One thing that won’t change in 2022, contractors must check the KIDs are alright
Contractors might need to cast their minds back, because it was in April last year that Key Information Documents were introduced and became law.
KIDs were designed to provide transparency on how contractors are paid whether directly to their personal service company, via agency PAYE, or via an umbrella employer.
However, 18 months on, it seems there is still some confusion around Key Information Documents and many agencies have not fully understood what they should be providing contractors.
Essentially, it is the responsibility of a recruiter to provide a KID to their workers at predetermined pre-contract points.
Here, exclusively for ContractorUK, Crawford Temple, CEO of the UK’s largest independent assessor of payment intermediary compliance Professional Passport, spells out what a contractor should be looking for in a KID, and what to check to ensure that recruiters and (where appropriate) umbrella companies are getting the documents all right.
What should a KID contain when it comes to a worker’s pay?
- Name of worker: The name of the worker should ideally be clearly marked (this is not strictly required by the regulations, but employment businesses may find it useful to include).
- Contract type: The type of contract the worker will be engaged under. This will typically be a ‘contract of service’ or apprenticeship, or a ‘contract for services.’
- Identity of the employment business: The employment business will normally be the person engaging or employing the worker, who will pay the worker. In a standard employment business–agency worker relationship, i.e. subject to PAYE, this will be the employment business.
- Rate of pay: This can either be the exact rate of pay that the worker will be given, or the minimum rate of pay that the employment business can expect to achieve for the worker (this is often expressed as at least the prevailing or current National Minimum Wage or National Living Wage).
- Pay intervals: How often the worker can expect to be paid by the employment business.
- Statutory deductions: A clear list and description of any deductions from the worker’s pay required by law, such as Income Tax, National Insurance, a Student Loan. Exact amounts are not required and a simple list of statutory deductions will suffice.
- Non-statutory deductions: Any non-statutory deductions that are made to the worker’s pay and how these are calculated, such as private healthcare. This must include either the amount that will be deducted or a description of the method of calculation.
- Any fees for goods or services: Any fees for goods or services charged to the work-seeker, such as the cost of a DBS (Disclosure and Barring Service) check. This must include either the amount that will be deducted or a description of the method of calculation. It might be useful to state whether these are one-off payments or ongoing.
- Any other benefits: Any non-monetary benefits that the worker might be entitled to, such as gym membership. These do not need to be quantified in monetary terms.
- Leave entitlement: Any leave entitlement that the worker would be entitled to and the details of holiday pay.
Transparency and compliance in the industry has never been more important, and it would appear that recruiters are failing contractors when it comes to issuing them with accurate KIDs. Typical errors that we see continually cropping up include:
- Many examples of the deductions being used are covering every eventuality, probably as a ‘just in case’ approach. However, this then renders the pay summary unrepresentative and meaningless for the worker.
- Conversely, many agencies are not including the required deductions within the example pay statement which, once again, would mean that it fails the requirements.
- Failure to provide revised documents where a material change occurs, for example where a specific umbrella is engaged after issuing a generic KID at the outset or at the point of auto enrolment where this has been deferred for three months.
- Umbrella companies failing to provide the correct and complete information to the recruitment company so the revised document remains incomplete. It is the recruitment company’s responsibility to provide this information and ensure its accuracy.
- Where recruitment companies are editing the templates available on .gov.uk they are wrongly amending them, and removing either required paragraphs or required fields in the summary.
When it comes to KIDs, it is the duty of recruiters to work closely with their umbrella partners to ensure that accurate information is provided to contractors, particularly when it comes to explaining how the payment structure works.
We would urge contractors to educate themselves about KIDs so that they are better informed and therefore able to question the staffing and umbrella companies they are working with and challenge them on their legal entitlement. Good luck contractors in ensuring your KIDs are all-right!