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Recruitment industry accused of tax avoidance and exploitation

The recruitment industry has recently come under fire in the media

It has been alleged by journalist Faiza Shaheen, who wrote a scathing Guardian article in November, that recruitment agencies are ‘arbiters of capitalism and the mass exploitation of workers’.

This view was worryingly confirmed by campaigner Adrian Gregory, who has owned recruitment firm Extraman for 30 years.

The accusations are that agencies flagrantly cook the books to avoid paying taxes and NI contributions. The hoodwinking of HMRC is allegedly an industry standard, with HMRC slated for its lacklustre response to abuses.

Of particular concern has been the practice of agencies peddling worthless accident insurance policies to workers on their books, profiting considerably in the process. Described unflatteringly as ‘the pimps of the labour market’ by Shaheen, agencies are also accused of acting lawlessly as the result of the now common practice of promoting flex contracts, zero-hours contracts and temporary contracts, which in practice deprive workers of the minimum wage.

The recent reports come as part of a wider wave of anxiety about the increasing precariousness of the labour market and the lack of security for workers in a gig economy. The general secretary of Unite, Len McCluskey, has described the behaviour of recruitment firms as a ‘race to the bottom’ and has called for companies to reform the way in which they approach recruitment of foreign staff to differentiate between the genuine needs of industrial labour markets and the penny-pinching desire to exploit cheap immigrant workers.

Some commentators have referred to the current work culture in Britain as ‘Dickensian’ at the lowest end of the pay scale. The use of agencies enables employers to find workers at a dramatically cheaper rate than direct employment. This is achieved by systematic tax abuses and exploitation of workers on the part of many agencies.

According to Gregory, one of the main ways in which agencies have historically perpetrated tax avoidance is by claiming the travel and subsistence rebates that are due to their temporary workers. This robs both the worker and the taxpayer, accruing lucrative profits for agency bosses. Gregory claims that an HMRC representative told him that the travel scheme abuses alone make over £1bn a year for agencies and he blames HMRC inactivity for the continuation of this situation.

Although travel and subsistence schemes are now banned, similar payroll solutions are frequently used to avoid NI contributions; in addition, workers’ rights are being systematically abused by agencies that deny holiday pay and use the Agency Workers Regulations to undercut permanent contracts rather than promoting equal pay for temps after 12 weeks.

Agencies are not the only ones to blame. Ruthless employers that insist on impossibly cheap labour have also been lambasted in the media lately; in addition, the insistence of some on employing only cheap and desperate immigrant labourers, who have little knowledge of their own rights, has been implicated in causing racial tensions in communities.

The government has passed legislation and created bodies that defend workers’ rights; however, these are woefully underfunded. Gregory has called for firm and sustained action from the government to target base practices and support bona fide agencies that want to support progressive employers in seeking a motivated and respected workforce.

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