Compliance in a Recruitment Business

5 months ago

A core and fundamental of running any business is to run it compliantly and this goes for recruitment businesses as much as it goes for any business. I would suggest that this is a basic hygiene factor and expectation from all clients in today’s legislative market now more than ever.

So what is compliance? 

Put simply, it is about complying with the laws of the land. It is about demonstrating that your business considers all aspects of law. Apart from the legality of this it is about establishing and maintaining a reputation for adherence to the laws of the land. Clients have this expectation of their supply chain as reputation is so high on all business’ agenda especially in these days of social media, where reputations can be tarnished so quickly.

Every year there appears to be more and more legislation that focuses on business and every business has a duty to be aware of this legislation and adapt their business to meet with it. So it’s not a one off exercise, it’s a continued commitment to compliance. With the recent introduction of the Criminal Finance Act business are required to ensure compliance throughout the supply chain and then this is all wrapped up in GDPR to boot. All owners and directors of recruitment business’ there is a fiduciary duty to ensure this commitment.

Good news is, shareholder value is being created with every aspect of compliance committed to. That shareholder value will come in the form of making the business more attractive to stake holders. Investors, clients, staff all expect a business to be compliant and typically wont engage with recruitment businesses who don’t demonstrate a commitment to compliance. Furthermore, if one day a business is to be sold a key part of the due diligence process will be review the levels of compliance being operated.

With Brexit on the horizon, who knows what compliance challenges we will face, but I’m pretty convinced that they are likely to be even more onerous.


So where to start ……..
Contracts is always a good place to start. The core basic contracts in recruitment are the contracts (terms of business) being issued to clients and the engagement contracts with the contractors. Again there is good news as these have the purpose of laying out the nature of the relationships and seek to fairly articulate the requirements and commitments of both parties, thus protecting both parties.

Sources and advice
I’m all for an easy life, so why reinvent the wheel? There are lots of organisations that can support a recruitment business in establishing compliance and many have these all packaged up ready for use. Trade organisation such as REC, ASPSCO and TEAM offer packages of contracts and compliance guidance. These include contracts and guidance which are regularly updated to include the latest legislation. They also offer online and telephone legal help lines, regular newsletters and webinars.

Of course you could engage a legal specialist on a one off basis, or on an ongoing retainer basis. I would suggest that one that specialises in recruitment businesses is essential as the rules that operate around agency workers are wide and quite specific.

Some aspects of compliance can be sensibly outsourced particularly if they are highly complex. One method of doing this is agreeing only to work with compliant suppliers. So deciding to work with suitably qualified parties who have also met high standards in their sector makes choosing suppliers easier and again provides everyone in the supply chain with the confidence that all parties are complaint. In turn this will also remove complexity. A great example of this is the decision to work only with FCSA Accredited umbrella and contractor accountants. This area is particularly complex and highly risky, and the FCSA have done all the work. They are the only independently reviewed standard in that sector and of course independence is essential in being assured that the standards are high.       


Types of compliance that effect recruitment agencies;

It’s probably worth considering them in groups to help clarify what we are discussing here.

  • Fiduciary and Corporate compliance – this effects all owner/directors of businesses and considers the legislation that wraps around corporate organisations and the way in which they trade. Examples of this are the requirement for record keeping, payment of taxes and corporate responsibility. Laws which effect it for example are the Finance Acts, Criminal Finance Act, GDPR, employment law, Right to work, Company Secretarial including Anti Money Laundering.
  • Trade specific – the laws, codes of conduct and best practice that are specific for the industry in which you operate. And of course there are lots of regulations that are specific to recruitment businesses including Agency specific regulations e.g. Agency worker regulations and contractor holiday pay.
  • Employment related – although employment law effects all businesses I think its worthy of splitting out in a recruitment business, given the engagement of workers is such an important part of the business. This of course includes employment law, tribunal, Union, gender, HMRC related (NMW, Taxation, IR35) Pension, AWR, Holiday pay, Agency Conduct regulations to name just a few.
  • Sector specific – depending on the sector there will be specific regulations, for example in the supply of workers in the Agricultural sector GLA, Drivers, DVLA, Medical. These industries and many more have their own laws and regulations and your clients will expect you to evidence compliance.

Ongoing review

Best practice is to regularly review the level of compliance in your business. 

This can be done internally and may be done by a member of your team. In a larger organisation there may be the role of Compliance Officer or the use of outsourced external reviewers. Many organisations will voluntarily put themselves through external based reviews.

Clients may also undertake their own reviews on your recruitment business. This may come at the beginning of the relationship as part of the selection process and then later as part of periodic reviews, so from a commercial point of view are very important. External reviews undertaken by the authorities are obviously serious and can lead to fines, penalties and potentially removal of status and potentially closure   

Conclusion

In my view, a commitment to compliance is well worth the investment and ultimately will pay back. It is not something to put to the bottom of the list, it needs to be up there as a core and fundamental aspect of your recruitment business. It’s also not a one off exercise, it is an ongoing and continued exercise.

Developing a compliance culture in your organisation that is deeply embedded in every activity and is second nature will mean that you are and your people will stand proud in your commitment to compliance ultimately creating on going shareholder value, Brexit or no Brexit.  

Theo Parkinson

Theo Parkinson

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