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Six leading employment agencies face being investigated by the Government after allegations they "profiteered" by mis-selling personal accident insurance to workers which was not needed, reports the Telegraph.
Business Secretary Vince Cable said his department would investigate after shadow business secretary Chuka Umunna claimed he had evidence that high street job agencies have been involved in mis-selling.
He hinted that low-paid staff were being tricked into buying the insurance, which they might not need because they were already covered by their employer's policy, and the cost of the product was taking worker's pay below the minimum wage.
During questions in Westminster for the Department for Business, Information and Skills (BIS), Mr Umunna said: "I've been passed evidence which suggests Blue Arrow, Staffline, Acorn, Taskmaster, Randstad, and Meridian, employment agencies employing over 100,000 workers, have been mis-selling personal accident insurance to workers, which they arguably do not need and from which those agencies have been profiteering.”
"There is even a company - G7 Group - which specialises in putting together these dubious arrangements for agencies,” he added.
Labour MP Mr Umunna challenged Mr Cable to: "Commit to holding a full inquiry into this shabby practice".
Earlier on in the session the shadow business secretary asked Mr Cable if he agreed: "That for an employer to mislead workers into purchasing personal accident insurance, the charges for which would take the workers' pay under the minimum and the purchase of which is not necessary given the employers' own insurance cover, would be completely indefensible and possibly unlawful?"
Mr Cable replied: "Yes, I agree it would be indefensible and I think it is unlawful. I have been advised that this practice has happened, the relevant body, which is the Employment Agency Standards Inspectorate, is investigating the individual 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."
In a statement, Mr Umunna's office alleged some agencies have been
- Taking a ‘fee’ of up to 500% of the true cost of the premium, where normal commission would be around 20%
- Boosting profits by £1 million a year through the schemes
- In some cases selling insurance policies without the necessary FCA accreditation.
A spokesman for BIS said that under legislation introduced in 2003, it was illegal for recruitment agencies to offer products such as insurance as a condition of employment.
Tom Hadley, head of policy and professional services at the Recruitment and Employment Confederation (REC) said: "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.”
“Let’s be clear, employment agencies are not doing anything wrong by offering workers the opportunity to purchase accident insurance. It’s a product that many other organisations offer to their members, including trade unions.
“Personal accident cover 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, and provides them with an income whilst 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," Mr Hadley concluded.
When contacted by Staffing Industry Analysts, both Randstad and Staffline declined to comment on the statement made by Mr Umunna, other than to state that they fully support the comments made by the REC.