Recruitment agencies (main agency) often contact other recruitment agencies (3rd tier agency) to place candidates into a role where they do not have the candidates themselves or that they do not wish to deal with the complex payroll legislation.
The main agency will have the contact with the direct client and continue to send invoices to the direct client but the main agency does not pay the candidate: the 3rd tier agency pays them. Against the job order, the pay rate will be the 3rd tier agency’s (Supplier) charge rate for supplying the candidate. The main agency does not necessarily need to know what the 3rd tier agency is paying the worker. The main agency may send a proforma remittance to the 3rd tier agency which details what the expected bill value will be before sending the actual remittance. This is so errors can be captured before the actual remittance is generated.
The other type of supplied payee is from an Umbrella Company. Agencies often use contractors to fulfil positions and this means that the agency is not responsible for payee as if they were a direct employee and has full employment rights. This saves the agency time and cost. However, in doing so, this could mean that the agency and payee are avoiding paying tax. To help all parties, the contractor would register with an umbrella organisation to have the appropriate country taxes managed on their behalf for a fee as if they were an employee. This way the agency does not have the responsibility of the collection of taxes, the payee has the correct tax deducted from their earnings as it is paid via the umbrella company and the tax office receives their required payments.