The Trades Union Congress in the UK on Monday called on the government to extend existing laws so that staffing buyers are liable for violations of minimum wage and holiday pay laws by staffing firms they employ. It also wants the regulations to include workers at outsourcing firms and franchise operations.
“This is an issue that affects millions, from fast food workers to people working on building sites,” TUC General Secretary Frances O’Grady said.
“Employers have a duty of care to workers in their supply chains. They shouldn’t be allowed to wash their hands of their responsibilities,” O’Grady said. “Joint liability must be extended to parent employers. Without it they can shrug their shoulders over minimum wage and holiday pay abuses.”
An estimated 5 million UK workers right now have no right to challenge their employers over minimum wage and holiday pay abuses, according to the union. It also claims up to 580,000 workers in the UK are paid below minimum wage and 2 million workers do not receive legal minimum paid holiday entitlements.
It says organizations are using strategies to transfer accountability to other parties, including outsourcing, franchising and staffing firms.
TUC’s report also cited concerns over “umbrella companies,” firms in the UK that act as employers to independent contractors working on temporary assignments who are usually provided by a staffing company. It says umbrella companies’ role has expanded.
“While in the past such companies primarily performed payroll functions, they are increasingly performing the role of intermediary employers, marketing themselves as being able to help reduce workers’ tax liabilities,” according to the report.
“The growing use of personal service companies (limited companies set up by independent contractors), which is spreading beyond high-skill professional workers, such as IT specialists, freelancers and management consultants, to become increasingly prevalent in other sectors, including construction and the public sector,” it said. “This means the company can avoid hiring an employee and the consequential tax and employment obligations which arise.”
“In their report, the TUC has bundled together a range of different services such as outsourcing, franchising and staffing as well as the use of umbrella agencies and cast them all in the same negative light,” said John Nurthen, executive director of global research for SIA. “Staffing firms in particular will not recognize the description of their services as a means to ‘avoid the employment law and tax obligations,’ especially given the stringent obligations they are obliged to follow under Agency Workers Regulations and a multitude of other employment laws. Nevertheless, as supply chains become increasingly complex and each party does its best to push risk down to another part of the chain, we are likely to see increased lobbying for the type of chain liability that is already in place in Germany. If employers wish to avoid further legislation in this regard, they should ensure they have good oversight of their individual supply chains to ensure there is no potential for workers to be exploited.”
The full report is available online.