It's not where you're from but what you do that counts

Posted on Thursday 19th January 2012 - Temping

The term ‘offshoring’ often has negative connotations. From the setting up of call centres in India to manufacturers moving factories (and jobs) to countries where skills are high but labour is cheap, offshoring is often seen as something that is best avoided.

Offshoring of financial services, human resources or payroll can arouse similar concerns in many, especially in an environment where compliance is in the spotlight. For recruitment agencies, the decision about whether to accept a contractor’s choice of umbrella company to administer their payroll is an important one and they often have to consider whether to accept an offshore provider or not.  When making this decision recruiters are rightly keen to comply fully with relevant legislation and to minimise the risks to them and their contractors.

With this decision in mind, it’s important to be clear that there is a difference between offshoring (i.e. a company basing itself offshore) and companies offering offshore tax structuring which attempt to reduce or remove individuals’ UK liabilities.

An offshore company, including umbrella companies, can be based offshore while offering fully compliant onshore services or products. Manufacturers have been doing this for decades and consumers are usually very comfortable with it. We’re now used to the fact that our t-shirts, jeans, suits and many other items are made outside of the UK, but are fully compliant with quality standards and regulations set by the UK government – for example regulations relating to labelling or fire safety standards.

In the same way, offshore based companies offering onshore payroll and tax solutions are no different. They can still differ in quality (as can manufactures of clothes) but despite operating offshore, the services they offer are ‘onshore’ – i.e. fully compliant with HMRC tax & National Insurance requirements.  In this way a recruitment agency can choose whether or not to deal with an umbrella company based on their respective qualities and compliance levels rather than their offshore status.

The location of FPS (like most other businesses around the world) is in fact down to where the owners live, however what does differentiate us from other onshore and offshore companies is regulation. We are obliged by the Financial Supervision Commission on the Isle of Man to keep certain levels of cash for solvency purposes, administer client salaries through a client monies account (similar to an escrow account) and certify that all of our staff receive annual Anti-Money Laundering training. Our KYC (Know Your Client) check is one of the most rigorous and sophisticated pieces of software used in any marketplace, checking client details against several UK Government databases. We are the largest employer in our town resulting in high retention rates (55% of staff have been with us for more than five years) and this is reflected in our customer satisfaction rates, recently recording 99.6% client satisfaction levels.

Not all offshore providers are compliant just as not all onshore providers are of good quality. Here are some top tips when considering an umbrella company.

An agency should ask the following questions of an umbrella company:

1. Is the company regulated?
2. Is your client’s (the contractor’s) money safe should anything happen to the umbrella organisation?
3. Do they offer insurance for AWR claims?
4. Does the company log and audit its customer complaints?

 

To ensure HMRC compliance, an agency should ask an umbrella company (whether offshore or onshore) to prove that they:

1. Operate client payroll through UK incorporated entities
2. Operate these company's affairs through UK banking arrangements
3. Are fully registered for PAYE and NI with HMRC and are up to date with remittance of full deductions for both employers’ and employees’ liabilities
4. Are VAT registered
5. Have undergone and passed VAT and PAYE/NI inspections by HMRC
6. Have relevant UK certifications for the processes they conduct (E.g. BACS bureau accreditation)
7. Don’t make 'too good to be true' offerings in terms of either take home for the contractor, or excessively generous incentive schemes

Like many companies based offshore, FPS is in fact a fully compliant onshore operator. It’s not where someone is based, but what they’re offering that counts.

By Simon Last-Sutton, Managing Director, FPS

 

<< Back to Temping