Why has my Agency Asked me to Change My Umbrella Company?

This is a common question and one which frustrates many contractors, you are not alone!

Recruiters have their own preferred supplier list (PSL) and when you start a new contract you can find yourself being asked to use their trusted suppliers. It’s perfectly reasonable for you to want to choose your own umbrella company, but this can cause tension with recruiters who feel a need to control their supply chain.

In the wake of the amendments to the Criminal Finance Act, recruiters now need to protect themselves from prosecution resulting from non-compliance by their suppliers. It’s never been more important for recruiters to know who they’re working with, and due diligence is imperative.

Now, more than ever, it’s likely that you’ll be asked to choose from the agency’s PSL and most will be unwilling to deviate from it.   

It could be in your interests to switch

We’ve already seen examples of this. Recent cases illustrate why compliance is an important issue for contractors as well as recruiters. For example, over a thousand HGV drivers were left facing financial problems when their accountant disappeared without paying their taxes, and hundreds of Ryanair Pilots are now facing HMRC investigation and unexpected tax bills.

The personal stories surrounding these incidents shine a light on the real potential cost. Your income, your home, your relationships and your health could all be at risk. If your agency wants you to change supplier for compliance reasons, it really is in your best interests to listen to them. 

What if I want to stay with my current umbrella company?

The answer depends on the reason you want to stay.

Because they pay you more…

In this case, the recruiter’s fears are probably justified. There is no magic formula that can legitimately increase your net pay. Trustworthy and compliant companies will all pay roughly the same amount for any given contract. If yours is paying you significantly more, they’re breaking the rules, putting you at risk as HMRC are actively hunting for these schemes and want them reported. In these circumstances, jump to the compliant company and consider it a lucky escape.

Because their service is great…

If you’d rather not switch because you’ve received excellent service, it might be worth asking the agency to explain their decision. Great service on its own may not be enough, and if a supplier doesn’t have the necessary accreditations recruiters will be instructed to not take the risk.

We recommend that recruiters and contractors only work with FCSA Accredited Members, as this is the most effective way to ensure that you’re dealing with a trustworthy and stable company. If you’re asked to move from a non-accredited supplier to an FCSA Accredited Member, once again we’d advise you to switch.

They are FCSA Accredited Members…

Accreditation should alleviate any fears about compliance, so in this situation the agency might be more flexible but this is a decision that each agency will make for themselves.

Can an agency insist that I change my umbrella company?

Any business must make informed choices about who they do business with. Ultimately, if the agency can’t be persuaded, your only choice is to switch or decline the contract.

Where a company has done a good job and treated you well, you’ll obviously want to stay with them. Unfortunately, the recruiter is at risk if they do business with a non-compliant company, and so are you. Insisting on accreditation is the best way for recruiters and contractors like you to protect themselves, and this brings HMRC transparency to the supply chain.

If you have any questions about this issue or if Orange Genie can help in any way, please contact our expert team on 01296 468 483 or email info@orangegenie.com.  

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