New Independent Management at Bar 2

It has been an exciting year for Bar 2. Behind the scenes we’ve been working to become independent from our parent company Empresaria Plc, and on 1st September the dream became a reality when Procap Services Limited acquired the brand, assets and goodwill of Bar 2 Limited.

Under new, independent management, without commercial links to other recruitment businesses we are able to offer new services, unrivalled compliance activity and increased flexibility.  With so many Contract Management and Umbrella Companies on the market, two of the most important questions you should ask when appointing a supplier is; who owns this organisation and where does the fee income go?

At Bar 2 the fee income goes to fund new products and services, to improve our current offerings, investing in compliance activity, rewarding our loyal Umbrella Employees and Independent Contractors and perhaps most importantly, to developing methods of servicing your needs with efficiency and compliance.

From 4th January 2014 Bar 2 relocates to new premises in Clarendon Road, Watford, a location with excellent transport links into the Capital and Nationwide.

We are running a competition for our employees and contractors next year with a prize draw of £10,000 held in June to reward the most loyal in the previous six months.

We have plans to improve our online presence and to offer our self-employed workforce access to a free accounting portal, making it easier for them to keep the records required to file their self-assessment return.

Our opening hours will be extended to 8 pm during the week as well as Saturday morning opening between 10am and 1pm.

We aim to be the most connected Contract Management Company in the country.  To be available to our customers and contractors, 24 hours, 7 days a week and 2014 will see the implementation of new technologies and working practices, turning this vision to reality.

Yours faithfully

Jason Hargreaves
Managing Director
Bar 2

BBC focus on “payroll” companies

Back in July, we blogged about the scandal at the BBC when it was revealed that a number of high-profile presenters were extensively using tax avoidance schemes.

The first of the programmes, 5 Live Investigates, was aired on Sunday 21st October. The programme, presented by Adrian Goldberg, was highly critical of recruitment agencies that use umbrella companies and their own travel & subsistence schemes, in order to avoid NI liabilities. Many of the contractors interviewed were paid at levels which were barely at minimum wage and the agencies in question defended themselves by saying it was the end-client’s fault that they were being forced down this route, as charge rates were continually being driven down to levels which made it impossible to compete commercially without using such schemes.

Last night, 5 Live aired a second programme which focussed this time on Supply Teachers who use an offshore payment company (specifically Sark-based ISS) to process payments – potentially risking bills for unpaid tax and NI for both teachers and agencies alike.

It may be slightly hypocritical that the BBC, having been seen to encourage use of some tax avoidance schemes amongst their own staff, are now putting others under the spotlight but our advice to any agency is clear;

i)                    An umbrella company that operates in a compliant manner remains a perfectly valid option for contractors as an alternative to traditional agency PAYE. However, if you engage workers at rates around minimum wage and are offered an umbrella solution then walk away. National Minimum Wage will be breached if umbrellas process payments at this level and no-one earning less than about £8.50 per hour ever really benefits from using an umbrella.

ii)                   Don’t be tempted to use an offshore company. Ask yourself simply why is it necessary for a worker to get his money sent offshore to be processed? There are a variety of legitimate options available so don’t be tempted to use gross payment solutions or any solution involving the offshore movement of funds.

If the solution you are being offered seems too good to be true, it probably is. Don’t risk the integrity of your business by cutting corners on compliance.

Accountax Autumn Seminar 2012

Craig, our payroll supervisor, and I were let loose on the Autumn Accountax seminar to keep Bar 2 abreast with current employment and tax legislation news.

I’m going to go through two subjects discussed that I found particularly interesting; Pensions auto-enrollment and regulation 10 of the AWR.

I’ll start with regulation 10 as this has been quite a hot topic; some recruiters even see it as the way around AWR.

