Following on from our brief mention of the Key Information Document (KID) in our article “The Essential Guide to IR35 April 2021 – Part 5”, we see value to agencies and contractors alike in explaining the KID in a bit more detail.
The requirement to produce Key Information Documents (KIDs) was introduced on 6 April 2020, the initial proposed date for the rollout of the off-payroll working (IR35) changes to the private and third sectors before the Coronavirus pandemic pushed the rollout back to 6 April 2021.
We look at the role the KID plays, who is responsible for it, what information it is required to include, and when it needs to be updated.
Key Information Document (KID) –who is responsible for it and why is it required?
A KID is an obligation on agencies to provide information about any deductions, including fees, to which agency workers – including via umbrella companies – are subject. In short, to make it clear to the agency worker what their take-home pay would be.
The KID is detailed in Regulation 13A of the Conduct of Employment Agencies and Employment Businesses Regulations 2003, which came into effect on 6 April 2020.
“Regulation 3 inserts a new regulation 13A in the 2003 Regulations. This requires the employment business to give a key information document to a person seeking work through the business. The document must be given before the business reaches an agreement on terms with that person.” (1)
This applies to individuals and to those engaged through umbrella companies and personal service companies (PSCs). This means that it is the agency’s responsibility to prepare the KID and provide a copy to the umbrella company and the individual and is not the umbrella company’s legal responsibility (2).
The link below explains the rationale for the KID with some examples of documents to be used to provide information to agency workers, workers paid by an umbrella and workers providing their services via a PSC: https://www.gov.uk/government/publications/providing-a-key-information-document-for-agency-workers-guidance-for-employment-businesses
What information should be included in a KID?
The KID should provide agency workers with clarity as to what their take-home pay is and best-practice advice is that it should be bespoke to each worker. As such, the KID should be a concise document and include key aspects of an employees’ role as follows:
- Name of the employee – Not specifically required but ensures the Key Information Document is personal to the individual;
- Nature of the contract – As an umbrella employee, you will be engaged on an employment contract;
- Who pays the employee – e.g. Your umbrella employer if working via an umbrella company;
- Gross rate of pay* – Your hourly rate or set wage amount;
- Payment dates and intervals* – Usually when your umbrella company is paid by the agency;
- Statutory deductions – This normally comprises employer’s National Insurance Contributions, (NICs), employers pension costs, Apprenticeship Levy;
- Other monies retained from the employee’s income – e.g.: umbrella company weekly/monthly margin;
- Minimum rate of pay to you – The minimum rate of pay is the National Minimum Wage;
- Other deductions from your gross pay required by law – Employee’s NICs, employee’s pension, student loan deductions (if applicable);
- Any other fees for goods and services;
- Any employee benefits – e.g.: cycle to work scheme, gym membership, etc;
- Leave entitlement – This amount is generally advised to be “kept to one side” on each pay slip for when you are on leave.
*In point 3, section C(iv) of the Regulation 13A of the Conduct of Employment Agencies and Employment Businesses Regulations 2003, it states the KID must include the rate of remuneration payable to the work-seeker; or the minimum rate of remuneration the employment business reasonably expects to achieve for the work-seeker; and the intervals at which the remuneration will be paid.
This means that, as far as possible, the KID needs to be a rate-specific document.
Other key information to be included is the details of all deductions, including PAYE and National Insurance Contributions (NICs).
When will the KID require amendments?
The Conduct Regulations require a revised KID to be issued no later than five working days from the day the change occurred. The revised KID must state the date on or after which the change takes effect.
A new KID is required when the facts within the KID change, such as:
- A new deduction being introduced (e.g. contributions to a private healthcare scheme)
- A change in the payment intervals
- A change in the intermediary or umbrella company paying the worker
Key Information Documents will likely need to be reissued once the rise in National Insurance Contributions takes effect in April 2022 and when the Health and Social Care Levy is introduced.