CWS 3.0: January 29, 2014

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UK Politician Accuses Staffing Firms of Profiteering

Six employment agencies, including global giant Randstad, have been accused by a U.K. Labour Party politician of knowingly and willingly mis-selling personal accident insurance to workers who were not eligible for coverage.

Shadow Business Secretary Chuka Umunna claimed to have evidence that recruitment agencies have been involved in the alleged mis-selling. (The “shadow business secretary” is a member of the opposition party whose job is to “shadow” the business secretary of the party in power.) He alleged that low-paid workers were being duped into buying insurance that they might not need because they were already covered by their employer’s policy. Umunna also claimed that the cost to the worker for the additional insurance lowered their pay to below that of the legal minimum wage.

Evidence suggests Blue Arrow, Staffline, Acorn, Taskmaster, Randstad and Meridian employment agencies have been mis-selling arguably unnecessary personal accident insurance to workers, “from which those agencies have been profiteering,” Umunna said.

A spokesman for the Department of Business, Innovation, and Skills said that under legislation introduced in 2003, it was illegal for recruitment agencies to offer products; such as insurance, as a condition of employment. The Employment Agency Standards Inspectorate is responsible for investigating such cases. “We’ll take enforcement action. If it proves to be a widespread practice then clearly there is a case for a more broadly based inquiry,” said Business Secretary Vince Cable.

Industry’s response. ”Profiteering is a very serious allegation and we would like Mr. Umunna to share any specific evidence he has to support these accusations against our members,” says Tom Hadley, head of policy and professional services at the Recruitment and Employment Confederation (REC).

There is nothing wrong with offering workers the opportunity to purchase accident insurance, Hadley asserted, adding that any other organizations offer such products to their members, including trade unions. “Personal accident coverage can be appropriate for workers in high-risk sectors such as rail and construction and may also cover them for accidents off-site that would prevent them from working,” Hadley said, providing workers with an income while off work. “By offering these benefits employment agencies are giving temp workers the same kind of support as that enjoyed by permanent, contracted employees.”

“As the professional body for the recruitment industry in the UK we require all members to abide by our code of conduct, which requires them to be open and transparent with their workers,” Hadley concluded.

When contacted by Staffing Industry Analysts, representatives of Randstad and Staffline said that the companies fully support the comments made by the REC.

Gee 7, meanwhile, issued a statement saying it has never offered such insurance policies and has no plans to do so. Following that statement, Umunna conceded “it was not fair of me to raise [Gee 7’s] part in this matter without giving it the opportunity to reply. I regret that, and I apologize to the company for doing it.”

Repercussions. If Umunna’s assertion regarding minimum wage is found to be accurate, the recruitment firms could face fines of up to £5,000 (US8,294) per worker. New legislation has been proposed that will quadruple this fine to £20,000 (US$33,177) per worker, although it is not expected to come into force until February 2014. 

“Anyone entitled to the national minimum wage should receive it,” Cable said. “Paying anything less than this is unacceptable, illegal, and will be punished by law. So we are bringing in tougher financial penalties to crackdown on those who do not play by the rules. The message is clear: If you break the law, you will face action.”

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