The idea is that the temporary worker receives minimum pay equal to 50% of what they were receiving during the assignment. The amount cannot be lower than minimum wage and the following criteria must be met:

  • There is a permanent contract between the engager and the individual
  • That they pay the minimum pay between assignments
  • That the permanent contract was entered into before the assignment started.
  • That the contract specifically deals with certain factors (hours, location, type of work etc)
  • That the contract specifically states the individual will not benefit from the regulations
  • That the engager makes reasonable efforts to find the individual work between assignments
  • That the contract with the individual is not terminated unless the engager has complied with its obligations regarding pay and finding work for at least 4 weeks in aggregate.

Given the criteria set out above it is obvious that this exclusion will apply in very rare instances and should be discussed before the assignment begins.

It also begs the question who can afford to implement it properly and actually mitigate the AWR risk? There are two models I have seen implemented where a PBA amount is taken from the rate agreed with the agency, very much like holiday pay; accrued PBA and rolled-up PBA. They went into quite a lot of detail about this so I will give you a short summary. The legislation says that the temporary worker must receive additional pay and this must be paid during a break in work. Now both of these models fall foul of the legislation and could not be successfully implement in order to mitigate risk. The rolled-up model doesn’t pay additional money, it is money that the worker would have been paid otherwise, and neither is it paid during a break. Accrued PBA on the other hand is paid during a break, however, it is not an additional amount and therefore doesn’t stick to the guidelines. The only way to successfully fund a PBA is for someone along the contractual chain to increase their costs. With Umbrella companies taking such small margins I can’t possibly see how it could be successfully implemented by the employer.

I think that there are only two ways to combat this legislation, either engage only genuinely self-employed subcontractors to work on an assignment or, pay the contractors parity. This doesn’t mean that a PBA contract implemented correctly won’t do the trick, in fact quite the opposite; the focus on this part of the seminar was only to demonstrate that it will be very difficult to tick all the boxes and comply with this clause of the legislation.

From my experience, when asking our agency clients for comparator information there is a massive misunderstanding of how PBA can benefit a recruiter and when it should be implemented. I have had contractors transferred to different Umbrella companies that will provide a PBA contract well into an assignments length and quite often after they have qualified for AWR rights. In most circumstances there is not only a successful claim but potential fines of £5000 could be issued in addition for avoidance.

The second subject I would like to take up is pension auto-enrollment, a subject that Jason our Operations Manager has blogged about extensively. So, with that in mind I won’t go into a lot of the detail but I will raise two points that I think are important.

Firstly, and most importantly, workers (the grey area of employment status classification) are to be included in the pension’s auto-enrolment. However, only the people that are paid through PAYE have been used to decide on your staging date. So if your company engages people that you know are classified as workers, you should take them into account and open up a dialogue to revaluate your staging date.

When this was being discussed, they mentioned that anyone engaged through an agency would have to be enrolled; my heart instantly sank as I thought about all of our CIS subcontractors. But, actually they are fine, only genuinely self employed people do not have to be automatically enrolled and all of Bar 2’s CIS subcontracted pass through a strict process.

Secondly, I have found out that we are allowed to discuss opting in or out and we are only prohibited from incentivising an employee/worker to opt out. This makes the nightmare conversations I was envisaging our customer care representatives having with our employees seem like a distant memory. However, the worker does have to make at least one contribution before the can opt out and the money paid into the pension cannot be reimbursed by the employer.

With this in mind are we going to see an increase in retention levels of umbrella workers?

I think we may, especially as the administrative burden on the employee will increase if they have to start reclaiming money from various different pension providers.

I also think that we will start to see an increase in retention levels of employees that are contributing to a company’s pension scheme. With the extra hassle of moving your pension amounts from your old provider to your new umbrella companies provider who would really want to do that 4 times a year?

All in all a great seminar and a good excuse to get out of the office and have some free tea.

Dayta Designs – Sage 200 presentation 10th October 2012

We were invited to the Sage 200 presentation by Dayta Designs earlier this year and we attended today.  We’ve done business on a small level with Dayta in the past and it was nice of them to offer us a free place.  Kay from Dayta and Zak for Sage presented a concise but seemingly thorough overview of the capabilities of the Sage 200 accounting platform.

