What does it mean to be a not-for-profit accreditor?

One of the distinctive elements of the Payroll Compliance Authority (PCA) is the fact that it is a not-for-profit organisation. In the UK, there are many accreditors across various industries that are set up as not-for-profits or charities. For example, the Royal Institute of British Architects, the British Accreditation Council or the Quality Assurance Agency for Higher Education. However, in the outsourced payroll industry, being not-for-profit sets the PCA apart from other compliance accreditors.

This article outlines what is unique about being a not-for-profit accreditor and why it is significant for PCA members now and in the future.

What is a not-for-profit organisation?

As the description suggests, the overriding purpose of not-for-profit organisations is not to make money, but rather to provide a service or help people in some way. These organisations need to make enough money to cover running costs, including appropriate renumeration, but any surplus is reinvested into growing the business.

As stated in the PCA's Articles of Association, publicly available on Companies House, the organisation does not trade for profit and 'the income and profits of the Company, however derived, shall be applied solely towards the promotion of the objects of the Company'.

These Articles of Association are the set of documents that define the purpose of the PCA and the regulations that govern it.

What does this mean in practise?

Before any funds can be reinvested, the organisation's costs need to be covered. The PCA offers legitimate umbrella operations the opportunity to demonstrate their commitment to unequivocal compliance and set themselves apart from the fraudulent players in the sector, activity that has been well-documented in recent years. This is an ongoing process that involves a rigorous audit with repeat annual audit checks and requires an efficient framework to manage it. To guarantee compliance, the PCA is working with organisations at the forefront of their fields.

Member fees cover the cost of this thorough audit process, carried out by one of the 'big four' accounting firms in a process comprising a minimum of 150 elements. The audit analyses every payroll model and scrutinises all documentation and statutory obligations. The process typically takes three months and is supported by legal advice from multinational law firm, Fieldfisher.

Over time, and as membership grows, any profit beyond these costs is reinvested straight back into expanding PCA services and support, to the benefit of its members. For example, the PCA will set up a whistleblowing line enabling agency workers to report fraudulent umbrella activities in a completely anonymous way. This is a service which is currently not provided by any other organisation.

As the PCA grows its membership base, its not-for-profit credentials also mean it will look to lower membership fees wherever possible. The organisation's purpose is not to make money, but to help clean up the sector through self-regulation, so any steps the PCA can take to support this is part of fulfilling this mission.

Why is the PCA taking this approach?

The PCA's primary motivation in becoming an accreditor in the payroll space is to offer protection to recruitment companies and workers put at risk by unscrupulous umbrella companies and to provide the opportunity for legitimate operators to show their compliance. 

Members of the PCA Board of Directors are not involved in payroll services and remain independent and without vested interest in this regard. Each director has chosen to become involved in the PCA to address the issues in the payroll sector, not because they look to make a profit themselves, but because they wish to be part of the solution, particularly in the absence of government regulation.

The organisation's CEO, Paul Newsham, is a Chartered Accountant with more than 30 years of experience who has ensured that the organisation is set up in a meticulous and transparent way. In doing so, it was clear that operating as a not-for-profit, in full cooperation with the business principles that this involves, would be the most appropriate way forward for the PCA and, most importantly, its membership.