Recruitment ERP Consultant, UK

PAYE, umbrella or limited company: why the route matters

In a typical British agency, three contractors on the same client site can be paid three different ways. One is a PAYE temp on the agency's own payroll, entitled to holiday pay and enrolled in a workplace pension. Another works through an umbrella company that employs them and invoices the agency. A third trades through a personal service company, which sends the agency an invoice or receives a self-billed one.

Each route changes what the back office must do:

• PAYE: hours go to payroll, employer costs are part of the margin calculation, and holiday pay accrues on the hours worked.
• Umbrella: the agency pays an umbrella invoice, so the system needs an approved list of umbrella providers and a check that the invoice matches the approved timesheet.
• Limited company: payment is a supplier payable, with company and VAT details held and checked, plus the off-payroll position recorded where it applies.

Employment status and tax treatment are decisions for your legal, tax and payroll advisors, and the rules in this area have changed more than once. I build their written guidance into required fields and approval steps, so the route chosen at placement drives everything after it. The sector process map sits on my recruitment ERP page.

Off-payroll status records and the agency in the chain

Where off-payroll working rules apply to a contractor engaged through their own company, the end client is generally responsible for deciding employment status for tax purposes and passing that decision down the supply chain. The agency then has to act on it: deduct tax and National Insurance before paying the contractor's company where the role is inside the rules, or pay gross where it is outside. Exemptions, such as for some smaller clients, change who decides.

I am not the right person to judge any individual determination. My part is making sure the system holds the evidence your advisors want you to keep:

• the determination received for each assignment, its outcome and the date it arrived
• a block on processing payment until a determination is recorded, where one is required
• a record of contractor disagreements and how they were resolved
• assignment extensions that trigger a fresh check rather than inheriting the old answer

Agencies that place contractors with public sector bodies and private clients often run both treatments side by side. Clear fields and reports mean the finance team can answer a question from a client or from HMRC with a record, not a reconstruction from email. Requirements like these are the core of my requirements gathering work.

Self-billing, VAT and paying limited company contractors

Many UK agencies pay limited company contractors on self-billed invoices: the agency raises the invoice on the contractor's behalf from the approved timesheet, under a self-billing agreement. It saves chasing invoices, but it puts responsibility on the agency to get the details right. VAT registration status, VAT number and the agreement period all need to be current, and the invoice must follow the format your accountant has confirmed.

In the specification I include:

• self-billing agreements stored per supplier with start and review dates
• a VAT status check before each pay run, so an unregistered contractor is not invoiced with VAT
• a dedicated numbering sequence for self-billed invoices
• remittance advice sent automatically once payment is made

Client invoices bring their own VAT questions, usually around expenses and overseas clients, and every route must end in figures your Making Tax Digital software can submit. I keep tax logic in the ledger rather than in the CRM, so the VAT return is built from one set of records. Broader UK tax context is on my UK ERP consultant page.

Transfer fees, rebates and the conduct regulations

Permanent recruitment in the UK runs on terms of business agreed with each hirer: the fee basis, the rebate scale if a candidate leaves early, and what happens when a client takes on a temp permanently or through another agency. The regulations governing the conduct of employment agencies affect how transfer fees can be applied and what clients must be offered in place of them, and your terms should be drafted or reviewed by a recruitment lawyer.

Once those terms are fixed, the back office should apply them, not a consultant's memory. I define:

• a terms record per client, linked to every placement and assignment
• a rebate schedule that calculates the credit due from the leaving date and the start date
• an alert when a temp's assignment ends because the client has hired them directly, so a transfer fee or extended hire period is considered
• commission clawback rules that mirror the rebate, so recruiters and finance agree

Testing covers a full rebate, a partial rebate, a transfer fee and a waived fee approved by a director. The UAT scripts are written from your own recent placements so the edge cases are real ones.

Weekly pay, invoice finance and choosing the system

A growing UK temp desk usually pays contractors weekly while clients pay on their own terms, so many agencies use invoice finance or a back office funding provider. Funders care about the same things a good finance director does: invoices raised promptly from approved timesheets, accurate aging and clear disputes handling. A system that delays invoicing to month end costs money on every placement.

When it comes to software, UK agencies choose between three shapes: a specialist recruitment back office covering timesheets, payroll and billing; a general ERP configured for staffing; or Xero or Sage with a timesheet portal and a payroll bureau. I score each shape against your contractor mix, payroll arrangements and client terms rather than against a feature list.

Migration covers active assignments and rates, contractors with outstanding pay, open client invoices, self-billing agreements and placements still within a rebate period. I deliver remotely, with workshops held while British offices are open and short screen recordings that desk consultants can watch between calls. For ledger-side detail see Zoho Books in the UK, and read the UK hub for how engagements are set up.