construction builder and foreman holding pen and looking through documents

Why is Compliance so important in construction recruitment?

Everyone in the construction sector should be aware of compliance legislation.

Whether you’re a business that engages agency staff, you’re the agency that supplies construction workers, or you’re a construction worker yourself, you must have some awareness of the importance of compliance.

With so many legalities surrounding construction, compliance is a topic that’s impossible to avoid.

If you’re engaging workers through an agency, it can be tempting to assume that liability for being compliant will fall to them, rather than you, but that’s not the case.

Similarly, even though construction workers don’t need to know the ins and outs of compliance, it’s key that you understand the basics.

Why should I care about compliance when I’m recruiting construction workers?

Put simply, pleading ignorance isn’t an option.

Without making yourself aware of your compliance responsibilities, you are risking every aspect of your business. Making mistakes when it comes to compliance could result in financial or legal penalties, damage your reputation, and even force your business to close completely.

Male builder and construction worker looking through documents

What are the risks of ignoring compliance in construction?

Before we consider how to make sure you’re compliant with relevant legislation, you need to consider how ignoring legislation will impact your business.

Financial and Legal Risks of Ignoring Compliance in Construction

PAYE and IR35

You need to understand how your workers are paid and who is operating PAYE on the earnings of workers. We’ve broken down the different methods of paying workers on our website, but if you need more assistance, feel free to reach out.

If it turns out that no one is paying the tax or National Insurance contributions for workers, HMRC can ask you to account for those payments. 

You must determine whether workers in your supply chain are within IR35, and know the implications if they are within, or outside of the IR35 rules.

Paying Workers Correctly

It’s a crime not to pay workers the correct rates, or to be seen to falsify payments. Any business named in a government press release as not paying the correct rates, could be fined up to 200%.

If you engage self employed workers through the Construction Industry Scheme (CIS), you must follow the rules of the scheme. The Employment Agency Standards Inspectorate gives a good breakdown of different workers on page 12 – 13.

Tax Avoidance

Construction businessman holding a pen pointing to graph

If an agency or umbrella company suggests that they can increase the take home pay for workers and reduce the tax payable, don’t believe them. As with everything in life, if something sounds ‘too good to be true’, it probably is.

Doing due diligence on any umbrella companies may seem like a laborious task, but it’s one thing you must include within your internal procedures. If you don’t have the capacity to take on the due diligence yourself, companies like SafeRec are there to help.

What is SafeRec?

SafeRec is an independent third party auditor based in the UK. At Pier, we use SafeRec to help us protect our clients and candidates against tax liabilities.

SafeRec will check the HMRC status of an umbrella company, as well as undertake daily monitoring to ensure we know of any changes within the umbrella company, such as HMRC notifications or loss of certification.

SafeRec can also generate Key Information Documents (KIDs) for workers, a legal requirement since April 2020. KIDs include detailed information regarding a worker’s assignment that is essential for accurate pay reporting.

Reputational Risks of Ignoring Compliance in Construction

It seems obvious, but if your business becomes associated with tax avoidance, criminal offences, illegal workers, exploitation, or the like, you are going to lose customers as well as workers.

Maintaining good relationships within the sector is essential for any successful construction business, and being implicated in anything below board will be incredibly damaging for your reputation – and bottom line.

Using a construction recruitment agency is not a way to avoid compliance issues.

Even if you use a construction recruitment agency, you can still be found liable for any mistakes (intentional or not) made within your supply chain.

Know your construction recruitment suppliers as well as you know your own business.

You wouldn’t trust ‘just anyone’ to take a senior leadership role in your business, so why would you trust ‘just anyone’ to source your workers?

Good construction recruitment agencies are transparent and will understand why you need to get to know their business. Never be afraid to question a recruitment supplier’s processes or ask to find out more about how they follow compliance procedures.

At Pier, we form good working relationships with every single one of our clients. A good relationship is beneficial for both parties: clients get peace of mind, and we know how to best support our clients with their workers, helping us to provide a much better service.

Three construction engineers discussing over digital documents

How can you make sure all of the construction recruitment agencies you use follow compliance procedures?

Ask to see their procedures.

It will either be demonstrated on their website, or they should be able to present their procedures to you in a clear format for your own records.

Simple steps to ensure you are compliant.

The government suggests 7 steps to help ensure you’re not using a non-compliant umbrella company. These steps are also a good place to start in ensuring you are in control of your complete supply chain, and we’ve condensed these into 5 points below:

1. ‘Perform due diligence on your whole supply chain.’

Knowing as much as you can about your full supply chain is an excellent way to stay on top of compliance. Be aware of any changes, and make sure you have easy access to your own information regarding each link in the chain. This way, you can avoid being caught out due to a lack of knowledge.

2. ‘Find out what you need to do when you engage a worker.’

The Pier website gives a simple breakdown of the ways you can engage a worker, and it’s a good idea to get these straight in your mind.

3. ‘Consider adding clauses in your contracts with umbrella companies.’

Your own contracts can help minimise your risk, and make it obvious that you understand the details within construction compliance. Check and update your contracts regularly.
If you are engaging an umbrella company, check their records on Companies House and make sure it matches the information you’ve been given. If they are based offshore or offer you a financial incentive, be cautious about continuing to work with them.

4. ‘Check payslips to make sure PAYE is being operated on the full amount received by the worker.’

Whether you outsource payroll or do it inhouse, you should know what your payslips show your workers. Take a sample from the next payroll run, or have a copy to hand for reference if you need it.

5. ‘Educate your workers by sharing information with them about tax avoidance schemes.’

We often find that workers receive little communication when it comes to how they are paid, or the reason for certain legislation. The more open you can be with your workers, the better. More informed workers will create a better dynamic between your business and the construction site.

Construction maintenance engineer with checking list

Does using a good construction recruitment agency help you to become compliant?

A good recruitment agency will understand how important it is to be compliant within the construction sector. Equally, if you’re in talks with an agency who haven’t mentioned compliance at all, alarm bells should start to ring.

Any reputable construction agency knows how much their business relies upon ensuring their policies and procedures are top notch. While you may not want to lead with a question linked to compliance, it’s a good idea not to go too far down the road before you broach the topic.

At Pier, we are proud of our tight compliance procedures, and happy to advise you on the best course of action if you’re concerned about your own supply chain. 

Get in touch with us for a confidential and informal chat, and we’ll make sure you receive a bespoke and compliant workforce for your next project.


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