Glossary

Employment agencies & businesses

Government departments often differentiate between employment agencies and employment businesses. The Department for Business, Innovation and Skills categorises employment agencies as those companies that find people permanent work, simply fulfilling a recruitment role. It defines employment businesses as those companies (often known as temping agencies) who are responsible for placing workers in roles with a client of theirs, usually on a temporary basis. Employment businesses are responsible for the payment of the worker and for dealing with employment rights such as annual leave.

Freelance workforce

This is sometimes referred to as the ‘flexible workforce’. Working on short term, interim contracts, which can last anything from 1 month to over a year, professional freelancers have an important role to play. Many different industries find there are times when additional resource is needed, for example, the IT, engineering and creative industries often require key skill sets for particular short term projects, while in other industries, notably healthcare and teaching, permanent staff are often in short supply and freelancers fill the gaps.

Limited company service

This service (offered to freelancers by FCSA members) covers the primary support services needed to help an individual in business on their own account run their own limited company. It traditionally includes administrative support (invoicing, record keeping, and document administration), bookkeeping, accounting, production of business financial information, company secretarial services, production of required corporate returns and corporate and personal tax advice, together with legal advice and support covering employment status.

Offshore structures

Freelancers who are unhappy with the employment structures (such as umbrella companies or limited companies) available to them in the UK will often seek alternate arrangements abroad. Freelancers may choose to use these structures because they offer greater flexibility in the balance between employment rights and the amount of pay they receive. In the simplest sense, freelancers may choose structures that provide little or no employment protections or mandated employment benefits (such as those that will be provided under the Agency Workers Directive). In return, the cost of those protections is not reflected in their pay, allowing them to earn more. The result is that these freelancers, who work in the UK, do not pay tax, leading to a loss in tax revenue for the Exchequer.

Open book accounting

Open book accounting involves companies publishing information whose availability is often restricted on the grounds of commercial sensitivity. This approach is based on the view that transparency will lead to greater accountability and help the service providers sector and the Government to work closely and openly together in a relationship of mutual benefit. It is this approach that underpins the FCSA Codes of Conduct.

Service provider sector

The service providers offer tax, accountancy and administrative support and advice for the professional freelance workforce. The sector provides support to workers across a variety of sectors, all of whom choose to operate as either independent businesses, limited companies, under umbrella companies (who provide employment and payroll services) or as self employed individuals.

Umbrella company service

Under this service (offered to freelancers by FCSA members), umbrella companies employ the freelancer under the terms of a full time contract of employment. The umbrella company is required to provide full employment rights such as access to pension schemes, paid leave for holidays, maternity, paternity, sickness etc. The umbrella company is also responsible for the provision of appropriate insurance. The umbrella company also undertakes all of the necessary administration such as checking visas, invoicing the agency for any work undertaken, collecting payment and calculating the amount to be paid to the freelancers, after withholding the appropriate PAYE tax/NIC deductions.

Vulnerable workers

Our experience tells us that the best way to understand the freelance labour market is recognise that it is multi faceted. FCSA is currently working with the Department for Business, Innovation and Skills to develop ways of identifying those workers who may be vulnerable to exploitation. A number of characteristics can identify potentially vulnerable workers, including job type, pay rate and skill level.