The end result of holding temps’ payroll; Conduct Reg Breach

We hear stories (fairly regularly unfortunately) about recruitment invoice financiers refusing to pay their agencies’ contractors / temps. This is obviously an awful situation to be in and very stressful for the agency with temporary workers relying on them to be paid. There is no legitimate reason why this should happen but, when it does, it is usually because the agency has reached their credit limit with a client, there are old invoices outstanding, or even because the client has become insolvent. As a result, the financier has refused to invoice, pay the workers and pay the agency margin.

As well as being a very frustrating and awkward spot to be in, this could also land the agency in some very hot water with the Employment Agencies Standards Inspectorate (EAS), the government body responsible for enforcing The Conduct of Employment Agencies and Employment Businesses Regulations 2003 (a bit of a mouthful), most commonly known as the Conduct Regulations. The Conduct Regulations are primarily there to protect workers and job seekers, both permanent and temporary. Any breach of the Conduct Regulations by an agency is a criminal offence.

The general rule is that an agency can’t refuse to make payment to a temporary worker on the basis that the agency hasn’t been paid by the client or doesn’t expect to be paid. If an agency refuses to pay the temporary worker or withholds payment until they have received the monies from the client, the temporary worker can (i) complain to EAS or (ii) take the agency to a tribunal for payment of the unlawfully-withheld pay.

A complaint to EAS will often lead to an onsite audit into the agency’s compliance, which can lead to a list of adverse findings and an instruction to remedy any defects in procedure and documentation. In the worst-case scenario, serious breaches of the Conduct Regulations may lead to Magistrates Court proceedings, a fine of £5,000 for each offence, a criminal conviction or even a prohibition order for up to 10 years, preventing someone from carrying on or being concerned in an employment business or agency.

Most EAS complaints, audits and findings start with a temporary worker not receiving their pay, which is why it’s crucial for agencies to understand their legal obligations and for financiers to help their agencies to comply with them.

For further information and to understand your obligations please see – https://www.legislation.gov.uk/uksi/2003/3319/contents