Consultation outcome

Consultation response on payment handling by employment agencies in the entertainment, sport and modelling sectors

Updated 14 December 2023

Introduction

1. The Employment Agencies Act 1973 (“the 1973 Act”) and the Conduct of Employment Agencies and Employment Businesses Regulations 2003 (“the Conduct Regulations”), both as amended, regulate the relationships between work-seekers and employment agencies and employment businesses. The 1973 Act provides statutory definitions of employment agencies and employment businesses in section 13(2) and section 13(3) respectively.

2. Employment agencies operating in schedule 3 occupations are permitted to charge work-finding fees to work-seekers as an exception to the general prohibition on charging work-finding fees. Some employment agencies in schedule 3 occupations are also operating the Agency Supplement. Our understanding is that this involves these agencies charging an enhanced fee to the hirer comprised of the agreed rate for the work-seeker’s services, their commission, and an additional percentage on top of the commission they would normally charge if they took their fee directly from the work-seeker’s pay (a pure commission model). The agency receives one total gross payment, which includes the additional percentage. From this sum, the agency pays the work-seeker the amount they were expecting to receive for the work, which normally equates to two thirds of the total gross amount though there are some variations. The agency retains the rest as their commission.

3. Under the Agency Supplement model, this enhanced payment to the agency does not come from increasing costs to the work-seeker. Disbursing two thirds of the total gross amount (which the government understands to be the normal practice) results in the work-seeker receiving the same amount as if their agency charged them the standard rate of commission directly.

4. An agency may not want to charge the work-seeker this enhanced fee, which is necessary to maintain higher earnings more comparable to non-UK based agencies and also necessary to continue being able to handle work-seeker’s pay. Their alternative would be to charge the hirer who would then need to pay the work-seeker and agency directly. The work-seeker is unlikely to be financially worse off whether paid directly by the hirer or by an arrangement involving the Agency Supplement. However, the administrative burden to hirers of processing separate payments would place significant burdens on them which hirers may not want to introduce for their clients and there are benefits that are not purely financial for work-seekers of not prohibiting the Agency Supplement.

5. However, this involves the agency charging a fee to the hirer, while continuing to handle the work-seeker’s pay. This is not permitted as regulation 26(3) disapplies the ability to charge a work-seeker a work-finding fee where the agency charges a fee to the hirer in respect of the supply or introduction of the work-seeker.  Charging such a fee to the hirer also means that the agency can no longer handle the work-seeker’s pay under regulation 8(2). The Agency Supplement therefore breaches the Conduct Regulations and consequently there is a gap between the requirements in the legislation and an arrangement that is reasonably common practice.

6. The consultation sought to build evidence and understand the impact of its two main proposals for addressing this gap which were:

   a. Option 1 – maintain the current legal position. The government would maintain the position that a qualifying agency cannot charge a hirer the fee and handle the work-seeker’s pay. They would continue to be permitted to handle a work-seeker’s pay where they charge the work-seeker their commission but not where they charge the hirer. Under this option the government would provide updated guidance to reflect this law as it stands, and the Employment Agency Standards (EAS) Inspectorate would enforce the regulations against non-compliant agencies in line with their usual compliance-based approach.

   b. Option 2 – change the legislation to permit the Agency Supplement to continue. This would allow an agency to continue handling a work-seeker’s pay where they charge the work-seeker or where they charge the hirer. This would require legislative change to the relevant provisions of the Conduct Regulations that apply to employment agencies. However, it would not permit employment agencies to charge work-finding fees to both hirers and work-seekers, expand schedule 3 of the Conduct Regulations, affect regulations governing agencies’ handling of work-seeker’s pay (see regulation 25) or the requirement to agree terms (regulation 16). In addition, it would not affect regulations only applicable to employment businesses.

Conducting the consultation exercise

7. The government ran its statutory consultation from 9 February 2022 to 20 April 2022. Time pressures may have prevented some individuals and organisations from responding. Given the importance of this issue to agencies operating in the entertainment, sport, and modelling sectors, we accepted each of the limited number of responses we received after the official close of the consultation and did not discriminate against these respondents.

