The Different Types of Worker for a Recruitment Agency

Recruitment agencies play a crucial role in connecting employers with suitable candidates. They cater to various employment needs, offering diverse types of workers. Understanding the different types of workers and their employment structures is essential for both employers and candidates.

Here, we delve into the different categories of workers that recruitment agencies handle, including temporary, permanent, PAYE and limited company contractors. We’ll also explore how recruitment funders play a pivotal role in ensuring the success of any recruitment agency. 

What are temporary workers?

Temporary workers, often referred to as temps, are employed for a specific period or to complete a particular project. These positions are ideal for businesses needing to cover short-term absences, seasonal peaks, or special projects without committing to a permanent hire.

Advantages of Temporary Workers:

• Flexibility: Employers can adjust the workforce size based on demand.
• Cost-Effective: Temps are typically cheaper than permanent employees, as benefits and long-term commitments are not always required.
• Speed: Recruitment agencies can quickly provide suitable candidates from a ready pool.

Recruitment funders are crucial in managing the financial aspects of employing temporary workers, ensuring that both the agency and the worker are paid promptly.

Three types of workers that an agencies engages.

What are PAYE Workers?

Temporary workers who are employed directly through an agency. The agency is responsible for paying the workers, even though they work on a number of different assignments. They must be paid at least the National Minimum Wage for their age group and the agency is responsible for deductions of tax and NI.

Prior to starting an assignment, all PAYE workers must receive a KID (Key Information Document) which provides details on expected pay, frequency, deductions, holiday pay and any additional benefits.

PAYE Workers should receive payslips detailing their earnings and deductions including any holiday pay that has been accrued or paid out.

After 12 weeks in the same job, temporary workers are entitled to the same pay and conditions as permanent staff doing the same job

PAYE workers are entitled to statutory sick pay, maternity, paternity, and adoption pay.

What are Limited Company Contractors?

Limited company contractors operate as independent businesses. They are not employees but are hired to provide specific services. These contractors handle their taxes and may benefit from various tax efficiencies.

Recently, changes in tax rules (IR35) have made it harder for Limited Company Contractor to get paid through an agency due to increased demands on the agency and end client to maintain compliancy with IR35.  A status determination will assess whether or not a role is “inside” IR35 or outside “IR35” and whether or not a Limited Company contractor is a “deemed” employee.

Limited Company contractors outside of IR35 receive their gross pay leaving them responsible for paying over their dues to HMRC.  They often engage accountants to help them run the financial side of the business.

What are Umbrella Workers?

Umbrella companies pay two types of workers – employees and self-employed.  Umbrellas handle payroll, taxes and other administrative tasks making it easy for the worker and the agency to concentrate on the assignments.

For employees the Umbrella acts as the employer of the worker.  The Umbrella handles the worker’s wages which are processed through the umbrella company’s PAYE (Pay As You Earn) system. The umbrella deducts taxes, National Insurance contributions, and any other necessary deductions before paying the worker. Workers receive standard employee benefits such as holiday pay, sick pay, and pension contributions.

For Self-Employed workers the Umbrella processes the workers pay, deducts tax where necessary (CIS as an example) and pays the worker.

Umbrella companies are popular as they take away a lot of the burden or running a payroll system and the responsibility of being an employer.

The Role of Recruitment Funders

Recruitment funders are companies or services that provide the necessary funds to recruitment agencies to manage their payroll and other expenses. They play a vital role in ensuring that agencies can operate smoothly without cash flow interruptions. By advancing funds based on the value of invoices issued to client companies, recruitment funders enable agencies to pay their workers promptly, whether they are temporary, permanent, PAYE or limited company contractors.

Benefits of Recruitment Funders:

• Cash Flow Management: Helps agencies manage their finances, ensuring they can pay workers on time.
• Growth Facilitation: Provides the financial support needed for agencies to grow and take on more clients.
• Risk Mitigation: Reduces the risk of late payments from clients affecting the agency’s operations.

Recruitment funders thus become essential partners for recruitment agencies, underpinning their ability to meet the needs of various workers and clients effectively.

Understanding the different types of workers that recruitment agencies deal with is crucial for both employers and candidates. Temporary workers offer flexibility, permanent workers bring stability, PAYE workers ensure compliance and limited company contractors provide specialised skills. Recruitment funders play an indispensable role in this ecosystem, ensuring that agencies can manage their financial obligations smoothly and continue to bridge the gap between employers and the workforce. By leveraging the strengths of each worker type and the support of recruitment funders, recruitment agencies can provide tailored solutions to meet diverse employment needs.

Want to talk about how QUBA can benefit your recruitment business? Get in touch with our friendly team now or book an introductory phone call.