agency worker payroll

Agency Worker Payroll & Benefits

February 2, 2024

Categorised in: Employee Benefits, Laws & Regulations, News, Payroll, Recruitment

Working in temporary employment through an agency offers a viable avenue for earning income, but it is crucial to understand your rights as an agency worker and to ensure proper tax compliance protocols are being followed.

You are an agency worker (or temp) if you are not operating as a self-employed individual. Instead, you hold a contractual arrangement with an employment agency while working on a day-to-day basis for an employer, taking directives from the employer rather than the agency.

Your Rights As An Agency Worker

Despite not being directly employed by the entity you work for, you still possess certain employee rights. These rights are the responsibility of either the agency employing you or the client company where you are deployed. As a temporary or agency worker, your rights include:

  • Paid holiday
  • Payment at or above the minimum wage
  • Statutory Sick Pay (SSP)
  • Unpaid parental leave
  • Non-discrimination based on race, age, disability or sexuality
  • Access to workplace facilities for staff, such as the canteen
  • After 12 weeks – if pregnant, paid time off for antenatal appointments
  • After 12 weeks – equivalent basic pay and working conditions as permanent staff performing comparable work

Agency Worker Tax And National Insurance Obligations

If your income surpasses a specified threshold and you are below State Pension age, you are obligated to pay National Insurance and tax. If you function as an agency employee, the agency will deduct your tax and National Insurance through the PAYE (Pay As You Earn) system, including any Student Loan repayments owed. The agency must provide you with payslips detailing the breakdown of your earnings.

Should you stop working through the agency, upon termination of your employment, the agency should issue a P45 form for your next job, along with a P60 at the end of the tax year, outlining your tax code and total tax payments.

agency worker tax and national insurance

Cash-In-Hand Employment

Engaging in cash-in-hand jobs where tax and National Insurance are not deducted is illegal.

While some employers resort to this practice to reduce labour costs, it deprives you of standard entitlements such as Jobseeker’s Allowance and sick pay. Furthermore, you may be liable to repay the tax and National Insurance, incur fines, and face legal consequences. If you suspect your employer is involved in cash payments to evade taxes, you can confidentially report it to HMRC.

More information on agency worker payroll and rights can be found here.

HIVE360 – The Agency Worker Payroll Solution

HIVE360 offers a complete agency payroll solution that not only includes payroll, but also encompasses benefits, wellbeing and pension administration, including those governed by the GLAA. Speak to one of our experts here to see how we assist you and help you make the right choice.