PEO Firms Put a Stop to HMRC’s New Naming and Shaming Rights

HMRC have recently started naming and shaming tax avoidance schemes to help protect contractors from being left with a hefty unpaid tax bill.

Small and medium sized firms are at risk of being targeted by dodgy umbrellas, because they are having to manage growing their business with ensuring payroll compliance. Working with a compliant umbrella company can be a great option to help relieve the burden. But, as HMRC’s new list proves, there are lots of sharks out there who are targeting unsuspecting contractors and employers.

There is another option however, working with a Professional Employer Organisation (PEO). Read on to find out more about the benefits of this model.

Working with a Professional Employer Organisation (PEO) can help protect employers from non-compliance, as well as save growing businesses time and money. By providing valuable HR expertise and doing the employer admin heavy lifting, PEOs can help companies avoid falling into the non-compliance trap and stay off the HMRC’s list of shame. In the meantime, working with a PEO allows other members of the team the time and energy to focus on their main operations.

What is HMRC Doing?

HMRC have exercised their powers to name and shame tax avoidance schemes for the first time and have started their list of umbrella providers to avoid. Although there are currently only two providers on the list, Absolute Outsourcing and Equity Participation Scheme (EPS), the list is expected to grow quickly, as more dodgy umbrellas are identified.

The list will also highlight any organisations who are promoting, enabling, or supplying tax avoidance schemes. This means that employers must be ever more vigilant in ensuring that they maintain payroll compliance.

What is a PEO and how can it protect employers?

Small to medium sized companies must juggle their own growth with ensuring that they maintain their HR responsibilities. After all, a business cannot grow without good people. But growing companies can quickly find themselves with mounting HR responsibilities, which, without a dedicated HR department can be challenging to manage.

While utilising an umbrella company, who employ staff on your behalf, can be a good hands-off option, the latest news from HMRC demonstrates how important it is to ensure that you only work with a compliant umbrella (such as Ship Shape). But a PEO company offers a practical middle ground, providing a host of benefits and cost savings, while working in tandem with your internal HR team.

A PEO company is effectively a co-employer, working with companies to take on HR responsibilities such as payroll, compliance, and benefits, to ensure that staff and properly looked after, but without placing the additional time and cost burden of creating a fully functioning internal HR department, or handing over complete control to an umbrella.

How does a PEO work?

PEO services and charges vary according to company, but the general model is the same.

When you work with a PEO, the PEO becomes a co-employer for your staff, and takes on the responsibility of payroll, compliance, and taxes. Many PEO companies also handle employee benefits and are able to offer benefits packages to staff which would be out of reach for most small businesses.

The employer retains full control of who they hire, how much they pay and the responsibilities of workers, and all other business operations. The PEO is an employer for administrative purposes only.

What are the benefits of working with a PEO?

Small and medium sized organisations need to prioritise where they spend their time and money, but they also need to make sure that they stay on the right side of compliance and that all staff are paying the right amount of tax and NICs. This can be difficult in the growing global labour market, PEO’s take on the role of payroll provider and employer responsibility.

Maintaining payroll compliance can take a lot of time, and when you add that to staying on top of the latest tax legislation, and negotiating benefits with partners, the burden on a growing company can be immense. But using a compliant PEO provider can save time and money, offer your workers a great package of benefits, and ensure you stay off the HMRC’s naughty list.

What to look for in a PEO company

While all PEO are different, you should look for one which offers the services that fit your needs. Also be mindful of whether the PEO can scale their services as your business grows. Check for ease of use and convenience for employees and check whether any systems they use will integrate with your existing software.

Ship Shape offers flexible and competitive PEO services, talk to us today about how we can help you remain compliant and reduce your costs.