Recruitment agencies face a busy autumn of employment-law changes, with the Fair Work Agency already naming employers and new obligations covering tribunal time limits, right-to-work checks, third-party harassment and umbrella payroll arrangements.
Azmat Mohammed, Director-General of the British Institute of Recruiters (BIOR), says agencies should focus on one practical habit: keep a complete, accessible file for every worker they place.
The Fair Work Agency’s first naming round is a warning
“The first naming round since the Fair Work Agency was set up tells agencies three things,” Mohammed says. “Enforcement is live now, not something for 2027. The list included businesses that supply staff, so nobody in our industry is outside it.”
He says the range of underpayments matters. “The agency is as likely to be named for a small payroll habit as a big one.” In agency work, he adds, the hourly rate is rarely the only issue; unpaid travel between assignments, waiting time, compulsory briefings, deductions that take pay below the minimum and missed age-band rate changes can all create exposure.
His advice is to check those five points on payroll this month, before anyone else does.
The five biggest compliance challenges this autumn
1. One enforcement body with a wider reach
The Fair Work Agency took over the Employment Agency Standards Inspectorate and the Gangmasters and Labour Abuse Authority in April. Mohammed says agencies are used to being inspected against separate rules, but the same body can now look at pay, conduct and the supply chain together.
2. Records need to last longer
From 1 October, the time limit for most tribunal claims is six months rather than three. Every placement, pay decision and exit therefore carries a longer evidential tail. “The file has to be complete and findable for longer than most agencies are used to,” Mohammed says.
3. Right-to-work responsibility
From 1 October, checks extend to workers and individual subcontractors as well as employees. The employment business is the employer of its temporary workers for this purpose, Mohammed says, and the civil penalty can be up to £60,000 for each illegal worker. An agency cannot safely assume that an umbrella company or client has completed the check.
4. The 30 October harassment duty
Employers must take all reasonable steps to prevent sexual harassment, and can be liable for harassment by third parties such as clients unless those steps have been taken. For agencies, Mohammed says, this applies both to consultants in the office and to workers placed on client premises.
5. The payroll chain
Since April, the agency that holds the end-client contract is responsible for PAYE being operated correctly on money paid to umbrella-employed workers, with HMRC able to recover underpayments from the agency. The Key Information Document must be issued by the agency and reissued following a significant change.
What agencies should do before 30 October
Mohammed recommends three immediate steps: document the steps taken to prevent harassment; include the client’s responsibilities in terms of business; and give placed workers a reporting route as straightforward as the one available to internal staff.
The placed worker is the area most easily overlooked, he says. “It is also about the care home, the warehouse and the school where your workers are, and about the client’s staff and customers who are the third parties.” If terms are silent, the issue is left to be resolved after a complaint rather than before it.
Pay transparency could change recruitment advertising
The equal pay consultation closes on 27 October. Two proposals would affect agencies directly: publishing pay information in every job advert, or giving it to candidates in writing before interview where there is no advert; and a duty on every party in an outsourcing arrangement to take all reasonable steps to uphold pay equality.
Mohammed believes the change could help agencies already publishing salaries. “The agencies that already put the salary in the advert fill roles faster and waste fewer interviews,” he says. “The question is who publishes what when an agency advertises for a client, and what counts as the employer for an advert placed by an agency.”
Common mistakes to avoid
Mohammed’s list includes Key Information Documents that were never issued or were left to umbrella companies; right-to-work checks that everyone assumed someone else had done; holiday pay calculated on basic pay alone; records that cannot be produced; and terms of business that say nothing about third-party harassment or pay information in adverts.
“A logo on the website standing in for proof” is another trap, he says. “A client who checks will want the live record, not the badge.”
A practical approach for smaller agencies
For agencies without dedicated legal or compliance teams, Mohammed recommends working from current government guidance, keeping a diary of key dates, and using a written checklist. BIOR publishes a twelve-point Fair Work Agency compliance checklist and an Employment Rights Act timeline on ior.org.
He also advises small agencies to use a professional body that monitors legal change, answers questions in writing and keeps documents current.
What to prepare for in 2027
Looking ahead, Mohammed flags changes from 1 January 2027, including a reduction in the unfair-dismissal qualifying period from two years to six months, with the cap on compensatory awards removed. Fire-and-rehire protections are also due, as is a duty to tell workers of their right to join a union.
From April, bereavement leave following a pregnancy loss is expected to become a right, holiday-pay enforcement by the Fair Work Agency can begin, and the minimum-wage team is set to move into the agency. Further reforms on agency-worker rights, umbrella company regulation and flexible working are also expected through 2027.
One habit that makes the difference
“Keep the file you would want to show an inspector, for every worker you place, as if the inspector were coming in six months,” Mohammed says. “The time limits now give that visit six months to arrive, the naming rounds give it a reason, and the file is the only thing that ends it quickly.”
