When umbrella companies pay agencies commission for putting contractor their way are they really paying bribes?
There has been a practice in our industry where agencies hand over IT Contractors to Umbrella Companies and get a bung for each contractor in return.
The questions is does that constitute a bribe which comes under the Bribery Act 2010 or is it merely commission?
Commission Deal with Umbrella Company
At one end of the scale there would be the case where the agency has a commission deal with a particular Umbrella Company and when a contractor asks the agency to recommend an Umbrella Company they tell the contractor about that relationship and tells the contractor that they get a fee from the Umbrella Company.
If the contractor goes ahead with that Umbrella Company and the agency get a commission fee then that would not constitute a bribe.
Forced to Use Umbrella Company
At the other end of the scale there could be the case where a contractor already uses an Umbrella Company but the agency, who gets him or her a new contract, tells the contractor that he or she can only use the Umbrella Company that they have an arrangement with and get a fee from, that it‘s compulsory.
The authroities would almost certainly not look upon that as commission. They would far more likely look upon as an outright bribe to force a contractor to take a route that he or she did not want to take. It may even have cost the contractor commercially. Paying bribes to agencies is illegal.
Shades of Grey
Between these two extremes there are many shades of grey.
For instance, the agency may tell the contractor that they have a PSL with a number of Umbrella Companies. The contractor can choose the one he or she likes.
That is still likely to come under the Bribery Act, unless the agency tells the contractor that they receive commission. Agencies may well still force contractors to go a route that they did not want to go. That’s even if they have multiple choices.
Paying Agency Commission
In another scenario where the Umbrella Company is giving a bung to an individual agent and not the company they could all be in trouble.
The Umbrella Company would be giving a bribe, the individual agent would be taking one and the agency may well be liable as well if they haven‘t taken enough precautions to stop their employees paying or taking bribes.
That comes firmly under the Bribery Act 2010.
A good test on whether it is a bribe or commission would be whether it would take place anyway without the agency recommending the Umbrella Company to the contractor.
Another test is whether the contractor has lost out by it.
If he, or she, is paying more for the same service that he got more cheaply at a previous Umbrella Company then that is likely to push it into the bribe category.
If the contractor has to pay more to the Umbrella Company than other contractors at the same umbrella company to pay for the agency fee then that would tend towards the bribery side of the scale.
If the contractor knows about the arrangement and is able to say yes or no then that would just be commission rather than bribery.
The 2010 Bribery Act states that if you are in an industry where bribes are likely to take place (and it looks as if the Agency / Umbrella Company arrangement is rife for bribery opportunities) then both the agencies and the Umbrella Companies have to have a strict Bribery Policy explained to all their employees. They should, also, take steps to make sure it doesn‘t happen.
If they has this strict Bribery Policy and one of their employees managed to evade that and offer bungs then the company would not be liable.
2010 Bribery Act
However, we do not know how many Agencies and Umbrella Companies in the industry do have these policies. It is likely they must have under the Bribery Act 2010.
It is possible that there may be a can of worms here?
Are Umbrella Companies ‘bribing‘ agencies to hand the contractors over without contractors being given any choice in the matter? Is it without the contractor‘s knowledge that ‘commission / a bribe‘ is being paid?
Is this commission or are umbrella companies paying bribes?
Are contractors losing out financially by that arrangement?
If you have any knowledge of any suspicious arrangements let us know in the comments or in an email.
Please do not be libellous if you put it in the comments section unless you are an expert in the area.
Note:- We are not lawyers and are not experts in the Bribery Act of 2010. We have, though, read it and have an opinion on it. So, if you‘re unsure whether you fall foul of it, or suspect you have been a victim of these arrangements, you should contact a legal expert.