Agency direct employment vs ‘direct engagement’ medical service. February 2019
8 February 2019
Agency direct employment is just one module of a broader NHS workforce management solution. STAFFflow and TempRE are our workforce management services utilised by NHS organisations for effective management of temporary workforce. Our approach is the most proven; currently used by over 60 NHS clients.
We started offering the concept of agency direct employment which was coined ‘direct engagement’ into the NHS back in 2011. Our definition at that time remains the same today, and we remain confident our version (which has been thoroughly checked by HMRC) to be ‘agency direct employment’ – ‘the process of NHS organisations facilitating direct fixed term contracts with workers introduced by agencies’.
Locums are workers, and as such, are employed via appropriate contracts for the period they are used as a temporary worker. Trusts and boards continue to use the same agencies and staff, we administer the contracts, induction, timesheet, statutory deductions (including IR35) and payroll. We support our clients with the HR, contract, legal issues and agency negotiations.
Unfortunately, there is misinformation and confusion in the market. Unlike some other providers in the market, our version of agency direct employment does not treat locum workers as being supplied as a ‘medical service’. NHS organisations employing this model which has been wrongfully labelled as ‘direct engagement’ should seek advice on the tax treatment of this supply. Our VAT team has 30 years’ experience of providing specialist tax advice to the NHS and can offer advice around this worker engagement model.
This approach does not reflect our definition of agency direct employment as trusts would not be contracting with their workers directly. We have been asked by trusts to consider adopting this approach but have remained firm in our own professional interpretation of agency direct employment. Our approach is to extend employment from the NHS bank to agency workers.
The Liaison Workforce agency direct employment service for temporary workers means that the NHS trusts continue to source their workers through an agency but they then contract and pay the individual doctor directly for the duration of the booking – in a similar way to how trusts employ bank workers. The agency fee disbursements can also be managed by Liaison Workforce.
Additionally, we do not accept umbrella companies through our direct engagement service as this would inherently add management cost to the process. Since starting the STAFFflow and TempRE services we have seen some trusts face pressure from their locums to work in this way but we have encouraged them to stand firm to avoid exposure to the risk of taxation debts. Working directly with a trust provides greater worker transparency and avoids the risk of the retrospective loan charge coming into play in April 2019. This approach has proved successful with many locums converting to PAYE as a simpler contracting route and a lack of umbrella fees resulting in a higher take home pay.
Of the 99% of workers who were employed on agency direct employment contracts (similar to NHS internal banks), 25% of workers chose to contribute to the NHS pension scheme and saw this as a benefit to being employed by the NHS as opposed to an agency or umbrella company.
Simply put: locums can’t have a direct contract with the trust if they are also employed by the umbrella as they would be contracted by two different businesses at the same time. Workers have always needed to stop working for an umbrella in order to contract for the fixed term work contract at the trusts we operate agency direct employment for. We don’t support these models and it is also in the locums’ best interests as, although they can join these umbrellas for free, the fee to extract themselves is so significant many can’t contemplate it.
Liaison Workforce’s STAFFflow and TempRE workforce employment services give NHS trusts the savings, control and visibility, IR35 compliance and assurance the right tax is being paid when contracting temporary staff directly whilst using the same agencies and workers they always have done. Our fully-managed service provides a unique combination of technology, high-level legal expertise and on-the-ground support mitigating any potential risks to trusts when choosing to employ temporary staff.
Contact our team to find out if your temporary workforce employment service is HMRC compliant today.