Joint Employment

VAT concession

This model was another variation of PAYE that we added in 2019 after it was gathering pace as an answer to the VAT problem found in the supply chain of healthcare recruiters and Umbrella providers.

In normal practice an agency would charge VAT to an end-client, but the ‘Nursing Agencies Concession’ is a VAT exempt sector for certain workers providing medical care for organisations like the NHS. This meant that agencies were not charging VAT upwards in the chain but were still having to pay VAT down the chain on payroll costs when using an Umbrella provider, therefore creating a cashflow problem. There was also a misunderstanding from certain Umbrella providers that they could operate in the standard agency-provider way and get away with not charging VAT simply because it was healthcare/nursing specific. This was proven as being non-compliant and a solution was needed.

That solution came through the agency/client and the provider becoming ‘Joint-Employers’ or sharing the employment responsibilities and having this confirmed by a specific Employer Tax Reference number per each arrangement. Through a Joint Employers agreement, an agency or end client can see vast weekly savings from the reduction of VAT on invoices. Payments for the workers’ earnings, holiday pay and employment costs between the joint employers are classified as disbursements and are therefore exempt from VAT. The only element of payroll that remains eligible for VAT is Orbital’s admin fee.

Benefits of the JE model:

  • Free for the worker – no margin taken from the Gross pay.
  • Option to run the payroll as either a standard PAYE or Umbrella PAYE rate.
  • Fully outsourced service as the payroll provider engages with the worker on an employment contract with variations for ‘employee’ or ‘worker’ status.
  • Specific Employer Tax Reference number confirms the collaboration between agency/client and provider.
  • Agency/client are free to concentrate on their standard day-to-day duties while the provider looks after the normal employment, back-office and payroll functions.
  • Cashflow savings are made with no VAT charged on the agency/client invoices for full earnings plus employment costs. Provider’s fee is the only Vatable element. Savings can also be made on insurance, pension, app levy and internal payroll costs.
  • Employee access to various savings and benefits through Orbital Rewards.

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