Employment agencies accused of mis-selling

Labour MP Mr Umunna challenged Mr Cable to "commit to holding a full inquiry into this shabby practice".

Earlier on in the session the shadow business secretary asked Mr Cable if he agreed "that for an employer to mislead workers into purchasing personal accident insurance, the charges for which would take the workers' pay under the minimum and the purchase of which is not necessary given the employers' own insurance cover, would be completely indefensible and possibly unlawful?"

Mr Cable replied: "Yes, I agree it would be indefensible and I think it is unlawful.

"I have been advised that this practice has happened, the relevant body, which is the Employment Agency Standards Inspectorate, is investigating the individual cases. We'll take enforcement action if it proves to be a widespread practice then clearly there is a case for a more broadly based inquiry."

In a statement, Mr Umunna's office alleged some agencies have been

*Taking a "fee" of up to 500pc of the true cost of the premium, where normal commission would be around 20pc

*Boosting profits by £1m a year through the schemes

*In some cases selling insurance policies without the necessary FCA accreditation.

A spokesman for BIS said that under legislation introduced in 2003, it was illegal for recruitment agencies to offer products such as insurance as a condition of employment.

Tom Hadley, head of policy and professional services at the Recruitment and Employment Confederation said: "Profiteering is a very serious allegation and we would like Mr Umunna to share any specific evidence he has to support these accusations against our members.

“Let’s be clear, employment agencies are not doing anything wrong by offering workers the opportunity to purchase accident insurance. It’s a product that many other organisations offer to their members, including trade unions.

“Personal accident cover can be appropriate for workers in high-risk sectors such as rail and construction and may also cover them for accidents off-site that would prevent them from working, and provides them with an income whilst off work. By offering these benefits employment agencies are giving temp workers the same kind of support as that enjoyed by permanent contracted employees.

“As the professional body for the recruitment industry in the UK we require all members to abide by our code of conduct which requires them to be open and transparent with their workers."

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