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The 6 Effects of Non-Compliance for Agencies

Eileen BreezeDirector
Visit any payroll company’s website and one of the first words you’ll likely read is ‘compliance’. It’s undoubtably the payroll industry’s favourite topic. But what does compliance actually mean and why is it important to agencies?
In simple terms, compliance means ensuring that a payroll company adheres to all laws and regulations, protecting itself, clients and workers from risks of breaking these rules. Given the work we do, this predominantly relates to tax and employment law. But why the fuss? Don’t all businesses have to comply with these laws. 
Absolutely! But as a payroll company aggregates payments which include tax and employment considerations for thousands of workers each year, the risks of non-compliance could affect multiple people, and easily run into very significant sums. 
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Because of the size and risk of any non-compliance, it means HMRC pay very close attention to the work payroll companies do. Which in turn means we pay exceptionally close to compliance to make sure we are always operating in accordance with all laws and regulations.  
Crucially, non-compliance risks run through the supply chain and if a payroll company is found to be non-compliant, HMRC can and will investigate the end-to-end supply chain including workers, recruitment agencies and trade contractors. 
So What Are Risks of Non-Compliant Payroll for Agencies and Businesses?
Financial Risk
Perhaps the most obvious risks are the financial back payments, penalties and fines which HMRC can levy. Investigations can look up to 6 years previously and re-classify payments to clients, workers and contractors. This can lead to significant sums needing to be repaid on PAYE, NI, VAT and corporation tax. 
Under the Managed Service Company (MSC) legislation, HMRC can also transfer debt and pursue agencies for unpaid tax. 
Reputational Risk
HMRC investigations and findings can have a severe impact on agency reputations in the marketplace as a result of published findings, supply chain investigations and general awareness in the market. This can impact your ability to win work and retain existing clients if you are perceived as risky. If you’re hoping to sell your agency, it can knock multiples off the valuation or even stop a sale completely. 
Impact on Growth
If you’ve ever been the subject of an HMRC investigation, you will know just how time consuming these can be. Forget a simple process and a questions to ask. Investigations use up valuable time, resource and money which you could otherwise invest on growing your business. 
Winning Work
Many clients now include proof of compliance and appropriate tax payments as part of tenders and new business pitches. If you cannot demonstrate that your agency is compliant with tax and employment legislation, you may find that you are excluded from tenders and lose new contracts to competitors. 
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Personal Reputation
If you work at an agency who is found to be non-compliant, you may find that your reputation is damaged as a result of non-compliance. This could affect your employability and future job prospect. If you are a director of a recruitment agency then the risks could be much higher as part of your additional responsibilities. 
Personal Impact  
As much as we talk about leaving work stress behind when we leave the office, the stress and worry of non-compliance and HMRC action can be significant. 
How do BoostPay Make Sure You Are Compliant? 
We’re driven by compliance, accuracy and efficiency. It’s so important to us that it’s one of our 5 core values. We understand that protecting you and making sure you are compliant with all legislation and regulations is crucial. That’s why we’ll never cut corners to keep you safe. 
The foundation of our payroll services is industry-leading compliance advice, strategies and processes. These are vital to ensure we maintain full compliance for workers, agencies and end-hirers at all times, keeping pace with the continual changes in legislation and regulation. 
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With our deep understanding of payroll regulations, we’re proud to take a low-risk approach to managing payroll for workers and the businesses we support. Our approach to compliance is based upon expert advice and reinforced by the BoostPay Promise. 
Find out more about our Promise and Compliance here. [LINK]

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Eileen BreezeDirector