From 6th April 2020 employment agencies will be required to provide new agency workers with a document know as a ‘Key information document’ – KID. Crucially this must be given to the worker BEFORE the business reaches an agreement on terms with that person and BEFORE any contract is issued. The requirement is set out in regulation 13A of the Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2019. This amendment ensures that anyone using the services of a recruitment agency to find work will receive a document that sets out clearly certain key information regarding their relationship and is intended to help agency workers make an informed decision as to whether or not to take on the work. The Matthew Taylor Review of modern employment practices identified transparency, particularly around pay, fees and deductions, as a big issue for agency workers.
What does a KID contain?
Firstly, the statement has to be headed ‘Key Information Document’ and must include details about pay, costs, benefits, deductions and fees. It is also required to show a ‘representative example statement’ which will illustrate the remuneration the person looking for work could expect to receive. You should also note that it may be that the ‘person’ seeking work could be a company or other legal entity which then directly or indirectly provides the individual to the hirer – e.g. an umbrella company.
Agencies and Umbrella companies – what happens with the Key Information Document?
From April 2020, where agencies use a compliant umbrella company such as Carrington Umbrella, they must obtain the specific elements such as the wage or salary that will be paid by the umbrella company to the individual. They must also show the fee or margin that the umbrella company will charge together with any employee benefits that will be offered to the worker. All these details must be included in the KID that the agency gives to the prospective worker – BEFORE any contract is entered into. The agency will have to list out all these charges/ items and most importantly they will no longer be able to offer an ‘umbrella rate’ also known as an assignment rate without a KID, because, on it own, the ‘umbrella rate’ is not the remuneration that the agency worker will actually be paid. In the past it has often been the case that the rate being offered or advertised by the agency is dependent on using an umbrella company. This then means that the ‘true rate’ is much lower after taking into account Employers NIC and umbrella margins.
What about PSC’s?
If an agency is prepared to engage with a PSC on an ‘inside IR35’ basis the agency must issue a KID to the PSC BEFORE any contracts are entered into. The uplift will have to be sufficient enough to warrant the PSC taking on the contract and we may well see some simply walking away as it is not financially viable for them. The PSC is faced with IR35 being deemed to apply together with the encompassing PAYE deductions – this double whammy means that the contract is not worthwhile.