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The recent unprecedented events surrounding the global pandemic and how the Government responded has highlighted issues in the sector that will need to be considered and addressed for the future.

The area that has come under the most scrutiny as a result on the Government’s CJRS arrangements has been the umbrella sector and whilst this has worked well for all parties in the supply chain historically different thinking may be required going forward.

It is also likely that alternative arrangements for engaging workers through payment intermediaries will also emerge.

Recruitment companies and end clients are likely to have a range of engagement styles for their workers with providers assessing the most appropriate for the workers arrangements.

The ‘one size fits all’ approach is likely to be replaced by more tailored advice and contractual arrangements.

Professional Passport is already leading the market in this area with newly defined compliance standards for emerging structures in the market. We have the most comprehensive standards across the broadest range of operating structures.

Compliance will also be a key consideration with many looking to restrict providers that can be used based around an independent compliance assessment. Whilst this is a sensible approach care must be taken not to restrict choice too far as it has implications for the worker relating to their employment rights. What appears to be emerging as the standard approach is to accept a worker with an existing relationship to continue with that relationship where the provider holds a valid independent compliance verification.

Professional Passport’s compliance verification is accepted by many of the largest recruitment companies, Government Framework agreements for supply of temporary workers, Recruitment Managed Service Providers and End Clients.



Umbrella companies have been around for many years and have adapted their offerings to workers based on an almost continually changing legislation landscape.

The umbrella offering is underpinned by their employment contract with the workers. Whilst there have been many adaptations of this of the years it has been commonplace for umbrella companies to offer standard contractual terms to all their employees. These standard employment terms were designed to provide the most flexible arrangements to cater for changing circumstances of the employees. This worked well for many years although using these standard terms across all employees has thrown up issues during the lockdown specifically relating to how pay had been defined.

This is an area where we are likely to see the biggest changes.

It is likely that umbrella companies will move to a range of contractual terms and offer the most suitable to a worker based on their individual circumstances and future expectations. The main differences between each contract variation is likely to be around how pay is defined within the contract.

Professional Passport are already in discussions with legal experts to understand the new contractual variations that may emerge, and we will ensure that all our existing providers have a full contractual review should this occur.


New Emerging Structures

The historic position was that workers were generally only offered either PSC, their own limited company, or umbrella arrangements as many recruitment companies did not operate their own PAYE arrangements. As legislation has tightened many recruitment companies and end clients have moved to specifying a list of providers that they would accept, generally based on an independent compliance confirmation.

Professional Passport’s compliance verification is accepted by many of the largest recruitment companies, Government Framework agreements for supply of temporary workers, Recruitment Managed Service Providers and End Clients.

What is already emerging is that, as we highlighted above, umbrella arrangements are likely to become more aligned to the workers specific situation and provide employment terms more accurately aligned to this. We are also seeing new service offerings:-

Professional Employment Organisation [PEO]

This is the same as the umbrella, where the provider would be the employer of the worker. The key difference is that the rate offered to the worker is the rate they are paid, i.e. a PAYE rate.

This removes all the complexity from the workers perspective as their pay is transparent. It also allows the providers to operate contractual employment terms that align to the workers situation ensuring it maintains the flexibility of the arrangement based on the individual worker’s circumstances.

Another key difference is that the recruitment company would agree and pay the costs related to the provision of this service.

The provider would work out the total cost of employment, over and above the rate paid to the worker, which would include the costs of Employers NI, Employer pension costs, Apprenticeship Levy and Holiday Pay.

Unlike the umbrella on the uplifted rate any savings on employment costs would result in savings to the recruitment companies costs and the workers income would remain consistent.

Professional Passport has already developed compliance standards for this arrangement, and we are seeing a growing number of providers seeking to offer this.

Joint Employment

As the name suggests in this arrangement there are two employers, typically the recruitment company and the provider.

The employment must be genuine joint employment and have precise contractual arrangements and communication that supports this fact.

Joint Employment can be delivered on either an uplifted rate or a PAYE rate although the PAYE rate is emerging as the favoured route as it is less complex and more transparent and easily understood by the worker.

One reason this area has been growing quickly in recent times is that it addresses the VAT issue faced by many nursing agencies. The VAT concession available to the nursing agency does not extend down to a provider and so where they used a third-party payment intermediary, such as an umbrella, VAT became a block.

Some providers had claimed that they did not have to charge VAT as they qualified for the concession. As the Nursing Agency VAT concession has become more widely understood users of these non-compliant structures have been looking for an alternative compliance arrangement.

HMRC guidance states:

Joint employment

Where staff are jointly employed there is no supply for VAT purposes between the joint employers. Staff are jointly employed if their contracts of employment or letters of appointment make it clear that they have more than one employer. The contract must expressly specify who the employers are for example ‘Company A, Company B and Company C’, or ‘Company A and its subsidiaries’.

Staff are not jointly employed if their contracts are with a single company or person, even if it requires them to work for others. Paragraphs 2.1 to 2.3 apply in that case. There is no joint employment where for example there is a contract with one employer:

which lays down that the employee’s duties include assisting others
that the employee will work full-time for another
where the job title shows that the employee works for a group of associated companies (such as a group accountant)

So, the benefit of Joint Employment is that there is no VAT on the cost of employment, VAT must be charged on any service fee applied by the provider and this is paid by the recruitment company.

Professional Passport has developed compliance standards in this area, and we are already seeing a growing number of providers using these arrangements with their clients.

Team Partner
Innovator of the Year 2008 & finalist 2009
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