8. This is a highly technical area of the agency worker legislation that only applies to a subset of employment agencies that supply work-seekers to specified occupations in the entertainment, sport and modelling industries (set out in Schedule 3 to the Conduct Regulations). We adopted a proportionate approach to publicising the consultation. We published it online, contacted several representative organisations in the entertainment and modelling industries to alert them to the consultation, and held roundtable discussions and follow-up meetings to discuss responses in further detail where this was of interest to stakeholders. We conducted two events with stakeholders prior to the consultation closing and one further stakeholder meeting after the consultation had officially closed, including with those who disagreed with continuing the Agency Supplement.

9. The Employment Agency Standards (EAS) Inspectorate receives a small proportion of its total complaints about potential breaches of the regulations covering schedule 3 occupations. Most of these complaints received have been outside the scope of EAS’ legislation as they relate to photographic studios. To date, there have been no cases involving sports people.

10. The department and EAS regularly engage with businesses, trade unions and work-seekers to understand the issues they face and keeps the regulations under regular review to ensure they remain fit for purpose. The government will continue to engage with businesses, work-seekers and their representatives in the entertainment, sport and modelling sectors going forward.

Summary of responses

11. The consultation posed 19 questions. They were divided into sections with questions seeking general information about the profile of the respondents, views about payment handling, and specifically about the Agency Supplement. The questions were further divided into those aimed at agencies and work-seekers. There was also an option at the end of the consultation for respondents to indicate any other points not covered in the response to other questions.

12. Stakeholders had the option to respond either by an online survey (8) or by email (8). Typically, responses received by email did not respond to each question as set but used them as an indication of the things to cover. When analysing these responses, we judged which of the set questions they responded to and included them in the summary of responses for the relevant question.

General questions

13. This section considers the responses to questions 1 to 7. These questions aimed to gather information about the profile of respondents. The aim of these questions was to improve the government’s understanding of the potential scale of the impact arising from a change to the law in this area and whether it would affect certain schedule 3 occupations more. Several respondents did not answer the questions as set, and so responses to these questions were lower than for later questions, particularly questions 17-19 which focussed on the impact of the options put forward and were open text.

Overall number of responses

14. We received a total of 16 written responses to the consultation from interested parties, of which nearly all (15 out of 16) supported employment agencies being able to continue handling the work-seeker’s pay notwithstanding charging fees to the hirer. This total does not include the additional engagement with stakeholders conducted during the consultation period and after it had closed. We received responses from 7 employment agencies / agents, 5 work-seekers, 2 trade bodies, 1 trade union and 1 hirer.

Profile of respondents: size / type of business (question 2)

15. We asked employment agencies and hirers about the size of their business. All the employment agencies/agents who responded identified themselves as micro business (3 out of 7) or small businesses (3 out of 7) and one did not respond to this question.

Profile of respondents: sectors and occupations (questions 3 to 7)

16. We asked agencies whether they considered themselves in scope of the exemption to charge fees (question 3) and about the sectors they and their clients operated in (question 4). Among employment agencies who responded, two supplied work-seekers (models) in the photographic and fashion modelling industry, four supplied actors and other performers and one supplied work-seekers to both acting and modelling assignments.

17. We also asked work-seekers and their representatives to tell us which industry they or their members were supplied to (question 5), whether they or their members worked in other sectors (question 6) and whether they have moved sectors (question 7). Among the work-seekers who responded four said they worked in modelling, and one said they worked in acting. We received one response from a trade union that represented actors. We had two responses from trade bodies, one of which represented actors and one which represented models. We had one response from a hirer, who hired models for advertising purposes.

Payment handling questions

18. This section considers the answers provided to questions 8 to 16. From employment agencies, we sought to understand their practices in respect of paying their work-seekers as well as how they considered their role and the value of the service they provide. From work-seekers, we sought to build a picture of their awareness of how they are paid and their views on the advantages and disadvantages of their agent being able to handle their pay.

Employment agencies’ / agents’ view on the service they provide

19. Six employment agencies said they were involved in paying work-seekers, and one did not respond to this question (question 8).

20. We also sought to understand how employment agencies who were involved in paying work-seekers discharged that function, including whether they had a standard approach (question 9) or whether they adapted it (question 10). Six agencies said they had a standard approach and operated the Agency Supplement and one did not respond to this question. Employment agencies said that they often varied how they obtained their fees depending on whether the job was a UK-based or involved a non-UK based hirer.

