The British Association of Social Workers (BASW) has launched its own umbrella company aimed at offering agency practitioners a trusted means of handling their financial arrangements.
Social Work Employment Services will cater exclusively for social workers who are also BASW members. Like other umbrella companies, it will, in effect, employ locum members, providing them with employment rights and insurance cover, handling invoices and other administration and paying taxes and national insurance contributions to HMRC.
According to the association, it has been set up “in direct response to members’ request for a trusted umbrella organisation, which is professional, ethical, and understands the complexities and challenges of the industry”.
The firm has been set up as a separate organisation to BASW – costing participants £15 per week – with excess cash being donated to BASW’s own membership services.
Kate O’Regan, BASW’s head of business development and one of Social Work Employment Services’ directors, said the new firm would provide a different option for social workers.
“One unique thing is that we have signed a formal recognition agreement with [BASW partner] the Social Workers’ Union,” O’Regan told Community Care.
She added that Social Work Employment Services would be working with the union to raise the profile of agency workers and address the issues they face, such as inferior working conditions or higher caseloads relative to staffers.
O’Regan said the umbrella company would also be developing a professional development package for social workers who sign up.
BASW chief executive Ruth Allen first floated the idea of providing an umbrella company “alternative” back in 2017, a time when some agency social workers had criticised the association for providing insufficient support around tax law changes that took many by surprise.
That April, amendments to ‘IR35’ tax rules came into force in the public sector, which meant that locums, in general, could no longer lower their tax liabilities by operating as limited companies, forced many agency social workers, who had long been able to lower their tax liabilities by operating as limited companies, to change their arrangements, bringing take-home pay into closer alignment with directly-employed peers.
The changes fuelled significant interest among locums in working for umbrella companies offering tax rates well below what would be levied through PAYE, in order to maintain take-home pay levels.
While most umbrella companies are perfectly legal, such offers involved creative tax arrangements that fell foul of HMRC. Most notably, many promoted schemes that paid out part of earnings as a ‘loan’, which would not be subject to tax or national insurance and would never be repaid.
The taxman gave notice in summer 2018 that it would be implementing a new charge targeting loan schemes from April the following year, which has since been subject to an independent review and which the government published updated guidance on this week. A Community Care survey of 250 agency social workers conducted around the time of the 2018 announcement found that a third were concerned about the level of tax they had been paying.
Over the past few years, many locums have been hit by large tax bills – with the vast majority now far more diligent in seeking out compliant umbrella companies such as BASW’s. With that in mind, O’Regan acknowledged that Social Work Employment Services’ launch could have had more impact had it come sooner.
Carolyn Walsh, a tax expert who has advised BASW on agency workers’ financial affairs, and offers social workers an umbrella company and advice services via her CWC Solutions firm, said that establishing itself would be the the new organisation’s main challenge.
Importantly, the new venture is accredited by Professional Passport, one of a small number of bodies recognised by the industry as providing competent auditing of providers’ compliance, although not so far by the more well-known Freelancer and Contractor Services Association (FCSA).
“Over the last few years, social workers have learned to trust umbrella companies that are FCSA members,” Walsh said. “If social workers have trust in BASW, they may have trust in SWES.” But she said the crucial test would be around how many recruitment agencies accept the new company onto their preferred suppliers list (PSL).
O’Regan said that Social Work Employment Services would shortly be added to the PSL of its first major social work recruiter.
“In our work with agencies, we want them to see benefits of partnering with us – if they are going to talk to a director and say we are on their PSL, they are in part with BASW, a trusted and respected brand,” she said.
Tania Bowers, the general counsel at APSCo, a membership body representing recruiters, said BASW’s new venture would need to “build relationships”.
“For social workers this is audited and gives them a straightforward option,” she said. “My guess is our members will become aware and decide whether to add it to their PSL – it seems a good option but is not the only one.”
- IR35 is a piece of legislation to is designed to prevent tax avoidance for any contractor working for a hiring organisation via a limited company or personal services company. Locums subject to it must make a payment to HMRC roughly equivalent to the taxes that would have been paid had they been employed by the hiring organisation.
- Umbrella companies employ contractors on permanent contracts, meaning that the individual receives all 84 statutory rights and employment benefits whilst also having the flexibility to work for a series of different clients. They collect payment and calculating the amount to be paid to the freelancers, ensuring that appropriate PAYE tax and national insurance contributions are paid to HMRC.
- Personal services companies have sole directors/shareholders who supply services to organisations, often through a recruitment agency. If arrangements are not covered by IR35, the worker will be paid through a mix of salary and dividends; within IR35, they are paid a salary.