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HMRC internal manual

PAYE Manual

Employment maintenance: employment agencies: agency schemes - general

The operational problems involving agency schemes are caused by erratic employee working patterns. The main difficulties for the operation of PAYE and the Employment Maintenance procedures are

  • Workers registering with several agencies simultaneously
  • Large numbers of workers changing jobs, often in quick succession

This interacts with

  • Employers confusion about when to submit forms P45 and P46 or starter and leaver information on their Full Payment Submission (FPS)
  • Poor compliance in supplying National Insurance numbers


Information for employers on the importance of supplying correct NINOs can be found at GOV.UK/HMRC homepage for operating PAYE in real time. Where the opportunity arises, you should explain the importance of using the correct NINO and the benefits of doing so

  • Starter and leaver information on forms (P45(1), P45(3) and P46) or FPS will be processed quicker and lead to fewer enquiries, for example telephone calls and forms being issued to the employer from the Processing Office
  • The National Insurance payments can be allocated to the employee’s NIC account quicker. This is important if the employee wants to claim Jobseeker’s Allowance (JSA) or other State Benefits

Agency database cleansing

The PAYE Service contains a large number of live records where the individual has not had paid employment with an agency for some time and may not do so in the future. Unless the employee tells the agency that a P45 or notification of cessation on their FPS is needed, the agency considers the employee available for work and keeps the employee on ‘the books’. In these circumstances a P45 or FPS leaver notification is not produced.

PAYE Regulations state that an agency ceases to employ the agency worker either

  • At the end of the relationship between the agency and the agency worker
  • At the end of a period of three months during which the agency makes no relevant payments to the agency worker

Note: A P45 or FPS leaver notification is not required each time the agency worker stops providing services to a client or agency.

If either of these circumstances applies, the agency must provide a form P45 to the employee and complete leaver notification on their FPS.

Note: If an agency is persistently neglecting its PAYE responsibilities, a report should be made to your Manager to consider referring the matter to your Employer Compliance Team.