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UK – Government plans to simplify recruitment sector regulation

15 August 2013

In response to a recent consultation on reforming the regulatory framework of the recruitment sector, the government has recognised the importance of a flexible labour market and is keen to simplify regulation.

According to an article from employment law specialists, Lewis Silkin, the government intends to introduce a new regulatory scheme to replace the existing legislation; which includes the Employment Agencies Act (1973) and the Conduct of Employment Agencies and Employment Businesses Regulation (2003).

Jo Swinson MP, the Parliamentary Under Secretary of State for Employment relations, consumer and postal affairs said, “We firmly believe that the reforms set out in the response will deliver real benefits. The most vulnerable workers on minimum wage will be better protected with an increase in resources for enforcing the national minimum wage. Employment agencies and employment businesses will benefit from simpler regulation. This will give the sector greater freedom to fulfil its role in providing labour market flexibility and adaptability”.

The revised framework will focus on areas where individuals are most at risk of exploitation, while reducing the administrative burden on businesses. The government also intends to change the existing enforcement regime, although it has not yet confirmed whether this will include providing individuals with the right to pursue claims before the Employment Tribunal.

One key area of reform is the lack of clarity around how the terms 'employment agency' and 'employment business' are defined. This creates confusion in the market as to which types of business are captured under the legislation. The existing definitions have not kept pace with technology developments, such as internet-based services, or present business practices whereby a vast array of entities provide temporary labour, including businesses providing staff on secondment. The government's conclusions accept that clear and specific definitions will be essential.

It has also been commented that the increasing number of intermediaries – including payroll providers and master/neutral vendors – has led to more complex supply chains where it may be unclear who is responsible for certain obligations and who is governed by the existing legislation.

Following the introduction of the Agency Workers Regulations 2010, many businesses reviewed their arrangements with recruitment providers to ensure that they could comply with that legislation. This ironed out many uncertainties, but as the regulations use different definitions and cover a limited section of the recruitment industry, there are still gaps. The government says that the new framework should address the issue of who is responsible for paying temporary workers where a complex supply chain is involved, but it remains to be seen whether their reforms will go far enough.

The government also believes that the existing rules on temporary-to-permanent employment and transfer fees are unworkable. These are highly complex and not widely understood, even within the industry. A simpler system, whereby fees could not be charged except where the hirer agreed, would be preferable. However, the government may seek to go further and prevent unreasonable terms from being placed on hirers – an issue that is likely to be hotly debated when the draft legislation is published.

Finally, the government's consultation questioned whether it would be appropriate for individuals to enforce their rights through employment tribunals. It has been suggested that the risk of litigation may well focus recruitment businesses on the benefits of compliance – a point that the government seems to have picked up. It would also be appropriate for recruitment businesses to be placed on a similar footing to other businesses with their own bank staff. However, only the awaited draft legislation will tell whether the government ultimately opts to underpin legal protection for individuals with the right to bring a tribunal claim.

Lewis Silkin welcomed the government’s proposals; commenting that a simplified framework would bring benefits to all users of the recruitment sectors.

The full consultation outcome can be read here.

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