5 Key Information Document requirements contractor agencies can’t do without
As part of one of the many changes coming to the contractor market in April 2020, an update to the Conduct of Employment Agencies Regulations 2013 means that recruiters will need to be on the ball with the information they provide to their agency workers, whether they operate via agency PAYE, their own limited company or an umbrella company.
In fact, an update to Regulation 13A means every recruiter will need to provide a Key Information Document explaining the path of income, and a detailed breakdown of their pay BEFORE the worker agrees to any terms, writes Lucy Smith, managing director of Clarity Umbrella.
So what do contractors’ recruiters need to be aware of when they are preparing their KIDs, to reflect these regulatory changes? There’s quite a lot but here’s five fundamentals.
- Path of income
The recruiter will need to be able to illustrate how the funds progress down the chain from end-client to contractor, whether this involves an umbrella company; a limited company, or if the agency are operating PAYE from their payroll.
- EAS Information
It will be a requirement for the document to provide the worker with contact details for the Employment Agency Standards (EAS) inspectorate, should there be any issues with the information provided. It has also been suggested that details could be included for ACAS; again, as support for workers who may have queries with the document and want assistance.
- ‘Who’ details
Details of who the employer is and who will be paying the worker are vital. These must be made clear, so as to put beyond doubt whether the worker is being employed and under what type of contract that employment is.
- Terms & Particulars
The Key Information Document must detail the terms of engagement; name, rate of pay, deductions that the worker will see, holiday pay entitlement, statutory deductions and non-statutory deductions, pensions, ‘additional benefits,’ and any charges.
Finally, KIDs must include sample illustrations of the take-home pay; what the deductions are and how the NET pay is arrived at.
Although this does not need to be specific to that individual worker, it must give a full breakdown that is comprehensible to any worker, so they can work from the Gross or Contract Rate down to the NET pay. If PAYE via the agency is available, then a comparison must be shown.
What about the position of personal service companies with KIDs?
The KID requirement applies if an agency chooses to engage with a PSC. The worker is still entitled to receive the written document and illustration. However in this scenario, as the PSC is defined as the ‘work seeker,’ any deductions between the employment business and the PSC will need to be shown, yet it may be the case that if the assignment is classified as ‘outside IR35,’ then no deductions will be made/outlined.
So because the PSC is defined as the ‘work seeker,’ deductions do not need to be shown on the ‘Key Facts’ page to the extent that these are paid by the PSC. If the engagement is deemed ‘inside IR35’ with payment to a PSC (which we envisage will be a rarity), then the key facts page must show who is making the deductions, what they are and what the net pay result would be to the PSC.
It is worth noting that the responsibility for issuing this document lies with the recruiter or employment business, so contractors’ recruiters must be ready for both this and potentially for working with an umbrella that can pro-actively help assist with this information.
On a final note, just to make things more interesting, should the engagement terms alter, maybe due to the addition of student loan deductions or because of terms under the Agency Worker Regulations, then the employment business will need to reissue the information document detailing the changes. Keeping up-to-date is going to be a bit of a compliance challenge.
Finally, bear in mind that it may be your chain’s umbrella company that receives the information with regards to changes to the deductions. So non PSC contractors, your recruiter will need to have something in place to ensure that this is communicated to them in order for them to be reflecting the regulations and not in breach.