I seem to be very late to the story on this one.
Early last year, people2people Shared Services Manager, Lisa Johnson had this issue raised with her in the comments section of her people2people blog Is your recruiter ripping you off? and subsequently Lisa wrote a follow up blog later in the year Who Wins When a Recruitment Agency Charges Temps an Admin Fee? specifically about the apparent trend of agencies charging candidates a form of ‘Payroll Administration fee’.
In the example that Lisa writes about, she quotes a figure of 2.5% of gross pay being deducted from the candidate. This is quite appalling when you do the maths.
Let’s say the temp or contractor is earning $40 per hour, gross pay. A 40 hour week would aggregate the employee’s pay to $1600 per week. Under the current financial year tax rates a tax deduction of $393 is made (assuming the tax-free threshold is claimed). The agency employee, being charged a 2.5% ‘Payroll Admin’ fee, is then hit with a $40 deduction from their after-tax pay, an actual cost to the employee of 3.3% of their weekly after-tax income. This $40 may be claimable as a deduction in their actual annual tax-return, but that’s not relevant to the core of this issue.
It would seem from one of the commenters in Lisa’s blog, who followed the issue up with the Fair Work Commission, was advised that as long as the ‘Payroll Administration fee’ deduction does not reduce the employee’s wage below the award minimum for that work, then there is no law being broken.
I don’t care that no law is being broken – this deduction is an underhand charge that is in no way justified and greatly damages the goodwill and reputation of the recruitment industry in general.
In my view, supporting the position that Lisa articulated in her blog, is that this levy on temporary employees and contractors is a coward’s way of recouping costs that are actually charged to the client as part of the hourly or daily rate attached to the agency’s employee or contractor. As Lisa so rightly puts it: ‘The agency has double dipped’.
This is an insidious tactic of winning work through low or uncommercial margins and then attempting to make this ‘lost’ margin back through the hip pockets of candidates.
I, for one, want this practise stopped – immediately.
I will contact the recruitment agencies undertaking this practise to request an explanation for the circumstances in which this levy is imposed and the reasons for doing so.
Please help me in this campaign by providing your comments, here on this blog, the name of any recruitment agency imposing any sort of payroll admin fee on their workers. You can post your comments anonymously if you prefer. Alternatively you can email me directly at [email protected]
Thanks in advance for your help.