Self-employment can be bittersweet. On the one hand, you’re your own boss, have full control over your working day, and can charge what you feel is fair for the quality of your services and experience. On the other, you have no guarantee of work month to month, full responsibility should a mistake get made, and a LOT of paperwork. If you’re a limited company contractor that works with recruitment agencies, you’ll be seeing another piece of paperwork come April 2020 – the Key Information Document, or KID.
What is a Key Information Document?
The result of a ‘quietly tabled amendment to the Agency Conduct Regs’, the introduction of the Key Information Document means yet another compliance procedure for recruitment agencies from Spring next year. In a bid to encourage transparency along the supply chain, this document will mean that recruiters will have to supply key information about the business relationship between the contractor, agency and end-client before a contract is signed.
In the case of a limited company contractor, the KID will be the responsibility of the recruitment agency and will need to specify:
- details about the relationship between the employment business and the work-seeker;
- details of pay and deductions, including any benefits; and
- a representative example remuneration statement to accurately illustrate the pay the contractor can expect to receive.
In the case of Umbrella contractors, the KID will be the responsibility of the recruitment agency and will need to specify all of the above as well as:
- details of any fees charged by the Umbrella company for the provision of its services;
- details of employment costs such as employers’ National Insurance; and
- details of any additional employment benefits for Umbrella workers such as holiday pay, sick pay, access to a company pension scheme.
Why has the Key Information Document been introduced?
As previously mentioned, it seems that the purpose of the Key Information Document is to cultivate openness throughout the supply chain in regards to pay and deductions. This could prove to be an improvement for many legitimate umbrellas and PSCs who’ll be navigating the post-IR35-reform landscape of the private sector when the KIDs come into force; there’s potential for remuneration to become more consistent between engagers, and the up-front information will help contractors to make better-informed work decisions when it comes to the off-payroll rules.
As a byproduct of this transparency, the disparity between the level of detail required for a limited company contractor and an umbrella contractor could, unfortunately, perpetuate the vilification of umbrella companies. Managing Director of CWC Solutions Carolyn Walsh warns of this exact response to the KIDs in the contracting community.
‘[The KIDs] require umbrella and PSC contractors using them to digest new paperwork and [will] potentially make umbrella companies less palatable,’ she writes for ContractorUK. ‘This possible sourness at using a conventional PAYE umbrella will be sharpest for agencies looking to convert PSCs – as happened after the 2017 public sector reform and as, therefore, can be expected will happen due to 2020 private sector reform.’
Who will be affected by the introduction of Key Information Documents?
While contractors will have yet another document to read and understand, it’s ultimately the recruitment agencies that will have to do the extra legwork. While there’s still six months before the KIDs come into effect, leaving sufficient time to get templates and processes in place ahead of time, agencies will still have to pull together a comprehensive job spec for each and every contractor that could be engaged for the project – a definite increase in output for no real increase in profit. Agencies will also lose out on being able to offer an ‘umbrella rate’ because, as a standalone rate, it would not be the pay the contractor would receive as the KID requires it to be represented.
Specialist employment tax advisor Aspire Business Partnership thinks that while the Key Information Documents are well-meaning, they could potentially harm agencies.
“The creation and provision of a KID brings extra administration and paperwork for agencies who are, very often, urgently attempting to place a work-seeker on assignment,” they state. “However, Regulation 13A doesn’t take effect until 6 April 2020 and therefore, there is time to get new processes and templates in place ahead of its introduction. There will be efficiencies to be gained by avoiding duplication of information in what is already a very paper-heavy environment.”
“The legislation is prescriptive and introduces strict timeframes for the production of information to work-seekers, therefore it is important to ensure compliance under Regulation 13A,” they continue. “Designed to protect the interest of the work-seeker, the spirit of the legislation is clear but, there are some aspects which we consider potentially undermine the intent. We have raised these with the Employment Agency Standards Inspectorate (EASI) and await further clarification. Unfortunately, it seems that detailed guidance is still some time away.”