Joint and Several Liability (JSL) has been in place for almost six months now. It is still bedding in and much of the discourse around the legislation has been centred on accountability, liability and who is responsible for paying HMRC the tax that is due. This remains an important consideration but Crawford Temple, CEO of Professional Passport argues that for recruitment agencies and end clients navigating JSL, there is a fundamental question that deserves greater attention:
Whose data are you relying on to establish that your payroll supply chain is operating correctly?
It is easy to assume that if an umbrella company provides payroll information, that information is checked and the resulting report is satisfactory, the agency has the assurance it needs.
But a report can only assess the information it receives.
That creates an important distinction between accuracy and completeness. Payroll calculations may be completely accurate for the workers included in a dataset, while the dataset itself may not represent the full population.
For example, an agency may fund 500 workers through an umbrella, while the payroll information supplied for checking covers 450. Every calculation for those 450 workers could pass the relevant checks. But what about the other 50?
Similarly, fake payslips and manipulated payroll data remain a real risk even with Joint and Several Liability (JSL) now in force. Fraudulent payroll providers and mini-umbrella schemes can make payroll appear completely legitimate on paper, with apparently correct calculations for gross pay, Income Tax and NICs, while the underlying data is false because the tax and NICs shown as deducted are never actually paid to HMRC. The danger is that data can look right without actually being true – and under JSL, relying on data supplied by the umbrella does not remove the liability.
Who sets the scope of the check?
This is where the source of the data matters.
The agency already holds its own records of workers, assignments, approved timesheets, rates and payments. That information provides an independently established starting point against which the provider’s payroll can be tested. Relying on data supplied by the umbrella, the organisation you are trying to verify, leaves the potential for manipulation, errors, inaccuracies and more.
Historically, there were frequent reports of non-compliant manipulation of data and workers, and this behaviour has persisted since JSL came into effect involving missing workers, different employing entities, PAYE references and dubious payroll arrangements. Whilst these discrepancies do not automatically establish wrongdoing, it does raise questions and shows that using the correct start point for data is critical in the post JSL world.
The hidden workload
Starting with provider-supplied information creates an ongoing operational burden.
In all instances the agency, or relevant party, must obtain a wide range of reports from the service relying on the provider supplied data. They must then set up a full audit and verification process to match the provider supplied data to their ‘master’ data. Any discrepancies or anomalies must immediately be addressed.
Technology may make a report quick and easy to access, but it does not remove the underlying work. Someone still needs to own the reconciliation, understand exceptions, investigate discrepancies and establish that the resulting tax liability has been settled.
What appears simple and quick to set up at the press of a button can therefore become a significant burdensome exercise further down the line as these reconciliations have to be carried out and aligned to every pay period, which could be a weekly exercise.
Start with what you know
An alternative is to establish the expected population before the umbrella’s payroll data enters the process.
The agency already has the information needed to do this, the ‘master’ data. Its worker records and approved timesheets establish who has been supplied and what funding should enter payroll. Using that information as the starting point creates an independently established expectation against which payroll output can be tested.
This does not mean the agency’s own data can simply be taken for granted. Rates, timesheets and payroll inputs still need to be accurate, and exceptions still need to be resolved.
Where the ‘master’ data is used and input into HMRC recognised software to carry out the calculations your risk becomes significantly lower.
The outputs do not need to burden your teams with a full reconciliation and reporting audit process as the reports provided already deliver this.
Why this matters under JSL
For JSL purposes, the distinction is significant. A compliance report can provide evidence about the payroll information examined, but it does not, by itself, confirm that the data is correct or accurate.
The control needs to extend from the data through to the calculation and then through to what HMRC is owed.
Controlling the data and processing removes the many threats from missing workers, different employing entities, PAYE references and dubious payroll arrangements.
A different approach to assurance
So, the answer is to start with the data the agency controls.
Agency-originated timesheet data can feed into payroll calculations, producing worker-level information on deductions, amounts payable to the umbrella and associated PAYE liabilities. The agency can then decide whether to pay all the money to the umbrella and let them pay the HMRC liabilities or pay the identified tax liabilities directly to HMRC, with the remaining allocation paid to the umbrella.
The aim is to connect the agency’s own records to the payroll calculation and resulting payments, rather than reconstructing the position afterwards from secondary questionable data.
The message is clear for recruiters: if you start with the data you know, you are in control.
