Preferred Supplier List: A Recruiter’s Guide

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As a recruitment agency, setting up a Preferred Supplier List, or PSL, is recommended to protect your business.

What is a Preferred Supplier List?

In general, a Preferred Supplier List, or PSL, is a directory of suppliers that you can use without incurring significant risk. This is due to having stringent requirements in place, audit processes and guidelines to follow to this ensures you and your employees are only using compliant providers.

Why should recruitment agencies operate with Preferred Supplier Lists?

When recruitment agencies work with umbrella companies, many choose a list of reputable, compliant providers to refer their contractors to.

PSLs also allow you to ensure your providers are:

  • Compliant
  • Financially robust
  • Providing service levels that you are happy with

Setting up a PSL can take time, but will save you time in the long run as you take a front seat in managing your supply chain.

There is no recommended length for a PSL, however lowering the number of umbrella companies will significantly lower the risk of non-compliance. A PSL can consist of one, two, or as many as necessary. It all depends on the size of your agency, the number of contractors you place, and your requirements.

However, managing too many umbrella companies can quickly become an issue for any recruitment agency. This is due to the need to regularly audit your supply chain to ensure continued compliance.

What happens if an agency does not have a PSL?

If agencies choose not to use a PSL, then they could risk working with a non-compliant umbrella company.

This potentially puts you at risk under the Criminal Finances Act. The Criminal Finances Act came into effect on the 30th September 2007, and features offences highly relevant to recruitment businesses:

  • There must have been an offence of tax evasion under UK or foreign law
  • The tax evasion must have been facilitated by an employee, agent, or those performing services for the business
  • The business must have failed to prevent the facilitation of tax evasion

By not having a PSL, audit procedures will not be completed on behalf of that agency, and the above offences could be committed. Ignorance is no defense under the Criminal Finances Act. It is important to note that recruitment agencies are liable for employees or connected persons who refer to tax evasion schemes even if they are unaware that it is happening.

Thankfully, offences are avoidable as there are ways of ensuring that your PSL is compliant.

How are PSLs audited?

Recruitment agencies must have processed in place to ensure all businesses on their PSLs are fully compliant. One way to do this is to look at third part accreditation.

Umbrella companies accredited by the FCSA are subject to a stringent audit process every year, which is completed by an independent auditor. We would recommend only using companies who are FCSA accredited, and that have had extensive experience in this field.

Using non-compliant umbrella companies can have significant consequences for the recruitment agency, such as reputational damage and a long line of unhappy contractors, who ultimately may find themselves on the wrong side of HMRC with a hefty tax bill to pay.

Add Parasol to your PSL

As one of the largest umbrella companies in the industry, Parasol is a name you can trust. We’ve been helping agencies and their contractors for almost twenty years, so you know they’ll be in safe hands when you use Parasol.

Speaking of lists, compliance is at the top of ours. We’re an accredited member of the FCSA, and stay up to date with every legislative update. Sit back and relax, safe in the knowledge that your contractors are being looked after whilst remaining fully compliant.

For more information on putting together your PSL, or adding us to your existing PSL, simply get in touch with us.