21. Employment agencies consider themselves to be providing a whole service to the actor or model, that extends beyond providing work-finding services. The tasks that comprise this service include invoicing hirers, paying work-seekers, chasing payments owed to work-seekers and ensuring the amounts for each job are correct. This is considered crucial as actors and models do not often personally have the time, expertise, or resources to do this themselves or hire an accountant to do it for them. The employment agencies who responded all represented either fashion and photographic models, actors (including those working in foreign jobs for TV or commercials) or other entertainers.

Work-seekers’ awareness of payment handling (question 13)

22. We also wanted to understand work-seekers’ awareness of how their pay is handled. We received five responses from work-seekers directly, of which four were from models and one from a self-employed actor. Their responses all indicated an awareness of the benefits of being paid by an agent. It is also reasonable to conclude that these work-seekers who responded are aware of the arrangements for who is paying them.

Work-seekers’ view on the value of an agent (question 14)

23. We asked work-seekers for their perspective on the benefits and drawbacks of being paid by the agent compared with being paid by the hirer. The responses from work-seekers highlighted the importance of their agent continuing to pay them and provide the “additional services” that go beyond work-finding. Work-seekers stated that the additional services included invoicing clients and chasing overdue payments on their behalf, providing remittance sheets to help them understand their finances, negotiating contracts with hirers on their behalf (including ongoing usage of photos for models) and booking travel and accommodation when needed, such as on international jobs.

24. Employment agencies supplying workers to schedule 3 occupations, perform functions that are now an integral part of how agents in these industries have worked globally for decades and which are distinct from the function performed by agencies outside of schedule 3. Work-seekers in these sectors have become used to the services provided by their agents and many would struggle if their agents could not provide or if they were asked to pay for these additional services for the following reasons:

a) Inexperience – work-seekers often start at a young age (particularly in acting and modelling) and do not have knowledge and expertise in how to invoice and do their own accounts. Many hirers have their own specific processes for invoices to be submitted. Some require the use of their own online portal or that purchase orders are raised for a payment to be made. If this is not done correctly the payments will not be made.

b) Confidence – actors and models, who often start young, would not have the confidence to chase hirers for overdue payments. Hirers do not often stick to the 30-day payment terms, and some even have 90-day terms meaning late payments are common

c) Lack of resources – most actors and models cannot afford to hire an accountant or other professional to handle their affairs for them. Without the agent being able to perform the extra services, they would have to try to do this themselves or depend on family which could affect the ability of individuals to pursue a career in modelling.

d) maintaining relationships and employability - having an agent who can chase overdue payments is important for actors and models to be able to maintain a positive relationship with the hirers, who will often be on set while filming or during the shoot for actors and models. Constantly chasing a hirer for an overdue payment could cause this relationship to deteriorate, which could impact the ability to get jobs in the future.

e) Practicality – acting and modelling involves long days and often with significant travel (particularly for overseas jobs), and actors and models will not be able to use their phones on set. In addition, the accounts departments often close by the time the actor or model finishes. It would be practically difficult for them to chase overdue payments on their own. Responses from work-seekers also suggested that the agents are more effective at getting responses from hirers’ accounts departments.

f) Overseas models – modelling, especially, is a global industry. There could be language barriers for international models, without English as a first language, that would make it difficult for them to chase hirers and talk to banks, which they would have to without an agency to do this on their behalf.

g) Effect on personal finances – work-seekers were doubtful about their effectiveness in chasing their fees compared to agents, having to find the money to pay an accountant, and other downward pressures on their personal finances for the actors and models.

Others’ views on the service agents provide

25. We also asked trade unions and other representative organisations about their view on the benefits and drawbacks of employment agencies handling pay for the work-seekers they are supplying (question 16).

26. The transparency of arrangements for actors and models dealing with agencies operating the Agency Supplement was raised as a concern. When using the Agency Supplement, the employment agency invoices a hirer for the work-seeker’s fee on their behalf and their own commission. The employment agency also continues to handle the work-seeker’s remuneration. It was one stakeholder’s view, who was against permitting the Agency Supplement, that this allows the agency to conceal from the work-seeker the fee they are charging. This means there is less of a direct link between the work-seeker and the hirer to whom they are providing services, which created concern about a lack of transparency. By contrast if we did not permit the Agency Supplement, the hirer would be required to pay the actor or model directly. This could create a direct link between them, which would be conducive to greater transparency.

