Professional Passport, the UK’s largest independent assessor of payment intermediary compliance, has issued a critical warning to the recruitment industry about a new and potentially fraudulent payment practice known as ‘Ghost Payroll’. This scheme poses significant risks to recruitment agencies and their contractor placements.
The Ghost Payroll scheme has been identified in two primary forms. In the first, payments are funnelled through undisclosed secondary companies. The second involves hidden payrolls that conceal the true taxable income of contractors. Recruiters should be on high alert for red flags such as discrepancies between contract details and actual payment sources, or payslips showing taxable pay at or near National Minimum Wage despite higher assignment rates.
Her Majesty’s Revenue and Customs (HMRC) has implemented sophisticated detection methods to identify these schemes, including cross-referencing Real Time Information (RTI) submissions with quarterly reports from recruitment companies. This increased scrutiny puts recruitment agencies at risk of potential legal and financial liabilities, as well as damage to their reputation and client relationships.
“The Ghost Model is a new and concerning development for the umbrella industry,” said Crawford Temple, CEO of Professional Passport. “The landscape has shifted. It’s no longer a question of if HMRC will detect these schemes, but when. Recruitment agencies need to be proactive in ensuring their contractors’ payment arrangements are above board.
“To mitigate these risks, recruitment agencies must take proactive steps,” Temple adds. “It’s crucial to thoroughly vet all umbrella companies and payment providers, being particularly wary of “umbrella brokers” promising high-return options. Educating contractors about the risks of these schemes is essential, as is implementing robust compliance checks for all payment arrangements.
“I would urge recruiters to advise contractors to scrutinise their payment arrangements carefully and encourage them to report any concerns or discrepancies immediately.”
“Moreover, working closely with Professional Passport and sharing information can help recruiters and the whole supply chain to stay compliant, as well as maintaining the strength of the accreditations. Partnering only with accredited and compliant umbrella companies and implementing regular audits of their supply chain is key to protecting both their agency and contractors.”
