What is real-time forensic auditing of umbrella companies?

We've all had that uneasy feeling, haven't we? That nagging sense of ‘What if?’


What if my umbrella company isn't as squeaky clean as it claims to be? What if, one day, I’m greeted by an unexpected brown envelope from HMRC demanding payment for unpaid taxes? What if my agency works with a couple of providers that promote tax evasion schemes?

Well, I’m pleased to reassure you that there is some good news on the horizon which should ease your uneasiness. And the news is this – the development and introduction of forensic auditing of umbrella companies, and real-time checks of these companies, writes Sebastian Sauca, chief executive of SafeRec.

Great! But what is real-time forensic auditing?

Forensic auditing delves deep into an umbrella company's financial records, operations, and functionalities. It uncovers inconsistencies, inaccuracies, and fraudulent activities that might not be immediately visible.

But in the context of umbrella companies, forensic auditing isn't just about being a corporate detective; it's about ensuring that all stakeholders in the supply chain, from contractors to end clients, are safe. 

Some might ask why forensic auditing of umbrella companies might matter to them, as a contractor, or agency. Here's why: it helps ensure payroll is processed compliantly and ethically each and every week and there is no tax liability for any party.

The traditional approach: why it's no longer enough

Common practice sees recruitment agencies and compliance organisations reviewing documents provided by umbrella companies, either yearly or semi-annually.

However, the documents are usually provided by the umbrellas themselves, implying a basic assumption – that the companies are always honest! But history has shown that this isn't always the case.

The way organisations review umbrella companies needs to do a lot more than go one step further. If getting it right really matters, I believe it needs to reinvent itself to truly offer contractors and supply chains tangible assurance of total transparency and compliance.

What is real-time auditing? 

Traditional methods used to vet umbrellas are akin to driving using a rear-view mirror; they only show you what's already happened, and that’s only if you know where to look!

Real-time auditing is like having a GPS with live traffic updates. It's an ongoing process that allows agencies and contractors to pre-empt problems before they turn into liabilities.

At the time of writing, our offering (and I can only really talk with confidence about what our outfit is doing) forensically audits all payslips of a particular umbrella company, as they get created from third-party payroll software, ensuring the integrity of the data. Each payslip is then cross-referenced with RTI and tax accounts to ensure taxes have been accurately disclosed and paid to HMRC. Additionally, each week, workers receive a copy of the payslip audit report, so they have evidence of compliance at their umbrella company.

This isn't some hypothetical, 'maybe-one-day' technology. It exists. Last year alone, our tech exposed underpaid workers, tax avoidance schemes, and helped recruitment agencies actively investigate their supply chains.

Time to adapt...

We're living in an age of technological marvels -- electric cars, AI, and automation, to name just a few! So why should the world of contracting, recruitment and umbrella companies remain stuck in the dark ages?

Increasingly, agencies and umbrellas are indicating that being proactive about supply chain compliance isn't just good business sense -- it's essential for ensuring the financial safety of their partners. Indeed, it’s difficult for any right-minded company in the contractor sector to argue that we DON’T need auditing methods that can keep up! Real-time checks and forensic auditing are designed to do just that.

So, the next time you're plagued with ‘what ifs,’ remember -- real-time auditing is already here for agencies and workers. And from everything we’re seeing, it's making the contracting world a safer place, one audit at a time.

Thursday 28th Sep 2023
Profile picture for user Sébastien Sauca

Written by Sébastien Sauca

Sébastien Sauca is the CEO of SafeRec.co.uk, a leading compliance and technology firm at the forefront of safeguarding workers and recruitment agencies from non-compliant umbrella companies. With a wealth of experience in the recruitment industry spanning almost a decade, and a Master's degree in management and HR, Sebastien left a director position to address the compliance challenges he encountered throughout his staffing career.

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