Impact of options

27. This section considers the responses to the questions about the impact of prohibiting the Agency Supplement (question 17) versus permitting it (question 18). It also provided an opportunity for individuals to add anything further thoughts (question 19).

Arguments in favour of prohibiting the Agency Supplement (question 17)

28. We asked all respondents to consider what the impacts would be on them and those they work with of prohibiting the Agency Supplement as set out in the consultation document. If the government chose this option, employment agencies’ arrangements with hirers and their work-seekers could not continue as they are. Employment agencies could charge work-seekers (rather than hirers) their fees and continue handling work-seekers’ remuneration or they could charge hirers their fees but they would have to stop handling the work-seekers’ remuneration. The work-seeker would have to invoice for their own fees and manage their own affairs. This would require separate direct payments to the work-seeker and agency in respect of each supply of services.

29. The impacts on work-seekers of not allowing the Agency Supplement to continue, as reported through the consultation, are summarised below. The responses only covered what impacts would be for work-seekers in the entertainment and modelling sectors and do not cover professional sportspersons. This reflects that the Agency Supplement is most used in occupations in entertainment and modelling and is rarely used (if ever) among professional sports persons.

a. Unreasonable burden - if agencies chose to charge hirers (and therefore could not handle work-seekers’ pay), the actors and models would have to devote significant time invoicing hirers and chasing payments. This is especially complicated where they need to chase fees from assignments for non-UK based hirers, and many would be ill-equipped to do this. It would also be complicated to understand different payment structures that there might be in union and non-union contracts.

b. Loss of protection - if agencies chose to charge their fee to hirers (and therefore could not handle work-seekers’ pay), the agency would no longer be able to chase their fees for them where hirers were not paying in full and on time. This could have a knock-on effect on the work-seeker’s relationship with the hirer.

30. The impact on hirers of prohibiting the Agency Supplement, reported in the consultation, are summarised below:

a) Multiple invoices - if agencies charged hirers, then hirers would need to be invoiced separately by work-seekers and employment agencies. This would increase the complexity of carrying out their business, particularly in terms of reconciling invoices for work-seekers’ fees with the employment agency’s commission for a particular job.

b) Increased costs - if agencies charged hirers, hirers could face increased operating costs from the administrative burden of processing large numbers of payments and from being chased by work-seekers rather than by one agency on behalf of many work-seekers.

c) Confusion for non-UK based hirers - if agencies charged hirers, and they were required to pay work-seekers, this would be confusing for non-UK based hirers. They may choose to work more with non-UK talent, which would hurt the competitiveness of the UK entertainment and modelling industry.

31. Prohibiting the Agency Supplement could reduce the competitiveness of UK modelling agencies. Work-seekers may view UK-based agencies as less desirable and choose to work with non-UK based agencies. Clients could also choose to work more with overseas agencies, who may have a wider range of work-seekers on their books, which would be crucial where they are looking to hire a lot of work-seekers for jobs requiring large numbers of work-seekers.

Views on the impact of permitting the Agency Supplement to continue (question 18)

32. We asked all respondents to consider what the impacts would be on them and those they work with of permitting the Agency Supplement. Most respondents supported retaining the Agency Supplement, but it was not a unanimous view.

Retaining the Agency Supplement would have a negative impact

33. One argument put forward was that retaining the Agency Supplement would allow a lack of protection and transparency for workers to continue. Agencies would continue to operate like the employer of the individual. In other words, agencies would be operating more like an employment business than an employment agency but without the protections for work-seekers that are required of employment businesses. In short, there was concern it could undermine the key protection provided by regulation 8 of the Conduct Regulations that depends on preserving a distinction between employment agencies and employment businesses. It also risked diminishing the transparency in the contracts the agency enters into on behalf of the work-seeker.

