The introduction of the IR35 Off-payroll working rules into the private sector this April is causing many recruitment businesses to reflect on areas fundamental to their operating model.
The new legislation means that most workers who are currently engaged via their own limited company will no longer be able to do so from the 6th of April 2021 and instead the workers will be engaged by a form of PAYE employment typically via you, the agency, or via an umbrella business. This has wide reaching implications not least on the cash flow cycle of recruitment agencies.
Your candidates engaged via a limited company will raise invoices at the end of the working period, often monthly. These are currently paid by the agency up to 30 days following. As your candidate moves to a PAYE employment model the payment for work is typically weekly, not monthly, and therefore payment is brought forward by a few weeks and will in most instances cause an increased need for credit.
We have already seen some recruitment agencies requesting longer payment terms from their umbrella companies, this may be a short-term solution but will not support an agencies long term growth.
At giant finance+ we provide 100% invoice finance solving this finance gap and we also eliminate agencies employment risk through the use of our many giant employment solutions such as giant umbrella, PEO and giant IR35 fee payer!