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Odd one - signing bonus paid by recruiter

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I have a client who finds software developers for companies and it usually works in a similar manner to a recruitement agent with a fee paid to them from the company but they have an odd scenario where a candidate has agreed to a placement but has insisted on a 25% "signing on bonus" which is apparently common in America.  Candidate is UK resident but works a lot with US software companies hence being used to this bonus.

The company has refused to pay it however my client has said they will pay it to the candidate out of their fee from the comapny as they want to get the deal done as theyve been promised future work.

Position will be standard employment/PAYE.

My client wants to get the candidate to invoice their ltd company (candidate doesnt have their own co or any self employment) for the bonus amount but I think its probably going to have to be PAYE via my clients company?  Any pointers appreciated thanks.

 

 

 

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paddle steamer
By DJKL
26th Aug 2020 11:42

If your client is paying it out of their commission earned from the company with which he has been placed I would consider arranging for that company (his new employer) to pay the sign on bonus via PAYE and your client (the agents) reducing their fee to the company or giving them a credit note for the same amount- you will also need to consider the NIER cost etc.

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By MissAccounting
26th Aug 2020 11:47

Thanks for the quick reply DJKL however I should have put in the original post that my client wants to keep the bonus away from their client so that they then dont assume that they are charging too much. Seems a potential slippery slope to me but you know what clients are like...

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paddle steamer
By DJKL
26th Aug 2020 11:54

Absolute recipe for disaster- they want to do more business in future with this client yet want to run an undetected deal with the new employee they have placed, if your client believes this is going to stay a secret they are idiots.

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By jonharris999
26th Aug 2020 12:12

I do not agree that your client should be in a PAYE arrangement with the candidate. There isn't any employment happening between them. If there were, there'd then be lots of other things to think about: contract of employment, entitlement to holiday, pension etc etc etc.

The simplest way to think about this is that the candidate has provided your client with the ability to earn a fee, and been paid a cut for it. That's sub-contracting. Candidate should invoice and be paid gross. Your client should set out the position clearly in writing and tell the candidate that they are responsible for accounting to HMRC for tax and NI as necessary.

The candidate not having/not wanting to register for SA is their problem, not your client's problem. If the plumber says to me at the door "I don't want to register for SA", I do not put her on my payroll.

This is unusual, but it arises from the unusual circs that the employer aren't paying the candidate, and none of the three parties want the employer in the deal.

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By FCExtraordinaire
27th Aug 2020 21:28

Your client can pay the bonus to the candidate upon receipt of an invoice or a "a request or application" for payment from the candidate - its a placement income. It is up to the candidate to disclose on a self assessment the receipt of this money as a UK taxpayer. Alternatively, your client can issue a remittance advice for the above or issue this anyway, similar to that of a sub-contractor with the declaration that the candidate is responsible for paying his own tax and NI, detailing the NI number and the purpose of the payment. I would recommend its a bank payment and not paid to his sister, mum or other person.

Alternatively, it can be covered by a back to back contract or agreement. Your client is not responsible for any tax situation of the candidate and the candidate would declare it under the 'Other income & Losses' section of a tax return.

Re the PAYE route , your client may well incur NI on any payment with this. They could "employ" , make the payment and then P45 next day, but I would recommend an agreement that this was for the purpose of the payment and not employment which they both sign, if your client wanted to ensure the tax is paid and leaves the company taking on the candidate out of the situation.

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