ESM2036a | Agency and temporary workers: agency legislation - provisions from 6 April 2014: personally providing service and contracts- examples

Nick is a decorator and normally works on a self-employed basis for individual customers. He’s registered as self-employed with HMRC and pays his Income Tax and National Insurance contributions (NICs) through the self-assessment system.

Nick also sometimes gets asked to do work for clients by agencies or people he knows in the construction industry.

Example 1 - agency finds Nick work

Nick registers with various agencies. The find-a-job agency puts him in touch with a person who wants a decorator for 2 weeks.

Nick will:

• engage directly with the client to establish what work they want doing, carry out the work, and provide the client with an invoice

• pay the agency 5% of the fees he charged the client

Nick is personally providing the services to the client. The agency legislation doesn’t apply because there’s no contract between the client and the agency.

Example 2 - agency sends Nick to work for a client

The agency enters into a contract with a client to supply 4 experienced decorators at £25 per hour and the cost of materials. The contract does not specify the names of any particular decorators. The agency sends Nick and 3 other decorators to the client to carry out the work.

Nick and the decorators complete tasks as required by the client.

Nick and the other decorators complete weekly worksheets setting out their hours worked and email them to the agency at the end of each week.

The agency pays the decorators £15 per hour.

After the end of the contract the agency sends an invoice to the client for the cost of the service.

In this case, Nick personally provides his services to the client, even though the client did not specify that they wanted Nick’s services.

They specified they wanted 4 experienced decorators, so:

• there is a contract between the client and the agency

• under or in consequence of that contract Nick provides his services

• the client pays for Nick’s services

• the conditions in the agency legislation about a worker personally providing the services and the contract are satisfied

• the agency will need to consider whether the other conditions in the agency legislation are satisfied - ESM2034

How the conditions apply with more than one client involved

Where there is more than one client in the chain, the overall contractual arrangement needs to be examined to see whether the agency rules apply. This will also determine who is responsible for the operation of PAYE and for ensuring the correct payment of NICs.

Example 3

A customer takes their car to a local garage to get its suspension repaired. They need the work done very quickly. The garage is very busy but agrees to take the work on.

The garage contacts an employment agency, asking them to provide a suitably qualified mechanic so that they can meet all their commitments.

The agency bills the garage for the mechanic providing the services, and the agency pays the mechanic.

The garage bills the customer for the mechanic’s labour and for replacement parts.

In this example, there’s a worker (the mechanic), 2 clients (the local garage who needs a mechanic and the customer who needs their car repaired) and an agency who provides the mechanic.

The mechanic (the worker) personally provides services to repair the customer’s car but is actually providing their services to the local garage (the client) and not the garage’s customer, so:

• the contract for the provision of the mechanic’s services is between the local garage and the agency

• under or in consequence of that contract the mechanic personally provides services, and the local garage pays the agency for the mechanic’s services

• the conditions in the agency legislation about the worker personally providing services and the contract are satisfied

• the agency will need to consider whether the other conditions in the agency legislation are satisfied - ESM2034