Third-party audits explained: how to prove compliance

29th September, 2021

There has never been more urgency for umbrella companies to be fully transparent and prove their compliance.

In this blog, we explain how every payroll we run is subject to third-party compliance audits, and how this audit process benefits contractors, agencies and end-clients.  

Why are third-party audits necessary?

Since the Off-Payroll working rules came into play in the private sector in April this year, the use of umbrella companies has increased significantly. Why? Because many contractors are now working ‘inside IR35’ and therefore deciding to operate via an umbrella for the quasi-employment benefits, while agencies and end-clients are also choosing to outsource their responsibilities to reduce their newfound, heightened administrative burden.

However, the umbrella industry is unregulated and, sadly, the far-reaching benefits of using umbrella companies have been somewhat tarnished by a few rogue operators that promote non-compliance or umbrella employee abuses. And that is nowhere near acceptable.

So, we at Orca Pay Group made the decision to lay out all our cards on the table to prove our compliance and make a positive change for the industry. This started through developing The Apex to give agencies and end-clients complete visibility of the money flows from each of our payrolls. Then we chose to become regularly audited by a third-party organisation to further demonstrate our commitment to supply chain transparency. As a result, we have now been audited by tax and compliance experts WTT Consulting for the past six months.

How our third-party audits work

Third-party audits can be described as nothing short of forensic. They are undertaken monthly to fit in with typical ‘month-end’ payroll arrangements and, crucially, they are conducted by a third-party so that there is no bias to the audit process, with our auditors specialising in tax law.

Below we outline exactly what this forensic audit process entails.

The first step sees WTT conduct a comprehensive monthly audit of all payments made by Orca Pay Group to its umbrella employees through The Apex. This ensures accurate tax, national insurance contributions (NICs) and pensions deductions have been made as well as guaranteeing holiday pay has been correctly accounted for and recorded – both accrued and paid.

The next stage is about WTT reconciling deductions, ‘connecting the dots’, and ensuring there are no discrepancies. To do so, we give WTT direct access to our HMRC Portal and our company bank account so that it can see every penny that goes in and out of our bank account – and even what HMRC sends us.

It is not just about auditing contractor payroll either. As part of this stage, WTT also checks payments made for day-to-day business operations – such as staff wages – to prove that all payments have been paid correctly and compliantly and, for example, that no monies have been sent overseas. It is for this specific reason that our audits are conducted by an independent body well-versed in identifying sophisticated tax avoidance or tax evasion schemes.

Furthermore, WTT conducts manual spot checks each month. This requires it to verify that payments have been correctly made to random samples of our umbrella employees.

Once all this has been completed, WTT issues a monthly certificate of compliance on its website, stating that the audit has been passed. In so doing, this adds yet another layer to the importance of the ‘third-party’ because hosting the certificate on its website ensures the audit cannot be tampered with by any party other than WTT – including us.

You can find more information on our third-party compliance audits here.

What does this mean to you?

Third-party audits mean there is no room to hide, removing any form of doubt about our payroll processes.

This enables agencies and hiring firms to confidently partner with Orca Pay Group, reducing their resource, time and effort while bringing total visibility of money trails into the supply chain. With our auditors providing independent verification that all payments from us are correct and compliant, our partners can be certain that they are best protected against any tax risk. So, while the Off-Payroll reform could become a threat to many businesses in the current climate, our audit process enables us to confidently mitigate this risk.

Similarly, the recent news that some umbrella companies are being ‘cloned’ by businesses with identical names on Companies House has alarmed many recruitment agencies about where they transfer money. But with The Apex underpinned via third-party audits, this risk is effectively mitigated because agencies have access to a real-time payroll-by-payroll audit and, therefore, they can instantly see and know that they are dealing with Orca Pay Group and not an imposter.

And for our umbrella employees, third-party audits confirm that you have been paid in full – freeing you from much of the stress that you may otherwise encounter working as a contractor.

So, in summary, third-party audits are a win-win for everyone. They verify our compliance. They secure your supply chains. They reduce your stress.

Orca Pay Group is the umbrella company that puts contractors first. To find out more about how our payroll-by-payroll audits can enable you to engage with confidence, contact a member of our team on 0800 090 3798 or