In the first half we were shown that it basically does what you’d expect but presents information very nicely, Sales Ledger, Purchase Ledger, Stock Control built on your own bespoke nominal structure.  The demonstration of its integration was particularly impressive, easily drilling down into detail on Sales or Purchase orders from invoices, even down to individual stock items and measuring profit per part.  Pretty good stuff for the geek in all of us.

The second half was more interesting still, being presented with their Business Intelligence and CRM (Client Relationship Management) platforms.  The CRM has a web-based interface, something I’m not too keen on being and old fashioned enjoyer of traditional software platforms but it comes with integration into the Sage 200 accounting system so allows the Sales and Marketing departments to easily see the revenue generated by particular customers, when they last purchased and even dare I say, how good they were at paying.  Very sparkly on the graphic front too with the ability to see graphs and pie charts and spin them round in 3d a bit like something off a star trek holo-monitor.  I love that kind of stuff so found myself swaying in favour and ignoring the web interface I often just can’t get past.

The business Intelligence was a further substantial improvement on most accounting platforms I’d seen, allowing you to extract data easily and manipulate in spread sheets at the click of a button, oh, and I mean proper spread sheets, none of this export to csv, don’t forget to save as xls or you’ll lose your formulas business.

All in all it was a very pleasant presentation with a smallish number of attendees giving it a personal feel.  We are happy to be doing business with Dayta Designs again after this informative morning in Stevenage.

Incidentally, Joss and I had an all-day breakfast at “Dad’s Café” in the nearby industrial estate afterwards, at £4.90 inclusive of cup of tea it’s a most delicious bargain.

Thanks Kay and Zak

Ucatt calls for scrapping of CIS

Well, they will be calling for it according to this article at theconstructionindex.  Perhaps they have forgotten why the CIS scheme was introduced, at great expense in the first place.  In simple terms the construction industry has its own tax system to control what was known as the “Lump”, where construction workers were often paid in cash and made little if any payments of tax or national insurance.

It has over the years proved very successful at both increasing tax take and attacking people who work whilst claiming benefits as every worker in construction, self-employed or not will be registered and on some kind of payroll and under CIS have their tax status verified by HMRC.

Self-employment in construction, as is half-heartedly admitted by Balls, is an essential part of the industry, as we require a flexible workforce in this area of the economy like no other.

Will new Pensions legislation affect the self-employed?

Here’s a very important article written by Henry Tapper regarding the entitlement of self-employed “workers” to be enrolled on a company pension scheme.

As we’ve discussed here before, a self-employed worker, in basic terms under employment law, is one who must provide his services personally.  In other words he is offering personal services.  Companies engaging the self-employed have to be careful when establishing the status of a worker not just in considering tax law, but employment law.  As far as HMRC is concerned, a person can be self-employed and in business on their own account for tax purposes if they meet criteria set out in their employment status test, but this test does not necessarily prevent a judge at tribunal considering an individual a “worker”, and therefore entitled to certain basic employment rights.

It is worth quoting here from the source of Henry Tapper’s article:

It was argued by HMG that Mr Westwood’s self-employed status was as a GP and the fact that he undertook work for both HMG and another medical trust meant he was clearly in business on his own account. The court found that his work as a GP and the advice on transgender issues had nothing to do with his work for HMG. Referring to the description of Mr Westwood in HMG’s promotional literature as “one of our surgeons”, the court found that he was an integral part of HMG’s undertaking in providing services in respect of hair restoration.

This result is surprising as there were a number of features of the agreement between Mr Westwood and HMG which indicated he was in business on his own account. For example, he invoiced HMG by submitting VAT invoices with the stamp of his surgery, was paid by HMG without deductions for PAYE, was required to take out his own professional indemnity insurance, had no set hours of work with HMG and could refuse to carry out surgery if he wished to do so.

Interesting times!

Trouble brewing at the Beeb?

It’s a story that just won’t go away at the moment; High profile TV personalities using tax avoidance schemes and there seems to be increasing demands by MPs on both sides of the house to clamp down on such arrangements.

