In a landscape where brand reputation is as valuable as any asset, the oversight of third-party labor agencies has become a critical C-suite concern. The recent case involving Harrods, where hundreds of warehouse workers were underpaid for years, serves as a stark reminder of the financial, legal, and reputational risks at stake. To unpack these complexities, we sat down with Sofia Khaira, a specialist in diversity, equity, and inclusion, who helps businesses build more responsible and equitable talent management practices.
Today, we’ll explore how HR can shift from a reactive compliance role to a proactive guardian of agency worker rights. Our conversation will cover the essential, cross-functional due diligence required before onboarding an agency, the practical steps for ongoing monitoring to catch errors early, and the importance of building a true partnership with agencies to prevent minor issues from escalating into major crises.
The Harrods case highlighted that hirers share legal responsibility for agency pay errors. Beyond just legal compliance, how can HR use its unique operational insight to proactively safeguard agency workers, and what specific, preventative steps should they take to avoid such a situation developing over two years?
That’s the absolute core of the issue. Legal responsibility is the floor, not the ceiling. HR’s true value lies in its operational insight—we have our finger on the pulse of the workforce in a way that procurement or legal simply doesn’t. For a problem like underpayment to fester for two years, it signifies a catastrophic breakdown in oversight. Proactive safeguarding means getting ahead of the problem. This starts with rigorous scrutiny during the selection process, questioning agencies whose pricing seems too good to be true, because that cost is often offset by cutting corners on worker pay. It means establishing clear communication channels from day one, not just with the agency’s account manager, but with the workers themselves, ensuring they know who in our own HR department they can talk to if something feels wrong.
Experts in the article suggest a cross-functional team for vetting agencies. Could you walk me through the specific roles HR, procurement, and legal should play in this process, particularly when reviewing documents like template contracts and sample payslips to catch potential compliance issues early on?
A cross-functional approach is non-negotiable for robust due diligence. Think of it as a three-legged stool. Procurement will rightly focus on the commercial aspects—negotiating rates, ensuring the agency is financially sound, and defining service levels. Legal’s role is to pore over the master service agreement, identifying and mitigating liability for the company. But HR’s role is arguably the most hands-on in protecting the workers. We are the ones who must demand and review the template employment contracts and, critically, the sample payslips. We’re not just checking for a final number; we’re verifying that holiday pay is calculated and presented correctly, that all deductions are lawful, and that the pay structure is transparent. We bring the human and legislative lens to ensure that the agency is not only compliant on paper but also capable of delivering a positive and fair experience for every worker who walks into our building.
Once an agency is onboarded, the focus shifts from vetting to ongoing monitoring. What does an effective monitoring system look like in practice? Please detail how a company can implement regular spot checks and create effective feedback loops between managers and contractors to detect pay discrepancies.
Onboarding is just the beginning; the real work is in sustained oversight. An effective monitoring system is active, not passive. It’s not an annual review; it’s a living, breathing part of your operations. In practice, this means conducting regular spot checks. On a quarterly basis, an HR or finance team member should be able to pull a list of all temporary workers on site, randomly select a handful, and request their recent payslips directly from the agency for review. This simple act keeps the agency accountable. Equally important is creating feedback loops. This involves training your line managers to have regular, informal check-ins with agency staff. It also means establishing a clear, confidential reporting channel for contractors to raise pay-related issues directly with your HR team, bypassing the agency if they feel uncomfortable. This creates a safety net, ensuring that whispers of a problem can be heard and addressed long before they become a deafening crisis.
The article mentions that reputable agencies should always be ‘audit ready.’ From your experience, what are the key red flags an HR team might see when an agency resists an audit or has trouble producing documents? Could you provide a step-by-step example of a mini-audit HR can conduct?
Any friction or delay is a massive red flag. A truly reputable agency partners with you on compliance and should be able to produce documents like payslips or right-to-work checks almost instantly. If they offer excuses, claim the system is down, or say it will take several days, your alarm bells should be ringing. It often suggests disorganized record-keeping at best, or something to hide at worst. A simple yet powerful mini-audit can be done in an afternoon. First, ask the agency for a complete list of their workers currently assigned to you. Second, randomly select 5% of those names. Third, request the full documentation for those individuals: their original application pack, their signed contract, proof of right-to-work checks, and their last three payslips. Finally, sit down and meticulously review these documents for consistency, accuracy, and full compliance with wage and holiday pay laws. It’s a targeted strike that can reveal systemic issues very quickly.
Given that third-party failures can severely damage a brand’s reputation, as seen with Harrods, how can HR build a strong working relationship with an agency? Can you provide an anecdote or example of how this partnership helps ensure concerns are addressed immediately, rather than escalating into a crisis?
Building a partnership instead of a simple client-supplier relationship is crucial, and it’s built on transparency and communication. It moves the dynamic from “us versus them” to “we’re in this together.” I remember a situation where a line manager mentioned to HR that a few agency workers seemed confused about a new overtime calculation. Instead of letting it slide, the HR business partner immediately called her dedicated contact at the agency. Because they had a strong, established relationship, the conversation wasn’t accusatory. It was a collaborative, “Hey, I’m hearing some chatter, can we look into this together?” The agency immediately investigated, found a minor clerical error in how the new rate was entered, and proactively corrected the pay for all affected workers before the next payroll run. That is the power of partnership. A small query was handled in a single afternoon, protecting both the workers’ pay and our company’s integrity, preventing what could have easily spiraled into a much larger, more damaging issue.
Do you have any advice for our readers?
My advice is to stop thinking of agency workers as separate from your own workforce. Whether they are on your payroll or a third-party’s, they are in your building, contributing to your success, and are under your care. Take ownership of their experience. Build a true partnership with your agencies based on shared values of fairness and transparency. Don’t be afraid to ask tough questions and conduct your own audits. Ultimately, investing in robust oversight isn’t just about mitigating legal risk; it’s about upholding your brand’s integrity and ensuring every single person who works for you is treated with the dignity and respect they deserve.
