Ones to avoid

There have been several tax avoidance and unscrupulous models of payroll that have left temporary workers financially penalised.

New guidelines evidence the government’s drive to encourage businesses to examine the supply chain with comprehensive, regular due diligence to ensure they work with only fully compliant and ethical payroll providers.

Full outsourcing of payroll has been commonplace in the recruitment sector for many years, with the reduction in downtime and streamlining of business processes cited as benefits.

Unscrupulous payroll providers are not uncommon. Known as Mini Umbrella Companies (MUC), these put a business at risk, so look out for red flags a company is a MUC:

• A MUC model of payroll payments is via randomly named companies – that frequently change – with no transparency of pay deductions provided. There are few or no employers’ NI paid on workers’ pay, which HMRC classifies as tax fraud.
• Workers are being paid through multiple limited companies with unusual names. This is because the MUC model needs payroll companies to have limited payroll payments that allow the use of employers’ NI allowance and very little else.
• Operates from serviced offices, bulk mailboxes, or offshore locations. The individual business type registered with Companies House frequently doesn’t match the Trading Group name.
• Directors/Shareholders are non-UK nationals, non-resident in the UK, and non-tax resident.
• Utilises flat rate VAT accounting, which gains them additional income without the need for accounting records.
• Are structured to achieve multiple employment allowance opportunities because MUC use multiple Limited companies.

Inside stories

Premiere Recruitment specialises in GLAA-regulated sectors including food processing and agriculture, with an average 250 workers on its weekly payroll. It has outsourced payroll since its launch in 2021.

“Payroll has to be run on time, accurately and compliantly, or it’s catastrophic,” says the company’s Director, Leon Vickers. “Handing payroll over to another organisation is terrifying, but ideal for busy businesses. For us, working with a legitimate, reputable provider has improved efficiency, saves money, gives peace of mind, and frees-up time and headspace to focus on the business.

“There are loads of payroll providers out there, and investing in comprehensive due diligence up front is vital to get the right one. Ask for references, evidence of HMRC compliance, and the latest audit. Talk to other businesses about who they use for payroll, check-out online reviews, and ask for proof the provider understands your sector and relevant legislation. Meet their team to establish the business is reliable, has robust systems and processes, the knowledge and resource to act and respond, and that payroll is in the right format for you.”

“It’s reassuring knowing we have payroll professionals on board,” says Patricia Hay, founder of First Base Employment, who has outsourced payroll for over 20 years. “Trust comes over time, but before selecting a payroll provider, get evidence they have excellent communication tools, secure technology, satisfied customers, and value openness and transparency.

“Take time to understand how each provider adds value,” she says. “Employee support is so important, and if this is part of the outsourced payroll provider’s solution, it’s one to embrace - it’s rewarding to be able to give our whole team access to counsellors and GPs, and tools that help with the cost of living.”