Temp to perm plans will alter way fees are levied

Draft
regulations will alter the conditions for agencies charging a firm which offers
a temp a permanent post.

Organisations
frequently engage workers through an employment agency and then decide to take
the worker onto their payroll, rather than continue paying the agency. 

In
such cases it is common for the contract between the agency and the hirer to
provide for a “transfer fee” to be paid to the agency.

Without
such a fee, the agency can find that it is effectively being used as a recruitment
service. There is a particular detriment to the agency in instances where the
worker is “poached” by the hirer a very short time after being supplied.

On
the other hand, the practice of an agency charging transfer fees to companies
who wish to take on its workers as full- or part-time employees has, it seems,
had the effect of discouraging the creation of permanent relationships. 

Direct
relationship

In
many circumstances once both the worker and the organisation it is providing
with its services have had a look at each other, they may legitimately wish to
create a direct relationship, rather than having to continue to operate through
the agency. 

This
is often the case where the individual has been in place for a long period of
time. What is more, from a legal point of view, the longer an individual has
been providing the same service exclusively to the same company, the greater
the risk that an employment tribunal will consider the worker to be an employee
or worker of the hirer.

Under
new draft regulations published earlier this month, agencies will be able to
continue to charge transfer fees, but only on certain conditions. The
conditions will apply not just to the fees charged where the client itself
takes on the worker, but also where it proposes to use another agency to supply
the same worker.

The
effect of the Govern-ment’s proposals is that employment bureaux will only be
able to charge transfer fees if they offer to continue to supply the worker for
an agreed period and the client rejects the offer. If the client elects for
continued supply of the worker, and the agency is unable or unwilling to do so,
then no transfer fee will be payable should the client then hire the worker
directly.

This
will be of interest to clients if their agency is seeking to withdraw a
particular worker – if they wish to place the worker with another organisation,
for instance.

In
such cases, if the client wishes to retain the worker, its only option is to
offer to take them on directly, which may well involve a transfer fee. Under
the new law, it will not have to do so, and will instead be able to require the
agency to continue to supply the worker.

However,
this proposal does not prevent agencies, in agreements with clients, from
providing that transfer fees must be paid where the client poaches a worker
despite the agency’s willingness to continue to supply that worker to the
client.

Transfer
fee

The
only proposed limitation will be a restriction on the life-time of the transfer
fee clause.

The
employment agency will be able to charge the transfer fee if the worker is
poached during the first 14 weeks of being supplied. Subject to that, however,
the agency will not be able to charge a fee in respect of the worker if the
worker waits for eight weeks from the last date she or he worked for the client
through the agency, before taking up employment with the client direct.

– Under
new draft regulations, agencies will be able continue to charge transfer fees
where the client takes an agency worker onto its payroll

– Clients
will be able to require agencies to continue to supply workers rather than
having to pay a transfer fee

– The
new regulations are due to come into force in summer 2001.

By
Alastair Brunker, a solicitor with Shell International

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