As a founder of Australia’s leading Contractor Management Organisation (CMO), I was disappointed to read about Plutus Payroll ceasing operations. It’s a tough industry in which to operate, with ever-changing regulations and strong competition with which to contend, so in that regard I can’t say that I was shocked. However, when details emerged last week about the scam that was allegedly being run by the company’s directors, I felt compelled to accelerate plans that would help set appropriate ethical standards and safeguard the industry. Our organisation prides itself on integrity. The time has come to ensure the same throughout our industry so customers and contractors can be assured of reliability.
On this occasion, it was Plutus Payroll who burst onto the scene only a few years ago, boasting their “Zero-fee Payroll for contractors and businesses”. Many contractors and businesses were lured, against advice on some occasions, and sought their services. It was unclear how the company was actually able to be financially sustainable without charging any management fees. The key justification (in their marketing collateral) being the on-selling of other financial services as their revenue generation model. We have since learnt, through information available in the media, that this is not the case.
When the ATO froze all accounts belonging to Plutus on April 27, its contractors didn’t get paid. Contractors quickly put pressure on their end client and also Entity Solutions (Plutus Payroll was a subcontractor to Entity Solutions) to pay them. However, details were yet to emerge and we were limited to act due to B2B contracts in place with Plutus. Prior to the enormity of the alleged scam hitting the news, we were being told it was a ‘commercial dispute’, so there was much caution in how to act. It was then revealed that the company’s directors had been accused of allegedly skimming parts of PAYG tax they were supposed to be paying on behalf of their contractors, now the subject of a major investigation by the Australian Federal Police and the Australian Tax Office. According to Shortlist, Plutus Payroll will be fighting the tax allegations. Notwithstanding what eventuates or is proven, the fact is that contractors and clients were left to pick up unnecessary pieces.
When a CMO like Plutus Payroll fails, the impacts on others are enormous. Aside from impacts on the industry, the consequences for contractors and their end clients are severe. Many organisations, including government departments, were unable to pay the contractors they had engaged. Families and individuals with financial responsibilities are reliant on this income to pay mortgages, rent and put food on the table. In some cases, such was the confusion that organisations were forced to keep their contractors away from the assignment until it was clarified whether insurance policies were indeed valid to cover the contractor whilst on site. This would have impacted both the earnings of the contractors and the output of the client organisation.
We, at Entity Solutions, have invested 18 solid years to build a compliant organisation through which organisations can safely engage contingent workers. In recent years, we have witnessed the demise of other CMOs who were new, small and disruptive in the marketplace, with motives not in the interests of the contractors or their end clients. Now, more than ever, there is a strong need for our industry to be comprised of respected organisations. When companies abuse the trust of their clients, just like Plutus Payroll allegedly has done, they tarnish the entire industry.
Pioneering an honest Contractor Management Industry in the aftermath of the Plutus Payroll scandal
Over the last few years, we have been exploring the prospect of establishing an association that enhances and broadcasts the values of CMOs and demonstrates to the customer community that all organisations within the industry operate under a code of conduct. This code of conduct would be reinforced by assurance of compliance and business sustainability.
With this in mind, along with our CEO Neil Merola, I recently travelled to the UK to meet with FCSA (the association established for this purpose in the UK) and we have committed to establish the same association in Australia. Entity Solutions is proud to be pioneering an association to protect our customers and those seeking to utilise other CMOs, and create a more honest industry, making it difficult for companies like Plutus Payroll to take advantage of unsuspecting contractors and their clients. The association will be supported and validated by independent compliance organisations including a leading accounting firm and our next step will be to garner the backing of the Independent Contractors Australia, of which I am the Vice President.
In the interests of preventing any further damage to the community through the engagement of dodgy CMOs, we list here some criteria that can assist you in your choice.
What you should be looking for in a CMO:
- Compliance Assurance – The CMO you work with should have in-house specialists to handle legal, migration, industrial relations, OH&S, insurance and taxation. These are core functions for a CMO. That should not be outsourced.
- Financial Assurance – Are they sustainable? Can they pay on time, every time? Do they pay their statutory obligations? Trust the judgement of your end client in the due diligence process as they carry out reference and credit checks. Corporate Customers should demand audited accounts from their CMO in the selection process.
- Brand Assurance – You will be associating your business with this organisation so ensure they have a trusted brand, obtain reference checks and validate they exist with well-established infrastructure. Ask yourself if they are a good cultural fit and do they exploit the same values as your organisation?
- Technology Assurance – Can your CMO’s databases and networks withstand stringent security testing? Keeping your organisation’s and contractors’ information secure is imperative.
Above all, if the deal sound too good to be true, it probably is. If you have any concerns about a CMO you are planning to or are already partnering with, it is best to do your research before making a firm decision. Check them against the criteria listed above and don’t be afraid to ask some tough questions.
At Entity Solutions, we pride ourselves on our compliance and integrity. If you have any concerns regarding your current arrangement, please feel free to contact us for further discussion on (03)9600 0333.
