Why Recruiters Need a Preferred Supplier List
A preferred supplier list or PSL is list of pre-approved suppliers from which managers and employees can procure goods and services at a lower risk.
These lists are common for recruitment agencies as the contractors working through them tend to use the services of umbrella companies and other professional services providers.
Most agencies will require their PSL to be audited annually by external bodies, this reduces the likelihood of expensive compliance issues and other supply chain risks.
Without a PSL in place, agencies put themselves at risk of the Criminal Finances Act and potential loss of money should the umbrella company not be stable. If a contractor uses an umbrella company operating an experimental scheme and later gets a tax bill, then the contractor may feel their agency have not shown them the support and guidance they needed.
Compliance issues in umbrella companies
The market for umbrella and professional employment services has changed dramatically in recent years.
It is more important than ever that recruitment agencies assess their suppliers to make sure they have adapted to a raft of recent legislative and regulatory changes.
Some unscrupulous umbrella companies claim to offer recruitment agencies and their contractors the best possible deals with market leading rates. But many of these companies are behaving unlawfully.
Other umbrella companies would not be considered ‘genuine employers’ if they were faced with an investigation and some do not meet requirements relating to the use of onshore intermediaries.
Recruitment agencies that set up employment contracts through non-compliant umbrella companies would likely endure statutory and reputational penalties if the offending umbrella company was ever caught out.
While the umbrella company could dissolve into the ether, as the recruiter, your company could be left with hundreds of unhappy contractors. So, it is essential that compliance risks are managed through the supply chain.
Setting up a Preferred Supplier List
There is no recommended length for a PSL or approved supplier list. It can be two suppliers, four suppliers or as many as you feel need necessary to deliver the best quality of service for your clients. However, the smaller the PSL, the slicker the back office.
There are various ways of assessing umbrella companies for a PSL.
“One good indicator is whether the umbrella company is externally audited and has industry accreditations. The best example of this we believe is FCSA Accreditation as this requires an annually audit by EY on all of the umbrella company’s contractor offering.” Dexter Dyer, Sales Director, Umbrella.co.uk