There is nothing too unique about the recruitment sector. It raises the same issues of management as many other activities. To start up and run an agency specialising in recruitment, you need experience in both the traditional ways that agencies have been run and in the modern technology and social media that have become so powerful today. Owners of small businesses need to have a range of skills far beyond their sector of expertise.
There are statutory requirements that vary depending on your company status, and some are fairly complex. Take, for example, VAT, which is a tax that has existed for around 40 years. It is still one that baffles many people. You would have thought that after 40 years everyone would be clear about things, but there are regular cases that are being appealed by either Her Majesty’s Revenue and Customs (HMRC) or business.
The most recent case involving the recruitment sector seemingly ended in favour of business. The question revolved around whether a recruitment agency was supplying a service or staff. HMRC claimed it was the latter and wanted VAT charged at the full rate on the whole invoice, including NI, even though the individual was not VAT registered.
The problem arose in VAT exempt industries like health, finance, education and childcare that were, therefore, bearing the cost without being able to claim it back. HMRC lost its case, meaning that only the agency’s fee would carry VAT as the service was one of introduction, not the supply of staff. The problem does not seem to be going away since the judgement in 2011, and it seems certain to lead to further cases in the future.
Agencies that now only charge VAT on a proportion of their invoice need to realise that they could be building up a problem of underpaid tax over a series of quarters.
This is just a single instance where an owner of a small recruitment agency needs help. When it comes to payroll, it is important to be completely up to date with employment laws, tax codes and allowances as well as returns to HMRC. An owner may decide that all of these things can be handled within the organisation, or he may instead look at outsourcing complex parts of the administration to a service company with administrative and financial expertise.
Time and worry
The latter route is sensible for a number of reasons, not least that it takes away a serious worry and puts it in the hands of someone who is dealing with these issues on a daily basis. Outsourcing will be completely secure and confidential when using the right company. The other immediate benefit to an agency owner is the increased amount of time that can be spent focussing on the business and its development.
Click here if you think that this situation, together with the complexities of employment laws and payroll issues, means that you would like to discuss outsourcing administrative functions to a service provider.
Image attributed to Freedigitalphotos.net Renjith Krishnan