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Meeting compliance in recruitment: all you need to know

For those of you running your own recruitment agency, whether you are big game or small fry, you need to consider the legal aspects and ensure you are always compliant with legislation, regulation and statutory guidance.

We understand meeting compliance requirements without sacrificing the recruitment process speed is key.

Legal Eagles in Recruitment: the “must dos” and the “need to knows”

There is no actual official requirement for any training or qualifications to run your own recruitment agency. Nevertheless, attending a few training courses, particularly on legal aspects relating to good recruitment practice would be very sensible.

These should, at the very least, help you to familiarise yourself with the need-to-know rules and regulations of the recruitment industry such as:

  • what information you are and are not allowed to give the candidate and the hirer,
  • issues around anti-discrimination,
  • holiday pay

All UK companies must comply with the regulations contained under the following acts:

  1. The Companies Act 2006
  2. The Employment Agencies Act 1973
  3. The Conduct of Employment Agencies and the Employment Businesses Regulations 2003

These all impact on recruitment agencies. The last act covers what you can and can’t charge for, what information you can disclose to clients, how to advertise and how to deal with someone below the age of 18, among other things.

As said, all recruitment agencies must follow the regulations highlighted above, however, is the key tax and employment legislation that currently affects the day-to-day operations of recruitment agencies.

These other specific regulations governing the industry include:

The AWR (Agency Worker Regulations)

This legislation affords rights to temporary workers who are supplied through a temporary work agency to work for a hirer. As well as rights that apply from day one of an assignment, such as access to collective facilities at a hirer site (e.g. a canteen), agency workers are also entitled to parity of treatment in basic working and employment conditions (pay, working time, breaks and leave) as the hirer’s own staff doing the same job once the agency worker has completed a qualifying period of 12 weeks at that hirer.

The Conduct Regulations

You will find these under The Conduct of Employment Agencies and Employment Businesses Regulations 2003.

These establish a framework of minimum standards by which employment agencies and employment businesses should operate in respect of candidates and clients. These standards include information to be obtained from the candidate and hirer as well as rules surrounding transfer fees. It is possible for individuals providing their services through a company (umbrella, PSC) to opt out of these regulations.

The Agency Tax Rules

You can refer to Ss 44-47 Income Tax (Earnings and Pensions Act 2003).

These tax rules require that an agency that has a contract with a hirer for an individual’s services must pay that individual subject to employment taxes (PAYE income tax and NICs) unless it can be shown either that the manner in which the individual provides the services is not subject to, or to the right of, supervision, direction or control, or that the employment taxes are paid by another party.

The agency (and its directors) is liable for any taxes that are due should it fail to apply these rules.

The Working Time Regulations (WTR)

These implement the EU Working Time Directive and detail rights of a worker, and obligations of the employer, with regards to working time. The regulations include provisions concerning rest breaks and night shift work, as well as entitlement to annual leave.

Self-employed individuals, those operating through a PSC, and some sectors (covered by their own sector-specific regulations) are outside the scope of the WTR.

The National Minimum Wage (NMW)

This is the minimum pay per hour that workers are entitled to receive.

Within the NMW there are different bands according to age and for apprentices:

For example, everyone over the age of 25 is entitled to the top tier of NMW, referred to as the National Living Wage.

Recruitment Employers Confederation

For support with legal issues and to learn more about the legislation underpinning recruitment agencies it is worth taking a look at The REC (Recruitment Employers confederation).

The REC provides recruitment businesses with a wide range of training, legal, business and accreditation services.

The REC has a handy section on its website specifically focused on legal issues affecting recruitment companies.

For ease, they have categorised these topics as follows:

  1. Introducing candidates for permanent/direct engagement by clients
  2. Supplying temporary workers (not limited company contractors)
  3. Supplying limited company contractors
  4. Managing your own employees

Note that you will need to be registered to access the links above.

It is also worth looking at the training provided by the REC, specifically the Certificate in Recruitment Practice which is a good grounding for those working in the recruitment industry.

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