Personnel Today
  • Home
    • All PT content
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • Brightmine
    • Learn more
    • Products
    • Free trial
    • Request a quote
  • Webinars
  • Advertise
  • OHW+

Personnel Today

Register
Log in
Personnel Today
  • Home
    • All PT content
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • Brightmine
    • Learn more
    • Products
    • Free trial
    • Request a quote
  • Webinars
  • Advertise
  • OHW+

Employment lawRecruitment & retentionTemporary employment

VAT rise on temps – what it means

by Personnel Today 2 Apr 2009
by Personnel Today 2 Apr 2009

The way that VAT is charged by employment businesses for the temporary staff they supply changed on 1 April 2009. This will have serious ramifications for employers that hire contract or temporary staff from employment agencies.

What does the VAT change mean for employers?

Staff Hire Concession arrangements in respect of temporary staff supplied by “employment businesses” (as opposed to “employment agencies”, which find staff who are then employed directly by their clients) have been withdrawn by HM Revenue & Customs. This arrangement had allowed employment businesses to charge VAT only on the commission element they charged for the supply, rather than the full cost of supplying the temporary staff, including their wages and other benefits. Its withdrawal is likely to significantly increase the costs of using temporary staff for employers that cannot fully recover VAT.

What types of employers will this affect?

The greatest impact will be on those using employment businesses for the supply of temporary staff that cannot fully recover the VAT charged to them. There are no exemptions.

How do the new rules apply to casual staff hired directly?

The concession is only relevant where temporary staff are supplied by an employment business, and so its withdrawal will have no impact on the treatment of casual staff hired directly.

What can affected employers do about it?

If you have not already planned for this, then you should start discussions with your preferred employment businesses. Employers should consider if they can negotiate adjustments to their existing contracts, so as to ascertain whether there is any way the increase can be apportioned between them. They could also discuss ways to defer or spread the increased VAT costs over the forthcoming financial year.

What other factors should employers consider?

This is an opportunity for employers to re-evaluate their staffing needs and long-term employment policies. Although the flexibility of temporary staff has its obvious attractions, these might be diminished by a significant increase in cost. While there are obvious financial constraints, it might be time to consider whether there is an advantage in using temporary staff.

What are the advantages of using temporary staff?

The advantages of using temporary staff stem from the flexibility and cost effectiveness that can arise from being able to draw upon an existing pool of available workers. The employment business undertakes the recruitment directly and will typically indemnify end users for employment claims that may be brought by the individual, permitting businesses to effect changes quickly.

Are temporary staff rights increasing?

It looks that way: they already benefit from the protection of working time legislation and the national minimum wage, as well as other protections such as health and safety and social security provisions and anti-discrimination legislation. In October 2008, the European Parliament approved the Temporary Agency Workers Directive, and the UK has three years to implement it. The main thrust of the directive is that temporary staff should receive equal treatment in terms of basic working conditions relating to pay, holidays, maternity leave etc (but excluding pensions), as if they were employed directly by the end user. In the UK, this protection will kick in after 12 weeks from the start of a temporary staff member’s placement.

Sign up to our weekly round-up of HR news and guidance

Receive the Personnel Today Direct e-newsletter every Wednesday

OptOut
This field is for validation purposes and should be left unchanged.

What about planning for employers’ longer-term staffing needs?

There is a move towards equality of treatment between temporary staff and permanent staff. Planning for the longer term, it is worth looking at the costs (which may mean additional administrative support costs) and risks that may arise from engaging staff directly on fixed-term or permanent contracts, or perhaps covering short-term staffing needs through overtime. Permanent employees currently only accrue unfair dismissal rights after completing a one-year period of continuous service, which potentially makes them as easy to dismiss as temporary staff during the same period.

Personnel Today

Personnel Today articles are written by an expert team of award-winning journalists who have been covering HR and L&D for many years. Some of our content is attributed to "Personnel Today" for a number of reasons, including: when numerous authors are associated with writing or editing a piece; or when the author is unknown (particularly for older articles).

previous post
On the move: Richard Neville and Lucy Adams
next post
Legal dilemma: women undergoing IVF treatment

You may also like

Company director wins £15k after being told to...

4 Jul 2025

How can HR prepare for changes to the...

3 Jul 2025

Government publishes ‘roadmap’ for Employment Rights Bill

2 Jul 2025

Employers’ duty of care: keeping workers safe in...

27 Jun 2025

When will the Employment Rights Bill become law?

26 Jun 2025

Graduate jobs this summer ‘will be toughest since...

25 Jun 2025

Employers struggling with soaring candidate deception

25 Jun 2025

UK engineering and manufacturing firms face hiring struggles

23 Jun 2025

Aldi to hire for 1,000 new supermarket roles

23 Jun 2025

Seven ways to prepare now for the Employment...

20 Jun 2025

  • Empowering working parents and productivity during the summer holidays SPONSORED | Businesses play a...Read more
  • AI is here. Your workforce should be ready. SPONSORED | From content creation...Read more

Personnel Today Jobs
 

Search Jobs

PERSONNEL TODAY

About us
Contact us
Browse all HR topics
Email newsletters
Content feeds
Cookies policy
Privacy policy
Terms and conditions

JOBS

Personnel Today Jobs
Post a job
Why advertise with us?

EVENTS & PRODUCTS

The Personnel Today Awards
The RAD Awards
Employee Benefits
Forum for Expatriate Management
OHW+
Whatmedia

ADVERTISING & PR

Advertising opportunities
Features list 2025

  • Facebook
  • Twitter
  • Instagram
  • Linkedin


© 2011 - 2025 DVV Media International Ltd

Personnel Today
  • Home
    • All PT content
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • Brightmine
    • Learn more
    • Products
    • Free trial
    • Request a quote
  • Webinars
  • Advertise
  • OHW+