Exploring hidden workers and hidden compliance risks  |  Owen Daniels  |  Powering Global STEM
23rd July 2024

Are you aware of your contingent workers? Exploring hidden workers and hidden compliance risks.

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A recent change in government has left questions around future legislation for any form of temporary or contingent worker. Current and future legislation is likely to capture all means of workers, whether they are engaged directly or through an intermediary or agency.

But is your organisation aware of how your workers are being engaged and paid? There may even be ‘hidden workers’ on site, that you have a compliance obligation with.

The Hidden Worker

When we talk about ‘Hidden Workers’, we approach it from two angles. The first is exactly as it seems; you may have workers on site that have been engaged that you’re not aware of. Lots of organisations classify spend differently, a hiring manager may have engaged a worker through a different procurement channel so it doesn’t appear as headcount, and you may have compliance risks you’re unaware of.

The other ‘Hidden Worker’ are those who you know are working for the organisation, but you may believe they are on a B2B relationship or service contract. The most common situation is organisations who aren’t aware of the compliance obligations when engaging these types of workers. They may be self-employed or through a Personal Service Company (PSC), and potential legislation such as IR35 could apply to ensure National Insurance contributions are paid. Your workers could actually be ‘disguised employee’s’ in eyes of the government, and it’s your responsibility to ensure correct taxation.

For more information on IR35, read our complete guide here

The Hidden Risks

Your organisation may now be aware of all the workers operating, whether via an agency, directly engaged or through a service provider. However, you may be exposed to compliance risks throughout the supply chains.

Most recently, Umbrella organisations have been in the spotlight, these organisations operate payroll for temporary workers and over 500,000 workers use them in the UK each week to process their pay. Not all Umbrella’s are equal, and may not be processing tax correctly, leaving your organisation at risk.

Read our more detailed umbrella compliance guide here.

Worker rights and AWR (Agency Worker Regulations) also often come into play. Your self-employed workers or contractors via an agency could require equal treatment in terms of pay and working conditions. There are day 1 obligations and 12 week obligations your organisation could be responsible for.

Tackling these Hidden Risks

The Hidden Workers and Risks we’ve covered are by no means an exhaustive list to work by, as legislation constantly evolves and policy such as Criminal Finance Act (2017) have further enabled the enforcement of tax evasion penalties. There are multiple ways you can strengthen your compliance;

Housekeeping and Onboarding

Keeping a strict and thorough onboarding processes for all workers on-site (including assessment of third-party companies or service providers) will give you the opportunity to uncover risks before they start. Being aware of where the risks lie is a great place to build from.

Compliant Partners

The majority of contingent workers in the UK are provided by an agency. It’s important your agency supply chain operates as a partner in your objectives to remain compliant, and has the expertise and more importantly, willingness, to provide quality, compliant services.

Contingent Worker Solutions

CWS (Contingent Worker Solutions) or MSP (Managed Service Providers) are a great solution for those with either an existing high volume of contingent workers, or plans to hire volumes of workers. These are outsourced solutions that cover both your own contingent worker compliance but also enforcing it through the supply chain of agencies that they’ll manage on your behalf.

Dependent on your hiring volumes and strategy, alongside available resource, you may benefit from outsourced services or require the strength of an expert partner. No matter which way you handle it, it’s important to keep on top of current legislation but be aware of the upcoming changes so you can remain risk free and as compliance as possible.

For more information on MSP, click here

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