Audits pt. II: building trust in the supply chain

25th October, 2021

Trust in contractor supply chains is more important than ever. Here, we explain how our audits – both payroll-by-payroll and third-party – enable us to build trust and benefit our supply chain partners.

Why is trust so important in today’s contractor supply chains?

The very existence of umbrella companies has always denoted a high degree of trust because the relationship between an umbrella company and its umbrella employee, whereby the employee is paid and receives employment rights from the umbrella company, requires guardianship.

By and large, umbrella companies respect this responsibility and deserve to be trusted. However, growing numbers of stories of non-compliance have been gaining mainstream coverage in the press recently. Unfortunately, this taints the hundreds of stories of umbrella companies making a positive impact that we tend not to hear about.

This is partially because, today, the issue of trust does not just affect the umbrella company in question – it carries significant weight throughout the contractor supply chain. An umbrella company gaining an untrustworthy reputation threatens the reputations of its supply chain partners’ and carries significant financial risk, as below:

1. The Off-Payroll reform has given HMRC unprecedented powers to pursue recruitment agencies and end-clients for liabilities that it cannot recover elsewhere in the supply chain.

2. The Criminal Finances Act 2017 permits HMRC to penalise agencies or end-clients that have unwittingly inserted a disguised remuneration scheme into a contractor supply chain.

3. Crucially, HMRC released this guidance on 11 October 2021, which unequivocally states that agencies and hiring firms that have been involved in tax avoidance schemes, even unwittingly, are at risk of: “penalties”, “tax liabilities”, “reputational damage and loss of business”.

As a result, agencies and hiring firms must conduct extensive due diligence before engaging with an umbrella company, and from that point on they must also actively monitor and police their supply chains, heightening the importance of trust.

However, the challenge for agencies and hiring firms is that they cannot see behind the curtain and examine their partners’ practices. And, even if they could, the methods through which some rogue umbrella operators are abusing their umbrella employees are so sophisticated that it is impossible to distinguish a compliant umbrella company from a non-compliant umbrella company.

Until now.

Auditing: the key to building trust

The only way to protect against these reputational and financial risks is via transparency, integrity and openness. For umbrella companies, this means disclosing and, if required, explaining fees, costs and deductions.

Many umbrella companies may argue that this is not realistically possible. However, this is something we vehemently disagree with. Transparency is eminently achievable – the solution just lies in auditing. At Orca Pay Group, we are subject to two types of audits: payroll-by-payroll and third-party audits.

The former shows agencies and end-clients what fees, costs and deductions have been transferred. It gives our partners the opportunity to spot if something is not right – and if they can spot it, they can easily terminate the relationship there and then. Naturally, this develops trust because there is nowhere to hide.

The latter sees third-party auditors follow all our money trails and provide an independent assessment of our payments and practices. These audits hold extra weight too because they are from tax and compliance experts WTT Consulting, a firm specialising in tax law and identifying all kinds of evasion schemes. This verification enables our partners to become confident that what they see through The Apex is correct and compliant.

How does this impact the supply chain?

The direct motive for us was to be fully transparent, show our compliance, and get closer to our supply chain partners. Thanks to these actions, we have been successful.

And in so doing, there have been significant knock-on effects that have flowed through our supply chains that we did not anticipate. Indeed, the indirect impact of our audits is that our partners have used us as a reference point for other umbrella companies on their preferred supplier lists (PSLs). As a result, they have been able to identify non-compliance they were previously unaware of.

For example, we have helped our partners find three instances of tax avoidance in the past six weeks alone. So, our audits are helping turn non-compliance that was previously invisible into something that is much more discernible. When these abuses have been discovered, they have of course been reported to the relevant authorities to help clean up a small part of the industry.

At present, we are the only UK umbrella company that is subject to regular third-party audits, but if others followed this approach, the industry could soon find itself cleansed and this, in turn, could enable the UK’s invaluable contractor workforce to thrive amid this post-pandemic boom.

Audits mitigate risk and give companies throughout the supply chain the platform to enhance their reputations as demonstrably compliant service providers, meaning they can differentiate their brands, gain competitive advantage and win more new business.

So, what’s stopping you?

Orca Pay Group is a progressive umbrella company that is setting the compliance benchmark for others to follow. If you would like to partner with a totally transparent and fully secure supply chain partner, contact a member of our team today on 0800 090 3798 or