towards Onshore Employment Intermediaries
It’s prudent for any contractor to work with compliant agencies and employment solutions providers (umbrella businesses) who follow the law to the letter and ensure their workers are employed correctly. Though contractors themselves do not fall in scope of liability under the legislation it’s important to know that those who are effectively there to represent their interests, are not side-stepping legislation that is designed to protect them, and remove risk to their employment.
Outsauce has come out publicly against the Elective Deductive Model
Outsauce provides compliant employment and accounting services to contractors and recruitment agencies. Any contractor referred to Outsauce, or electing to join us, is reviewed to ensure they are working correctly under the legislation, and has the option to take our Best Advice Consultation to determine their most appropriate working status and minimise risk associated with all employment legislation.
For more information about Outsauce visit www.outsauce.net or call 0330 100 8686