Posted on 13 April 2012.
With the RTI pilot already underway, and all employers and agencies required to have implemented the system by October 2013, it’s a good idea to become familiar with what will be required from you, the recruitment consultancy, and what you can do to make your life easier before, during and after the transition.
What is RTI?
RTI (Real Time Information) is being introduced by HMRC as a way to improve the PAYE system for employers, employees and HMRC, and will support the introduction of Universal Credits.
Instead of the previous haphazard way information has been received by HMRC regarding pay and taxable deductions, HMRC will now be receiving information as payments are made and will therefore be better equipped to ensure the correct deductions are made from pay. This will also mean that many more employees will pay the correct amount of tax and National Insurance in the tax year.
What are the benefits?
For HMRC, there seem to be many benefits, which will in turn result in benefits for companies, individuals, Umbrella Companies and recruitment companies – all related to a more streamlined process and the possibility of individuals and companies paying the correct tax more of the time. HMRC suggests that RTI will:
- Remove the need for the end of year return (P35 / P14)
- Make PAYE more accurate for individuals
- Simplify the employee starting and leaving processes
- Reduce the number of bills and repayments sent after the end of the tax year
- Allow HMRC to pursue late payments more effectively
- Support the payment of Universal Credits
- Reduce Tax Credits error and fraud
- Reduce the number of individual customer records needing an end of year recalculation
What does it mean for recruitment consultancies?
RTI reporting will need to become an integral part of an employer’s normal payroll activity. When running the payroll, the software will gather all the required information send it to HMRC via internet, either through the Government Gateway or by using Electronic Data Interchange (EDI) on or before the date the payment is made.
While the new system might help to streamline the processes at HMRC, it could prove time-consuming and disruptive to small and large businesses alike.
There will also be initial costs to cover the transition software and training.
Umbrella a solution
For agencies wanting to avoid the additional costs, administrative work and issues likely to arise from the cross-over, using an Umbrella Company could prove to be the best solution. Not only would the Umbrella Company carry the transitional costs of switching to the RTI system, they would also take on the additional work required to implement it, and the onus would be on them to stay up-to-date with any RTI changes and news.
The agency would only need to send through the relevant timesheets and funds once a week – the rest would be taken care of by the Umbrella Company.
Choosing an Umbrella Company
Here are a few tips for choosing the right Umbrella Company to take care of your payroll responsibilities:
Experience and Reputation
Only consider an Umbrella Company that has been in operation for a number of years and look for one that has existing relationships and a good reputation with other agencies. Be wary of any new companies as you run the risk of losing money (and your own reputation) to a fly-by-night operator.
Easy online system
Make sure that your Umbrella service provider has a simple online system that’s easy to manage. There’s no point in using an umbrella provider to avoid admin, only to have to spend hours figuring out their complicated systems.
As important as an online system is, when you need to speak to a real, live person, one should be available to you immediately!
It is extremely important that you establish upfront what the fees are – Ask the Umbrella Company to provide you with a full schedule of fees to ensure that your candidates aren’t going to be overcharged.
Always ask about the insurance policy to be 100% sure that you will receive your money, no matter what. Your Umbrella Company should have public liability, employers’ liability, and professional indemnity insurance cover.
Some companies may claim an extensive claims policy, but the conditions attached are so extreme that the likelihood of your clients actually claiming is pretty slim. Do your research and ask as many questions as possible. Avoid any company that states that there is no need to prove your expense claims – if HMRC does query expenses and you cannot provide the necessary receipts, the tax liability could fall on your candidates.
Will they give your clients the option of employee benefits such as sick leave and maternity leave? Well established companies like 1st Contact Umbrella can offer fantastic employee benefits.
Does the scheme have fixed payment dates you (and your clients) can rely on? Be sure to find out what the payment methods and schedules are and make sure the answers are not vague. You want to know exactly what their payment policy is, so that you have recourse should the timelines not be met.
1st Contact Umbrella has successfully assisted over 100,000 clients with our no-hassle, efficient payroll service. We have an excellent reputation and long-standing relationships with many top UK agencies and you can expect:
- invoices and timesheets to be dealt with in a timely manner’
- your clients to be paid on-time with no fuss or hassle to them or you;
- great discounts for you and your candidates;
- PAYE, NI payments and returns dealt with each and every month;
- P45’s and P60’s lodged with HMRC with no effort from your candidates;
- any payments or tax queries dealt with by us, not you;
- Rapid responses to your queries
If you have any questions related to Umbrella Companies and RTI, visit www.1stcontact-umbrella.com or speak to an experienced and professional consultant by calling 0808 141 2341.