Construction payroll services is an overarching term, and the phrase can refer to a number of different arrangements.
These can include a simple payroll bureau which removes some of the administration from the client, but crucially, leaves them with all of the legal responsibilities – especially when dealing with the Revenue investigations.
There will also be umbrella companies who will take on some workers and engage them under PAYE arrangements, then look to mitigate the costs of those arrangements by taking advantage of the expense’s regimes; these are notoriously costly for the individuals who often have no choice in the use of the company, and are almost always linked to employment agencies.
Then there are genuine sub-contracting businesses (intermediary) like EEBS who take on the full engagement of the subcontractors, maintain their self-employed status and supply the clients as a subcontractor to the client. This usually requires the companies concerned to be within the Construction Industry Scheme, and it’s aimed squarely and exclusively at the Construction Industry.
What are the benefits of using an Intermediary like EEBS for your CIS Payroll?
The engagement of a Bona-fide construction intermediary provides a number of benefits for a contractor; flexible labour supply, reduced admin and cost avoidance being the . The cost of PAYE is generally 40%+, compared to engaging individual self-employed sub-contractors, and if you have to take on a permanent workforce, it’s very difficult to match your workload to your workforce. Working with the flexibility that comes with an intermediary is one of the key aspects of using that type of arrangement, and keeping that workforce cost effective is the other!
Where do Umbrella Companies fit within construction payroll services?
In June, a long-awaited consultation paper was published by the government for umbrella companies to be brought under the control of the Employment Agency Standards Inspectorate. There’s a lot of history around the whole intermediary sector with agencies and all those types of intermediary suppliers, so let’s take you through what’s been there before, why the regulations have been introduced and what’s changed.
Employment businesses have been around for decades, and the different descriptions for these businesses often cause confusion – Employment businesses, Employment agencies, Recruitment agencies etc – but the distinction is quite straight forward, as there are only two real differences:
Employment agencies work for the client to usually find and supply temporary workers, whereas Recruitment agencies work to place an individual in a permanent role with an employer. Once the Recruitment agency has placed the individual then generally the relationship is over, whereas an Employment agency will look to have a long-term relationship with both client and worker. And they exist really for two simple reasons: firstly, to provide individuals with flexible working arrangements; many people don’t want or can’t take full-time employment and working through an agency will often provide them the flexibility that they need to balance their work and home lives together.
Secondly, they exist for businesses: most businesses that use agency workers will have a core of employees and they’ll manage the peaks and troughs of their workload with agency workers, so it allows both parties to maintain flexibility.
Umbrella companies grew to take on the legal responsibilities and payroll management services for many of these agencies, who lacked the expertise to manage these responsibilities internally in areas of ever-increasing legislation and compliance. The construction industry has always had a strong agency sector, hence the rise of Umbrella companies who provide construction payroll services.
As you might imagine, whilst there is lots of administrative legislation to deal with, the sector is actually very lightly regulated – and as not all players in the intermediary field are squeaky clean, inevitably certain abuses have taken place in the past – principally around extortionate and undocumented fees, charges or costs, or the lack of proper information – hence the push for the sector to come under the scrutiny of the inspectors – a move that the compliant amongst us welcome!