Corporate Financiers will always tell you that if you wish to create shareholder value in a recruitment business that you will ensure that from the very beginning you should pay a great deal of attention to compliance.
And typically, as a recruitment agency expands, unfortunately it is very easy for that focus to become diluted, as it becomes a perceived non-margin generating activity and potentially to cope with the pace of change, “corners are cut”.
Compliance fundamentals can be summarised in to the following core areas;
Recruitment agencies are subject to all sorts of wide and complex legislation, from right to work checks, agency worker regulations, employment law, not to mention specific sector compliance requirements e.g. driving license checks, qualifications, CPD, HMRC and insurance.
Contracts, terms and conditions need to be professionally prepared and kept up to date an on-going basis. Failure to do this can lead to problems later. Ultimately in times of dispute it will always be the contractual arrangements that will be relied upon. Of course, legal compliance is a hygiene factor and merely a basic expectation of any client or contractor.
Of course, there is always the opportunity to differentiate yourselves from competitors by offering high levels of compliance standards. Conveying expertise and reassurance in these areas can make you stand out from the crowd.
Demonstration of such levels can come in the form of accreditations e.g. ISO, trade body membership, professional membership, awards etc.
The damage caused by a compliance failure can be significant. It could result in the loss of a key client contractor legal claims.
Such failures if discovered and published widely through social media can very quickly result in significant loss of credibility and ultimately shareholder value.
Very often these days’ clients undertake their own audits to ensure compliance requirements defined in their requirements are adhered to. Failure to meet such audit requirements can lead to the loss of contracts.
This is certainly not an area a growing recruitment company looking to create value wants to become the victim of, as it’s a sure way of destroying shareholder value. An example of this would be the use of non-compliant umbrella/intermediary arrangements.
HMRC can investigate these at any time and the subsequent claim for tax loss would cripple most businesses. If identified during a sale could end the sale activity or lead to a significant reduction in price. Poor quality or lack of financial records would also raise significant questions and could imply that the business profitability is overstated.
For this reason, outsourcing financial activity to qualified professionals can be a genuine way to ensure quality and reliable financial records, giving stakeholders such as investors, banks and buyers the reassurance that they demand.
Key to any organisation maintaining high levels of compliance are the staff through the creation of a compliance culture.
All staff need to know that compliance is a number 1 priority and are clear as to how such levels are to be achieved and that they are continuously monitored to ensure high standards of compliance are achieved.
These can be done via incorporation in company CRM systems, documentation, communication, staff meetings, newsletters, audits and are often by incorporation in to reinforced via commission schemes.
Published: 22nd November 2018