The positive impact of permitting the continued use of the Agency Supplement

34. Most respondents, which include hirers, models, and agencies, supported the government permitting the Agency Supplement. According to the responses the main positive effects would be:

a. Protecting workers – some employment agencies and trade associations, highlighted that removing the use of the Agency Supplement could diminish worker protection. It would increase the costs and administrative burdens for hirers, and in response they could seek to engage work-seekers directly who would then not have any of the protections offered by the Conduct Regulations. Allowing the Agency Supplement to continue would, therefore, maintain the current level of protection for work-seekers. The government could introduce a licensing regime for agencies if it wanted to strengthen protections.

b. Ensuring the continued provision of the full agency service – it would enable the employment agencies to keep investing in and developing work-seekers, which was reported as a particular feature of the modelling industry. It would make it financially viable for modelling agencies to provide extra services which models depend on. In addition to points raised above, the additional service can include protecting them in scenarios where the hirer becomes insolvent as they negotiate on their behalf.

c. Work-seekers get to keep more of their money – employment agencies would continue to charge hirers who would also pay the VAT on the agency’s service, rather than the work-seeker paying it which would be the case if they paid their agent’s commission.

d. It would allow work-seekers to focus on what they are good at, rather than spending time managing their financial affairs.

e. Minimise disruption – the Agency Supplement is well understood by hirers and work-seekers themselves. Retaining it would minimise disruption to the sector after a period of intense disruption due to the pandemic.

f. Enable continued competitiveness of agencies - the additional income provided by the Agency Supplement enables the agency to cover the additional costs of work they undertake when working with non-UK clients. It would maintain agencies’ financial viability when competing with agencies subject to different legal frameworks, where “double-charging” is permitted.

Other comments not covered elsewhere (question 19)

35. Respondents highlighted several other benefits of permitting the Agency Supplement (or disadvantages of prohibiting it) that were not mentioned in response to other questions.

a. Implications of hirers issuing multiple invoices – in addition to the administrative burden, multiple sets of bank details would need to be shared with hirers for them to make separate payments. This increases the risk with sensitive personal financial information being handled on a large scale. There would be higher unnecessary charges in respect of international payments which involve different currencies. This would particularly affect jobs where an agency needs to supply multiple models to a single hirer. It is unlikely, for reasons of transparency, that the hirer could group the agent’s fees into one payment while paying the work-seekers separately.

36. It was also suggested that the government should implement a system of registration and regular checks to clean up rogue agents and agencies and work with the industry to tackle financial insecurity faced by many models, who can go up to six months without being paid.

Government response

37. The government understands that the nature of the services provided to work-seekers by employment agencies operating in schedule 3 occupations to work-seekers are different to those provided by employment agencies operating in occupations not operating in schedule 3.

38. Generally, an employment agency matches the work-seeker to the hirer who employs and pays the work-seeker. The hirer pays the employment agency a fee for finding them a work-seeker. The relationship between the employment agency and work-seeker ends when the work-seeker finds employment, until the work-seeker is looking for another job. By contrast, an employment business employs or engages the work-seeker and supplies the work-seeker to work under the hirer’s control for a fee. There is typically no ongoing relationship between an employment agency and work-seeker which there is with an employment business.

Rationale for regulation 8

39. Between 1976 and 2003, both employment agencies and employment businesses had been able to handle work seekers’ remuneration.  This blurred the distinction between employment agencies and employment businesses, created uncertainty for work seekers and hirers about the identity of the employer and made enforcement of protections difficult. Regulation 8 of the 2003 Conduct Regulations was introduced to help address this by creating and maintaining a distinction between employment agencies and employment businesses. It does this by prohibiting an employment agency from handling a work-seeker’s remuneration (see regulation 8(1)).

40. Regulation 8(2) allows for limited exceptions to this principle for employment agencies operating in schedule 3 occupations. Such employment agencies are permitted by regulation 26(1) to charge work-finding fees to work-seekers and handle their pay.  Employment agencies may alternatively charge a fee to the hirer, but where they do this, regulation 26(3), read together with regulation 8, provides that they must not handle the work-seeker’s pay and the hirer must handle the pay. Employment agencies are not permitted to charge work-finding fees to both the work-seeker and the hirer (sometimes referred to as “double-charging”). This exemption for schedule 3 employment agencies reflects that, by contrast to non-schedule 3 agencies, they do have an ongoing relationship with work-seekers that justifies them handling work-seekers’ pay.

