Step 2

How to comply – what it looks like in practice

STEP 2 - Ensure that the rate paid to labour providers covers legal requirements and a sustainable net margin

The rate that labour users pay to labour providers is a matter for commercial negotiation but it is also a key variable that the GLA monitors.

Unrealistically low rates can only be achieved either through worker exploitation or tax evasion or both.

Labour users must pay rates that allow the labour providers to meet:

• Actual minimum unavoidable total wage costs required to meet basic legal requirements such as the minimum wage, overtime premium (which may require a higher charge rate) national insurance, SSP and statutory holiday entitlement.

• Business overheads, transport costs, management cost

• Sustainable net margin

Where a seemingly low rate is being paid the labour user must verify with the labour provider how it is meeting its legal obligations and seek confirmation that it is doing so.

Some labour providers may claim that they are legally able to avoid national insurance contributions or holiday pay because of the status of their workers (e.g. self-employed or based outside the UK). This is most likely to be incorrect and a means to illegally undercut legitimate businesses.

Current and detailed Charge Rate Guidance at and GLA

Now take the next step through: Agency Labour.

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