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  • Crawford Temple

Why are Key Information Documents so Important for Recruiters?

Key Information Documents (KIDs) were introduced in April 2020 to provide transparency to contractors on how they will be paid when they undertake an assignment. For recruiters, they are a vital link in the chain, outlining the precise relationship between them and any contractors they place in the workplace. Here, we explore why they are so important.

What KIDs contain

KIDs were introduced to give contractors a realistic snapshot of both the work they are expected to do and the amount of pay they can expect to receive, and offer them real-time information in order to reduce confusion about the ways in which they can be paid – whether that’s directly to their personal service company (PSC), via agency PAYE or through an umbrella company.

According to the legislation, a KID must be no longer than two A4 pages, and written in easy-to-understand language. It must be provided to the contractor before the terms of engagement are agreed, and outline information which is key to their employment.

The document must include the following information:

  • The identity of the contractor

  • The nature of the proposed work – the job specification

  • The type of contract

  • The number of hours that the contractor is expected to work

  • The remuneration that the contractor can expect to be paid after deductions

  • Any fees that the contractor will need to pay, such as a DBS check

  • Who the employer is

  • Who is paying the contractor

  • When the contractor will be paid

  • Statutory deductions such as tax, National Insurance and any other deductions (such as student loan repayments)

  • Non-statutory deductions such as private healthcare or gym membership

  • Other additional benefits

  • Holiday entitlement

Although recruiters are responsible for providing a KID to a contractor, they may rely on information provided by another party, for example an umbrella company if the worker selects to operate in this way, . Templates for such documents are available online.

If the facts contained in the KID change, the recruiter must issue a new KID to the contractor. If terms have already been agreed, this must be within 5 working days of additional changes.

The impact on recruiters

There is no doubt that KIDs represent an additional administrative responsibility for recruiters. For example, potential contractors may have to be issued with three KIDS, depending on their pay arrangements – either through an agency’s own payroll, through an umbrella company or via a contractor’s own PSC..

As the KID is sent to the contractor via the recruiter not the umbrella company that the contractor has engaged, the PAYE calculations will be different from standard PAYE and, therefore, the recruiter must liaise closely with the umbrella company to ensure that any paperwork is accurate and representative of that specific provider’s arrangements.

Events which cause a material change to the worker’s pay (usually new deductions such as auto-enrolment into a company pension) also add to the bureaucratic burden on recruiters. In the instance of auto-enrolment into a pension scheme, for example, two KIDs will need to be provided to the contractor, either at the beginning of the contract (showing both the initial position and the post-enrolment one) or before the enrolment commences. In either case, it involves even more paperwork for the recruiter.

The results

While undoubtedly adding to recruiters’ workloads, KIDs are intended to have a positive outcome. Umbrellas and recruiters now have to work more closely together than ever before and the Government believes that this will increase transparency within the industry. HMRC also states that KIDs will provide greater understanding for contractors of the impact of umbrella or limited company working on both net and gross pay.

Their ultimate aim in enforcing KIDs is to make the identification of non-compliant practices easier – making it simpler for contractors to identify non-compliance before engaging with companies who operate such practices, adding another layer to the protection of contractors and recruiters in matters of taxation, and eventually eradicating them completely.

If you have questions about KIDs or are looking for further information on working with a compliant provider, get in touch with Professional Passport.

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