Why compliance is important for recruitment businesses

Why compliance is important for recruitment businesses

15th February 2021

Despite the ongoing uncertainty that coronavirus brings, international contractor placement is set to pick up in 2021. And with this uptick, the need for compliance continues to become increasingly important for recruitment businesses placing contractors overseas.

In this blog, our Managing Director – and 6CATS International’s Group Compliance Director –  Jonathan Clarke, shares his insights into the importance of compliance and what recruitment business owners can do to stay on the right side of the law no matter what international markets they venture into.

The role of compliance in valuations

For some businesses, compliance won’t necessarily be a front of mind consideration for consultants and company owners in their day-to-day work. While I’d certainly argue that it should be for all agencies deploying international contractors, for any recruitment business owner looking at potential external investment or an acquisition, compliance is fundamentally critical.

In those scenarios the vanity figures that you have from your turnover and your contractor runner book are great. But if there is an underlying issue regarding the compliance of the workers you have engaged operationally and an auditor does their due diligence on your business, it can have an horrific impact on financials in certain circumstances.

Getting your books in proper order before any significant growth plans are pushed through is imperative so as not to waste valuable time and money, or damage any relationships with investors.

Through 6CATSPRO I very often end up speaking to the key stakeholders and owners of the business, as well as the recruitment teams and their back office functions, to ensure that everyone recognises the importance of compliance before any funding and acquisition deals are instigated.

The Criminal Finances Act 2017

The introduction of the Criminal Finances Act 2017 had a huge impact on the recruitment sector, as it became something tangible to drive compliance. Perhaps more importantly, the fact that the bulk of the responsibility and risk rested solely on the shoulders of the agency owner made more people take a lot more notice.

I remember back in the day when I was working for international management companies before the CFA, we would go in and talk to recruitment businesses and explain why compliance was so important, with the message very much focused on it being morally  and reputationally the right thing to do.

The difference now is that because of the CFA, we can go in and meet with a recruitment agency and explain to them that what they do day-to-day has a direct bearing and significant consequences for the owners of their business – whether they’re aware of it or not!

This is what will usually get the biggest reaction from recruitment owners. Once we explain that they must be aware that if their teams are working with companies or individuals who perhaps aren’t vetted and may be doing things that they shouldn’t be doing, they as the owner will face the penalties, this tends to grab anyone’s attention.

It is the responsibility of the company owner to make sure that they have ongoing monitoring and controls in place. This includes having reasonable prevention measures in place to remove the concept of the possibility of tax evasion, facilitating money laundering, terrorism funding, and other illegalities.

Client terms

As well as the valuations concept and the underlying personal liabilities and responsibilities on recruitment business owners, client terms are another important factor driving the importance of compliance.

As client terms are written as all encompassing, it’s not solely your responsibility as a recruitment business to just find the right person with the right skills and experience for the job.  Agencies are also taking on everything that comes with engaging a contractor – including an individual’s right to work, their ability to freely and without legal restriction perform services, their compliance to work in those countries and much more. Ultimately these all-encompassing client terms push a number liabilities back down onto staffing businesses, so they are taking on much more than just recruiting in its traditional sense.

For recruitment companies, though, tackling compliance in house is no easy task, and no matter how good your consultants are at hiring, knowing the intricacies of a compliant contractor models is unlikely to be part of their repertoire. Where these skills aren’t available, businesses essentially have two options. They can outsource everything to an expert (like 6CATSPRO). Or they can develop the skills internally through external strategic support and training – both of which we provide for staffing companies of all sizes and stages of their International journey..

Contact the experts

Compliance for recruitment businesses is constantly evolving with new legislations and amendments coming into place on a global scale. While the above provides a brief insight into why compliance is so important, with international authorities taking more stringent approaches to tackling tax fraud – whether deliberate or accidental – the risks of getting it wrong are great. Even the smallest of errors can expose your firm to possible fines or criminal charges, so to protect yourself and your company, partner with an expert.

Contact the 6CATSPRO team to find out how they can support your business.



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