Last month it was comedian Jimmy Carr that was exposed after using a highly dubious offshore trust which allegedly resulted in him reducing his tax to barely over 1% of his income. This week, several top presenters at the BBC are in the news again as it has been revealed that some 3,000 BBC staff were paid through personal service companies and that 148 of the BBC’s 467 presenters were also paid in this manner.

Of course the use of a personal service company (PSC) is perfectly legitimate provided you are a genuine freelancer, in business on your own account, and ideally undertaking a series of contract assignments. IR35 rules which were introduced over ten years ago however were designed to ensure that such arrangements were only used by genuine freelancers and that tax couldn’t be avoided by claiming contractor status when in reality an employment relationship existed and was just being disguised.

In the case of the BBC presenters, many of the stars implicated (including Fiona Bruce, Sophie Raworth and Jeremy Paxman) are to all intents and purposes the face of the BBC and therefore to pretend that they are anything other than pretty permanent features on our television screens and radio stations is rather naïve. When such stars work almost entirely or exclusively for the BBC, they must at best, be running very closely to breaching IR35 rules and I very much suspect that there will be more high profile exposés of “dodgy dealings” before this story disappears from the headlines or decisive action is taken by HMRC to close further loopholes.

NatWest Technical Crisis and Bar 2 Response

On 20th June 2012 we were informed by NatWest bank that there were some technical issues with bankline and they would keep in contact to make sure that any disruption to our service was minimal.  At this time we had managed to make our usual Wednesday payroll and all contractors had been paid.  We could see our statements and all seemed pretty normal.  The following day there was a problem, we could not see our bank statements but we could input and upload batch payments to our system, we could also see CHAPS payments arriving but not the more often used Faster Payments.  We did a test where we sent £20 to one of our staff and requested that they sent it back.  They confirmed receipt of the £20 but we couldn’t in fact see it on our payment summary as being returned to us.  Following this, in the knowledge that payments were being received, we paid our usual contractors on Thursday night for clearance in their accounts Friday morning.

On Friday morning we could not see our bank statements OR a Payment Summary so we could not see whether anyone had been paid.  We received a letter from NatWest at 9am on Friday informing us that the expectation was that payments would be made that day, an extract of that letter is below:

Response to Mid Crisis

The phone system was in meltdown at this time, most of our workers are paid by 9am every Friday as they have become accustomed over the last 12 years.  We knew we had sent half of the payments on Thursday and were processing Friday’s payments on the basis that we expected to have been paid by our clients.  We had informed NatWest of this action and expected them to make good any payments made without a valid receipt.

We completed the payroll process for Friday by 10am, the delay being caused by the need to respond to all the incoming calls, all payments had been uploaded to the bank and authorised.  Not having access to our bank statement OR the payment summary we had no idea who had been paid and who had not, nor did we know which clients had paid us and which had not.

The calls coming into the office were constant and we heard tales of people not being able to top up their electricity meters as they rely on their weekly wage to fund them through the following week, some people only had a few pence on their meters.  Other people had mortgage payments not made, some couldn’t pay their rent, others didn’t have enough food in the house to see them through the weekend.  All the staff could do was repeat the information we had been given by Natwest; that we expected all payments to be cleared by the end of the day as was stated in the above letter.  We closed after 7pm.

Work was done over the weekend to try and establish who had been paid, if anyone.

On Monday morning it was clear that a very large number of contractors had not been paid as was expected over the weekend and they were understandably angry, distressed, disbelieving and any other number of adjectives you can imagine to describe a person at the end of their tether.

By 9.30am we had discovered that anyone paid on Friday for clearance on Friday had actually received their money, but all of the people paid on Thursday, around half of our entire workforce had not been paid at all, the payments made as Faster Payment (the majority) were showing as expired and nothing was on the bank statement.  The single CHAPS payment we had made on Thursday had in fact cleared.  It was us who informed the bank of this scenario and it was conveyed to them that we needed to make these payments again, immediately.

