Business Advice Temporary Labour

Employment Bureaux and Temporary Labour
- a new regulatory framework

The stated aim of Government is to provide temporary workers with greater protection and more flexibility to move from temporary to permanent work. The Regulations are also intended to safeguard hirers (both individuals and companies) against being provided with unsuitable temps. Failure to comply with the Regulations is not only a criminal offence, carrying a maximum fine of £5000, it is also possible for anyone
suffering loss as a result to sue for compensation.

Definitions
An employment agency introduces workers to a hirer who may then contract directly with a worker (so the contract is between the worker and the hirer);
An employment business contracts with workers and then supplies their services to a hirer (so the employment business has two contracts, a supply contract with the hirer, and a separate contract with the worker)

Important changes
There is a wide range of new restrictions and rules too extensive even to summarise here. However, if you deal with employment bureaux, the following areas are
particularly important:

Transfer Fees
Transfer fees are any payments charged by an employment business when a worker it has supplied takes up employment directly with the hirer, or is subsequently supplied to the hirer by another employment business. Historically, such charges have
often been penal, and have deterred hirers from permanently engaging workers who have been supplied to them on a temporary basis.

Under the Regulations, an employment business’ ability to charge transfer fees will be restricted. These restrictions apply with immediate effect to any new engagement of a temporary worker, and will apply to existing engagements after 6 July 2004.

The Regulations deal with three potential scenarios:

Changes to the handling of VAT
Under the new Regulations it is generally no longer possible for an employment agency to pay any money to a worker on behalf of a hirer who has contracted
directly with the worker. Historically, the incentive for pursuing such an arrangement was that the agency would only charge the hirer VAT on the introduction fee,
and not on the service provided by the workers. The Government has moved to prevent this type of arrangement in order to avoid confusion as to the employment status of such workers, and because generally it never intended organisations to avoid paying
VAT in this way. Note that certain sectors are exempted from this rule.

Currently, when an employment business supplies workers to a hirer, it can make use of the ‘staff hire concession’: instead of paying the workers’ salaries itself and then passing this charge, together with VAT, onto the hirer, the hirer can pay the workers’ salaries direct, incurring no VAT liability. Customs & Excise will review this concession in the 18 months following 6 July 2004, at the end of which the concession may be withdrawn. They have promised not to make any changes during that period.

Documentation
The Regulations require employment bureaux dealing with a hirer to agree certain terms and conditions to govern the relationship between them and for these to be recorded in a single document. Importantly, this should include the procedure to be followed if a temporary worker is supplied who proves unsatisfactory.

This ties in with the new requirements on employment bureaux to obtain and communicate information about temporary workers which might indicate that they are
unsuitable for any particular role.

Obligation to acquire information
Employment bureaux are now under an obligation to establish the identity and qualifications of any worker who is going to be introduced to a hirer, and to confirm
their willingness to work. Where the role requires certain professional qualifications or involves dealing with vulnerable people such as children, employment bureaux are required to obtain at least two written references and copies of relevant qualifications.

These must be disclosed to the hirer. Employment bureaux are under a general obligation to take all reasonably practicable steps to confirm that the worker is suitable
for the position concerned.

In any case where an employment bureau introduces a worker to a hirer, it must ensure that it provides to the hirer all the information it has obtained about the identity
of the worker including experience, training and qualifications.

Hirers should be aware that they will (or should) be required to provide details of the role which they are seeking to fill, including details of any risks to health and safety, the steps taken to prevent and control such risks, and details of experience, training and qualifications considered necessary for the role.

Where an employment business obtains information that gives it reasonable grounds to believe that a worker is unsuitable for the position for which they have been supplied, it is under an obligation to inform the hirer and to terminate the worker’s engagement with the hirer immediately. Where such information indicates unsuitability but does not amount to “reasonable grounds” the business must give that information to the hirer and make further reasonable enquiries to determine the worker’s suitability.
Employment agencies which introduce people for permanent employment are under a similar obligation to provide such information for the first three months of the initial placement.

Summary
There are important new restrictions on employment bureaux which should help protect work seekers, temporary workers and those that engage them. Those
dealing with employment bureaux can expect to be asked to agree to new and more detailed terms governing their relationship. Given the potentially serious sanctions an agency or business faces for failure to comply with the new Regulations, hirers and workers are likely to find that the balance of power has now shifted at least a little in their favour.

For further details visit www.ffw.com