Key Information Documents are being ignored, at a potentially hefty cost

Contractors have heard a lot about them -- even before they became legally required in April, but Key Information Documents are strangely non-existent in the temporary labour market at present and, potentially, with financial consequences, writes Robert Sharp, CEO at Orca Pay Group.

Ironically, furlough and lockdown has been a help for contractors, as they have been able to spend the time understanding the market’s new compliance obligations, which with ‘KID’ is central to how they should be getting paid.

If you’ve started work with no KID, it’s already too late

For the doubters, I urge them to read the official guidance regarding Key Information Documents (KID). Readers of this BEIS document can see that it is a clear legal requirement for the recruitment agency to provide terms to the worker and umbrella company before agreeing the terms of the assignment.

A failure to comply with this requirement is a breach of the 2003 Agency Conduct Regulations, which can be enforced by the Employment Agencies Standards (EAS) Inspectorate.

Currently, some contractor recruitment agencies believe that because the umbrella company is, on paper, ‘the employer,’ that the KID should be issued by the umbrella. But legal opinion we have commissioned states otherwise. The lawyers say that the KID should be issued ‘by the business that sources the work for the contractor,’ meaning the recruitment agency -- at least in most cases.

Off-payroll staff (only)

We’d urge the sceptics to take advice from their own legal experts. Those experts will hopefully also point out that the new in-force regulation (relating to KID) only applies to new off-payroll workers. However, if the off-payroll worker leaves the contract and takes up work or employment elsewhere, they will be entitled to a KID.

Somewhat positively (as it shows awareness and that we’re not alone), we have heard many of our competitors in the umbrella sector voice their own concerns about a lack of Key Information Document being issued. 

Perfect storm

So why has KID not been totally adhered to? It should be acknowledged that this regulation is new and only took effect on April 6th 2020, so it was introduced in the very heart of the coronavirus lockdown. With many recruitment agencies concentrating at that time on not grinding to a halt and having to go into survival mode, it is perhaps easy to see why KID could have been missed, or parked. 

Similarly, with staff being placed on furlough, the expertise which would normally advise the agency about compliance may have also been missing. Our own experience has shown that some recruitment agencies had absolutely “no idea” what a KID is (according to one email we received), and thus it was ourselves who had to educate our clients, both existing and potential, on this new legal requirement. 

Where we’re filling the vacuum

Our alarm at this lack of knowledge and the potential exposure to penalties or reputational risk which our business could face was such that we have seen fit to have our solicitors draft a KID document, template-style. We have passed this document onto our clientele to fill in and use (they can even insert their own branding), thereby ensuring that our supply chain is KID-compliant and protected.  A great deal of other businesses (and recruitment agencies of course) are adhering to the KID regulations. but for those who haven’t, and aren’t, the simple reality is that they have been flouting, and are still flouting, a statutory requirement.

The ramifications of ignoring KIDs

I would recommend that any agency or business which has not been issuing KIDs, turn their hand to these legally- required documents as a matter of urgency. Not issuing KIDS when your business ought to be is a breach of the Conduct Regulations and can result in penalties on the agency or business.

In addition, non-compliance can even result in retrospective claims made by the off-payroll worker (who could be awarded retrospective damages), which can also be potentially claimed against umbrella companies if they have failed to comply with the regulations and KID process. The longer you breach the Conduct Regs by not adhering to KID, the more potential pain, exposure and damage you’re storing up. So don’t delay, sort your KIDs out today because it’s the law and has been since April 6th 2020.

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Written by Robert Sharp

I have over 16 years payroll experience working through Umbrella Companies and there were only 10 in operation when I came into the marketplace, suffice to say it was a very different market back then.  I quickly became passionate about my industry and the seemingly constant changes this industry brings.  I have a real passion for compliance and most importantly helping contractors.  I pride myself on being able to be a strategic resource for my clients and contractors and will always champion doing what’s best for them.  I am the founder of Orca Pay Group Ltd.

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