Government scrutiny of external worker arrangements is at an all-time high. The immediate driver is tax. HMRC is working harder than ever to recover unpaid tax and National Insurance from across the supply chain, and the tools available to do so are getting ever sharper.
But compliance is only part of the story. Businesses that properly understand how their external workforce is engaged consistently find commercial benefits they weren’t expecting. Better rate control. Cleaner supplier relationships. Fewer invoice disputes. A more accurate picture of what external labour is actually costing them. The government scrutiny is the prompt. The upside is bigger than avoiding a fine.
So why aren’t more businesses looking?
Most CFOs are already juggling eight things at once — cash flow, forecasting, the board deck, the audit, the next funding round. External workforce spend is rarely the arm getting the attention, simply because there aren’t enough arms to go round. Worker data sits across different systems, processes are fragmented and without true ownership, and until now, no one has really been pushing to know more. The curtain has stayed closed.
These five questions are a good place to start pulling it back.
1. Do you know what you are actually buying?
The invoices are landing in accounts payable. But do they reflect what was actually agreed? Are rates consistent across the business? Is the same work being charged differently in different parts of the organisation? In most businesses, Finance can tell you what was approved. What’s harder to answer is whether that spend represents value and whether anyone is in a position to challenge it if it doesn’t.
2. Do you know how many suppliers you are using?
There is usually a list. There is rarely an accurate one. The approved supplier list and the list of suppliers who actually raised invoices in the last twelve months are frequently very different documents. Local relationships, legacy arrangements and managers making their own calls mean the real number is almost always higher than expected and some of those suppliers have never been properly vetted.
3. Do you know whether any of your workers are engaged through umbrella companies?
Most businesses don’t. Umbrella arrangements tend to be invisible at the client level. They sit between the agency and the worker. But they carry real risk, and with umbrella reform underway and joint and several liability in play, it is worth understanding your exposure.
4. Do you know whether your worker classification decisions are documented?
IR35 has been on the agenda for years. Most businesses have had the conversation. Far fewer have documented decisions for each engagement that would stand up to scrutiny. If HMRC came asking, the question isn’t whether you thought about it. It’s whether you can demonstrate that reasonable care was taken.
5. Do you know how long your external workers have been working with you?
In businesses that have scaled quickly, it is not uncommon to find contractors or agency workers who have been continuously engaged for two, three, sometimes five or more years. Long tenure creates disguised employment risk and it almost never surfaces from the Finance function without someone going looking for it.
If you can answer all five confidently, your external workforce is in better shape than most.
Written by:
Founder & Workforce Governance Advisor
I’m an art school graduate who ended up running a record label in Lisbon before finding my way into PMO. Not the most obvious path, but looking back, the thread is obvious. I’ve always been drawn to complex, moving-parts problems and I’ve always wanted to work differently.
That second part matters. Workforce ecosystems are built around people choosing how they work, whether that’s as employees, contractors, consultants, freelancers or service providers. I found my way into this space because I wanted that freedom myself, and now I help organisations make it work better for everyone involved.
I founded RedWizard in 2014 after realising how fragmented workforce management had become. Different functions owned different pieces of the picture, but nobody owned the whole. Coming from a PMO background, I saw that fragmentation differently to most. Where others saw complexity, I saw an opportunity to create more visibility, better decisions and stronger collaboration.
Today, my work focuses on helping organisations bring clarity to workforce complexity. I work with leaders across HR, Procurement, Finance, Legal and Operations to design practical governance, operating models and workforce capabilities that improve how decisions get made and how work gets done.
I’m at my best where complexity, ambiguity and competing stakeholder priorities need turning into something that works in practice.