41. The government is not considering expanding the scope of schedule 3 to add further sectors. This would blur the distinction between an employment agency and employment business in those additional sectors, without the same benefits arising as in the existing Schedule 3 sectors. It would diminish protections for work-seekers who are using employment agencies to find work and so undermine the purpose of the Conduct Regulations, as set out in section 5 of the 1973 Act, which is to protect them.

42. The occupations in schedule 3 to the Conduct Regulations are included by virtue of all being types of entertainers or performers. Schedule 3 to the Employment Agencies Act 1973 (Charging Fees to Workers) Regulations 1976 (“the 1976 Fees Regulations”) included entertainment and modelling occupations to ensure historical operating models in entertainment as well as fashion and photographic modelling that pre-dated the 1973 Act and associated regulations could continue.

43. Sports people were not initially included in schedule 3 to the 1976 Fees Regulations. When the government proposed adding them, this reflected their view that when professional sports persons were being found work in addition to their specific sport this included appearances on television shows and similar performances. The jobs professional sports people were obtaining through agents were therefore considered to be operating in the entertainment sector not the sporting sector. Adding professional sportspeople to schedule 3 was therefore consistent with the current government’s position that its scope should stay the same and only offer an exemption as set out above, to agencies providing the unique functions required to find work in entertainment and modelling.

Rationale for retaining the agency supplement

44. On balance, and having considered all the responses, the government considers that the benefits to businesses and work-seekers of permitting the Agency Supplement outweigh any potential disadvantages, which include a potential lack of transparency and protection for work-seekers and a risk of undermining the distinction between employment agencies and employment businesses that regulation 8 seeks to preserve.

Benefit to work-seekers

45. Without the Agency Supplement, employment agencies may still be more likely to charge the hirer. The work-seeker’s remuneration and the agency’s commission would be separate sums of money to be paid by the hirer to each party in separate direct payments. The agency would only chase the hirer for late payment in respect of its commission and not the work-seeker’s fee. There is potentially a greater risk that the work-seeker is left out of pocket.

46. Where the Agency Supplement is used, employment agencies would charge hirers a total gross fee comprised of their commission and the work-seekers’ agreed rate of pay. The hirer would pay this total gross sum to the employment agency, which would then disburse the work-seeker’s pay to them. The combination of sums owed to work-seeker and agency, made possible by the Agency Supplement, could benefit the work-seeker. When chasing a late payment, the agency would be chasing payment of a sum that includes the work-seeker’s remuneration as well as their commission.

47. An employment agency could wrongly refuse to pass on the money to the work-seeker that it has received from the hirer. However, permitting employment agencies in schedule 3 occupations to continue using the Agency Supplement would be a narrow change. It would not involve changing or diminishing the obligations that agencies must comply with when they supply work-seekers to whom they have charged a fee (regulation 26(1)). Agencies would still be required to agree terms and conditions with those work-seekers (see regulation 16). These terms must include details of the work-finding services the agency is providing, details of the agency’s authority to act on the work-seeker’s behalf, a statement as to whether the agency is authorised to receive money on the work-seeker’s behalf, details of the fees payable by the work-seeker to the agency and terms governing termination of the agreement. Information about the fees should cover the amount or method of calculation of fees, the method of payment, what the fees relate to, and circumstances where refunds and rebates are payable. Agencies would also continue to be subject to obligations concerning their handling of work-seekers’ pay where they directly or indirectly receive money on work-seekers’ behalf, for example those set out in regulation 25 which require the use of client accounts and work-seekers’ money to be paid no later than ten days after the agency received it.

48. We believe it to be highly unlikely that many agencies would decide not to pass on a work-seeker’s pay. This would result in loss of business and earnings in the longer term if work-seekers decide to take their business elsewhere. In addition, employment agencies that do not comply with the relevant legislation, such as those mentioned above, would be subject to an EAS inspection and enforcement action where relevant. The enforcement action EAS could pursue could include anything from a Labour Market Enforcement Undertaking or Order through to prosecution in the courts or prohibition through an Employment Tribunal.

