The Hidden Risk: Illegal Payroll Practices Among Some Agency Staffing Providers in Health & Social Care

Introduction

The private health and social care sector is under growing scrutiny—not just from regulators and inspectors, but from within its own ranks. One of the more pressing concerns quietly building momentum is the increasing use of agency staffing providers who operate using illegal or non-compliant payroll methods. While agencies play a vital role in bridging workforce gaps, some are putting both clients and workers at serious risk through unethical and unlawful practices.

The Issue at Hand

As demand for temporary care staff continues to surge, many providers are turning to agencies that promise fast, affordable cover. But behind some of these low-cost offerings lie payroll setups that may breach UK employment and tax laws.

Common red flags include:

• Misuse of Umbrella Companies: Agencies engaging umbrella companies that deduct excessive fees, fail to pay holiday entitlement, or misclassify workers as self-employed.

• False Self-Employment: Care staff being incorrectly treated as contractors to avoid PAYE tax and National Insurance contributions.

• No Right-to-Work Checks or AWR Compliance: Failing to properly vet staff or provide fair pay and working conditions under the Agency Workers Regulations (AWR).

• Lack of Payslips or P60s: Staff not receiving the proper documentation required under UK law, often left unaware of their entitlements.

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The Consequences for Providers

Working with non-compliant agencies is not just a reputational risk—it can also carry serious legal and financial consequences. Care providers can be held jointly liable for breaches of tax, employment, or immigration laws if found to have turned a blind eye to how their temporary staff are being paid.

For care homes and home care providers that already operate in a tightly regulated environment, associating with rogue agencies can result in:

• CQC sanctions or failed inspections

• Financial penalties and backdated tax liabilities

• Damaged staff morale and retention issues

• Legal action from agency workers

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What to Look for in a Compliant Staffing PartnerTo protect your service, your staff, and your reputation, choose agency partners who:

✅ Operate PAYE or use fully audited, HMRC-compliant umbrella companies

✅ Provide transparent payroll reports and payslips to all workers

✅ Carry out right-to-work checks, DBS verification, and maintain full compliance documentation

✅ Understand and apply AWR from day one

✅ Offer clear service-level agreements and liability protection

Conclusion

Temporary staffing is essential in today’s care sector—but only when delivered with integrity. As regulatory attention increases and HMRC continues to clamp down on tax avoidance schemes, care providers must act decisively. Choosing a compliant, ethical staffing partner isn’t just good practice—it’s a legal necessity.

If you’re unsure about your current agency’s payroll practices, now is the time to review your supplier list and take action.

Spire Staffing are offering a free review and consultation on your current or future needs for Temporary Staffing. Contact us today to arrange.

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