Preferred supplier lists explained

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As a recruiter, it’s a great idea to set up a preferred supplier list (PSL) to protect your business. Not only do they give you valuable insight into the workings of your supply chain, it also allows you to ensure your providers are:

  • Compliant;
  • Financially robust; and
  • Genuine employers of flexible workers

Although the process of setting up a successful PSL system takes time, it’ll help you create a proactive approach to supply chain management.

Why should I consider a PSL?

The umbrella and professional employment organisation (PEO) market has changed a lot in recent years, increasing its focus on compliance. What’s more, legislative changes such as auto-enrolment and onshore intermediaries mean you have to be absolutely certain that the providers you work with are genuine employers.

By failing to carry out the necessary checks, you could get caught up in controversy if the umbrella is deemed to be non-compliant. We’ve already seen some agencies forced to shoulder the blame when companies they associate with go out of business due to compliance failures.

What should I consider when drawing up a PSL?

The first thing to do is look at the financial stability of potential providers. This should be fairly easy, as compliant businesses will be more than happy to provide the relevant information.

It’s also a good idea to check out the compliance and ethics record of your providers – as using rogue firms could put your own business at risk if they get caught.

What’s more, the nature of the recruitment industry means that providers get to see a lot of your data so it’s essential that you know what they’re doing with this information and how they are keeping it secure. You don’t want angry candidates knocking at your door because their information has gone AWOL!

You should also investigate whether your suppliers are wholly or partly based overseas. HMRC has recently taken an increasingly hard line on tax avoidance, meaning unscrupulous companies could end up disappearing overnight. If this happens, you may find yourself facing a hefty bill for unpaid tax.

Finally, it is worth checking your providers’ credentials and professional accreditations. Membership of the Freelancer and Contractor Services Association (FCSA) is a good place to start as they have the backing of a number of key industry bodies. These include HMRC, the Association of Independent Professionals and the Self-Employed (IPSE), the Association of Professional Staffing Companies (APSCo), the Confederation of British Industry (CBI) and the Recruitment and Employment Confederation (REC).

The FCSA operates a strict and transparent code of conduct that is backed by an ‘open-book’ policy and an annual independent audit by one of the ‘Big Four’ accountancy firms. The results of this audit are presented to HMRC, meaning bad practices can’t be swept under the carpet.

Why Parasol?

As one of the largest and most well-respected umbrella companies in the industry, Parasol is a name you can trust to be top of your PSL. With 15 years’ experience in the business, we’ve built up an in-depth knowledge of what makes contractors tick, so you know they’ll be in safe hands.

We’re a founding member of the FCSA, meaning compliance is at the heart of everything we do. This ensures there’ll be no nasty surprises waiting around the corner, giving you peace of mind that your contractors won’t be the only people that are looked after – you will too.

At Parasol, we’re committed to being with our contractors and recruitment partners all the way, offering expert advice whenever needed.

For more information about constructing a PSL, or to join us as a partner, contact us today on 01925 644423 or email

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