Public Sector Managers
Public Sector Managers may, unwittingly, be encouraging Umbrella Companies and Agencies to break the law. That law is the 2010 Bribery Act.
Umbrella Companies cannot legally pay recruitment agencies money as an inducement to put contractors their way. However, we all know it happens.
Indeed, if agencies coerce contractors to join a particular umbrella company against their wishes, this could constitute a criminal act. Indeed, they could do 10 years in jail for it.
New Government Public Sector IR35 Regulations
With the new Government regulations for the public sector on IR35, some government departments are telling their contractors that they will no longer use contractors who operate through Personal Service Companies.
They are contacting the contractors’ agencies to tell them this.
So, basically, the government departments are forcing contractors to switch from Personal Service Companies to PAYE umbrella companies.
No Choice of Umbrella Company
However, there is a danger that agencies will not give the contractor a choice of which umbrella company to use.
Many agencies have their Preferred Supplier Lists of umbrella companies. They only allow contractors to use one from that list.
Is that because they are the only umbrella companies that the agency trusts?
However, there are several hundred umbrella companies operating.
Surely there must be more than a handful of trustworthy ones.
Forcing Contractors into Umbrellas
Or are the agencies forcing contractors into umbrella companies that give them a commission for each contractor the agency supplies to them.
That stands a great chance of falling under the 2010 Bribery Act.
That’s especially if the agency doesn’t tell the contractor (which they never do) that they are receiving ‘commission’ from the umbrella company for them.
So, public sector managers could now, effectively, be telling contractors that they must use an umbrella company and forcing contractors into the hands of agencies and umbrella companies who are committing an illegal act between them.
2010 Bribery Act
Of course, these public sector managers could say that they didn’t know that the agencies and umbrella companies are acting illegally under the 2010 Bribery Act.
However, as soon as they are told that this is the case then they well become implicated in this crime. If they continue to allow this to happen after finding out about it they could be in big trouble too.
The Government’s new IR35 rules may be a problem for these public sector managers.
However, all you get from IR35 is a financial penalty.
Breaking the 2010 Bribery Act, or conspiring to allow others to break it, could constitute a crime that would warrant a criminal punishment and maybe even a spell in jail.
Giving Recruitment Agencies the Message
What public sector managers now need to do is to inform agencies that they should not induce contractors to join a particular umbrella company. They should allow them to join an umbrella company of their choice – whether inside the agency’s PSL or outside it.
If they do not discontinue this practice, the Agencies, the Umbrella Companies paying them Commission (legally bribes), and maybe even the public sector managers, could be in heaps big trouble.
I said at the beginning “Public Sector Managers may, unwittingly, be encouraging Umbrella Companies and Agencies to break the law.”
Of course, once they know it is happening, it is no longer unwitting.
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