49. Therefore, we consider it more likely than not that permitting the Agency Supplement to continue would be “risk neutral” and may deliver a “protection dividend” to work-seekers. This would arise from the continuation of the status quo in terms of existing protections under the Conduct Regulations and businesses’ desire to retain a good reputation among work-seekers to protect their future earnings.

50. We also appreciate that by being able to provide the additional services set out above, entertainment and modelling agencies open the sector up to more people who would otherwise not be able to pursue a career in these fields, due to the burden of compliance and other financial and practical considerations.

51. The government is also mindful of the effect of this decision for employment agencies and hirers, even though the latter are not directly regulated by EAS. Employment agencies could continue handling work-seekers’ pay without the Agency Supplement. The agency would have to charge the work-seeker. The actual rates of commission that an agency charged may be lower than the rates of commission they charge under the Agency Supplement model (or when otherwise charging the hirer), which would in turn make it hard for them to compete internationally and continue their businesses when competing with agents who would not be subject to these rules. The agency could decide that this drop in margin from lower commission means there are certain services they can no longer offer, which would in turn have a detrimental effect on the work-seekers who rely on these services, including arranging and advancing/covering the costs of travel and accommodation for jobs requiring travel.

52. Alternatively, agencies may decide to charge hirers. However, this would require the hirer to make separate payments to them for each work-seeker, even if the agency have supplied large numbers of work-seekers to the same hirer. Reconciling vast numbers of payments from hirers is an administratively complicated process when compared with receiving one payment for their commission in respect of all the work-seekers the agency supply to a particular hirer. They may decide they cannot support the extra administrative burden this represents.

53. As part of this decision, the government has considered the equalities impact of permitting the Agency Supplement. Compared to those in employment generally we estimate that the agency workers affected are more likely to be male, have a disability, be from an ethnic minority and be aged 16 to 24. The protection dividend mentioned above may have a slightly more positive effect on those with certain protected characteristics.

54. The government has also considered the impacts on businesses. The government has estimated there would be little or no cost to businesses (hirers and employment agencies) from allowing the Agency Supplement to continue as it preserves the historic status quo.

Next steps

55. Having considered the responses to the consultation and conversations with stakeholders, the government has decided to move forward with the proposal to amend the Conduct Regulations to permit the Agency Supplement.

56. The immediate next step will be to draft the required secondary legislation, more formally consider the impact to business of the changes, and then introduce this legislation when parliamentary time allows.

57. We also intend to update the enforcement statement for the Employment Agency Standards (EAS) Inspectorate to set out EAS’ regulatory response to this decision.

Annex: Questions posed in the consultation document and online survey

Question 1: Are you a hirer, employment agency/independent agent, union, or a work-seeker?

Question 2: If you are a hirer, employment agency/independent agent, what is the size of your business?

Question 3: Are you covered by the exemption to charge fees to work-seekers as stated by schedule 3 to the Conduct Regulations?

Question 4: If so, which of the occupations covered by schedule 3 do you operate in?

Question 5: Which sector do you or your members primarily work in and what is your occupation?

Question 6: Do you or your members work in any other areas?

Question 7: Have you or your members moved to working in a single sector in the past 12 months? Or have your members started working in multiple sectors in the past 12 months?

Question 8: Are you involved in paying work-seekers?

Question 9: Do you have a standard approach to operating the Agency Supplement or charging commission to work-seekers?

Question 10: Or do you adapt your approach depending on the sector or occupation?

Question 11: If you use the Agency Supplement which occupations do you use it for?

Question 12: For occupations where you use the Agency Supplement, what proportion of work is paid using the Agency Supplement?

Question 13: Do you know if you are paid by your agent or the hirer you are working for?

Question 14: Do you think there are benefits or drawbacks to you of being paid by your agent or by the hirer you work for?

Question 15: Are your members (work-seekers) paid by their agent or the hirer they are working for?

Question 16: Are there benefits or drawbacks to your members (work-seekers) of being paid by their agent or the hirer they work for?

Question 17: What would the impact be of not permitting the continued use of the Agency Supplement?

Question 18: What would be the impact of permitting the continued use of the Agency Supplement?

Question 19: Is there anything else you would like to add about whether the Agency Supplement continues or not?