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28 June 2016

Govt proposals for HSE harder bite and oversight of labour suppliers - Employer’s Liability

Recruitment Agency Employer's Liability
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The January 2016 Government White Paper on exploitation in the labour market heralds some likely changes in legislation. We take a look at how these changes could affect Recruitment agents.

The regulatory powers of DEFRA’s Gangmasters Licensing Authority (GLA) currently applies to the supply of labour to horticulture, agriculture and shellfish harvesting/ packaging markets. It is proposed that all UK labour markets will become subject to GLA oversight which will have significantly wider powers of investigation and enforcement – as well as increased funding.  The main risk based implications relate to employers’ liability (EL) and Health & Safety responsibilities. Importantly, these significant changes will apply to all labour suppliers – as well as firms employing through a labour supplier. it’s time to check your processes and start preparing for compliance.

Employer’s liability: the implications

The increasing use of personal service companies (PSCs) and umbrella companies by contractors and overarching contracts of employment (OACs) by recruitment companies (employment intermediaries) have blurred the lines for Employers’ Liability cover – particularly for the end-client.  The 2016 tax changes to umbrella models look set to see labour supply firms engaging increasing numbers of agency and contract workers as ‘employees’ and that means taking over responsibility for tax compliance, Health & Safety, training and wages. The potential impact could be a combination of increased compliance costs, lower gross profit and lower take-home pay for those in your charge.

In a complex environment, who is the employer?

  • Who is obliged to provide work for the contractor?
  • Who has supervision and control of the contractor when they are doing the work day by day?
  • Grey areas can extend to what the recruitment firm provides including who provides the protective personal equipment and having to provide a set number of people to do a job under an agreed contract.

Some useful questions to consider

  • Do you provide worker training, supervision, project or job management or planning, equipment, materials or uniforms/branded clothing to contractors going to work for end clients?
  • Do you contract with any clients on the basis that you actually employ the workers?
  • Do your end clients ask for your EL certificate in relation to workers that you place?

Any of the above could increase your exposure or mean that you are seen as a party in the claim - so any way that you can avoid this is useful risk reduction. We definitely believe that trying to limit this is a good idea but the difficulty will be everyone else (for instance umbrella companies) will be trying to do it as well. 

What should you be checking today?

How the timings and the precise shape of the White Paper proposals will pan out are as yet unknown. However, here are a few pointers on the EL areas you should be checking.

  • Ensure your processes and procedures are fully compliant with the terms necessary to demonstrate ‘fitness’ to hold a GLA licence – that means checking tax standards, Health & Safety and your employee welfare provisions.
  • Double-check your obligations in additional areas like training and wages, particularly if payment part-comprises benefits from transport or accommodation.
  • If you take workers ‘direct’ rather than through umbrella models, are you compliant across all the above categories?
  • Are you set up to satisfy the needs of an inspection by the GLA, HMRC or Employment Agency Standards Inspectorate (EAS)? How quickly can respond to an enforcement order?
  • It’s not just about you – it’s also about the other partners or suppliers in your labour network. Talk to them and make sure your collective compliance – and reputation – is secure.

If you have any questions or want to discuss this further then call us on 0800 612 3649 – we’re here to help.

For information about our modular recruitment insurance solution and to request a call back, please visit our website

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