We were told in no uncertain terms not to do this, and to wait for further instruction.  So we waited, responding to the incoming calls by explaining what has happened, specifically that if we had tried to pay you on Thursday you had not been paid yet.  The anger and distress felt by these people was on a level never experienced before.  Most seemed to disbelieve our explanation as we had assured them on Friday by phone, text and in some cases email that we expected them to be paid on Friday.

Many had gone without a decent meal all weekend, some had run out of electricity in their homes, one man slept on the streets of Glasgow after being evicted from his B&B, and still the calls were coming.

We were then called by our Relationship manager and informed that all payments made on Thursday would be made on Tuesday, the following day.  After much argument about how unacceptable the situation was, informing him of the situation of some of our workers it was no good, if we were to pay all of these people today, knowing they would receive their money today and thus relieving them of their hardship we were told that if we do that the payments would be made again on Tuesday and NatWest would not cover the loss which we now know to have been well in excess of £300,000.

Shortly after 1pm we received another letter stating that the expectation was that the payments would be credited on Tuesday, an extract is below:

Natwest Response Mid Crisis


In the meantime our Director, Ken Taylor, having left a comment on the BBC’s “have-your-say” page received a number of calls from BBC staff.  He was on The World at One on Radio 4, the same clip was repeated on News Programmes on Radio 5 and later that day a Camera Crew turned up and he was interviewed for the BBC Six O’Clock News which was later repeated at 10 O’clock.  We continued the day until gone 7 trying to convey the situation to our workers, and helping where we could.

Checking the bank statement at 20 past Midnight we still couldn’t see these payments being made but by 6am they were there, all of Thursdays payments being released 5 days late and all “Timestamped” 00:00, which we know not to be accurate.

So that is the story of the worst crisis in the history of Bar 2, a problem caused solely by a process undertaken by RBS / Natwest and likened by Mr Stephen Hester to poor weather causing a delay to an aircraft.  Really?

Why do we go to such lengths to ensure your self-employment status is genuine?

When you register with Bar 2’s CIS service, every subcontractor must undergo and pass a status questionnaire to confirm that they are genuinely self-employed. We also advise every subcontractor that they have a legal obligation to complete a self-assessment return at the end of each tax year. We work closely with an accountancy partner to make this process easier and they can also help with VAT registration which is both another way of safeguarding your status, and also has a significant financial benefit.

But why go to all that bother when other suppliers are prepared to cut corners?

Maybe this will make it clearer

Olympic flames doused

For many years now, we have had the argument that the Olympics will be a major boost to the UK economy. There is no doubt that is true in the main, but with just 100 days to go until the start of the games, construction agencies are now bracing themelves for a shock.

Our blog article going-for-gold-olympics-boost-to-the-london-jobs-market/ highlighted the fact that salaries for jobs at the London Olympics were standing at about 30% higher than the national average. As an example, construction site managers were demanding rates of around £310 per day on average.

Now though, it has emerged that all remedial and maintenance work on the London Underground, and at airports will be ceased for the 4 weeks before the Olympics start; the 4 weeks the games actually take place; and another couple of weeks afterwards. The situation will also be repeated for the Paralympics too a few weeks later. Two reasons are being cited for the cessation of works; the security risk and the fact that the tubes are running until 1.30am during the games which means there is no time to actually do the work required. It has also been cited that several large buildings on the route to the games will be shut down and potentially boarded up with advertising hoardings to make them more aesthetically pleasing.

We estimate that some 1,000+ workers operate in construction on the tubes daily and with clients now forced to suspend works for a month, it is highly likely that agencies will see a significant drop in demand for contractors, and many contractors will be forced into taking an unexpected holiday at the very time when holiday prices leap and the school holidays commence.

On the plus side though, the work still needs to be undertaken, so there is the suggestion that in the run up to July, more work will be undertaken to make up for the shut down, and that after the games, there will be another surge as they try and catch up on the backlog of work.

There does appear to be little doubt though that any agency engaged in rail work are faced with a ten week period of very little activity and several REC agencies have voiced their concerns about the situation. The Olympic legacy lives, but for many, July is going to be a very tense month.