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What are the potential consequences of breaches of compliance?

Consequences of Breaches of Compliance

Depending on the nature of the breach of compliance and the specific country involved, there are several possible repercussions. Some of these can be as follows:

  • A total prohibition on carrying on recruitment business in a country for a defined period (in France this can be up to 5 years) which would obviously also affect our perm business;
  • Publication in the press of the prohibition notice;
  • Lump sums fines for the client. For example this could be a fine of up to €500,000 in France for illegal labour leasing or the same amount in Germany for having illegal contractors on site without valid work permits. These fines can be passed directly on to The Agency via the client contract.
  • Back-dated liabilities imposed on the client either by the tax or social security authorities. These will usually be based on the total contract income (i.e. not just the salary part) and will be topped up by penalties and interest. It is typical for such an amount to come to between 50% and 100% of the contract income.
  • Fines or liabilities imposed on the client where we are on our own contract terms. This obviously reduces our exposure but nevertheless, the client is unlikely to be coming back to us with more requirements.
  • Tax or social security investigations at a client site can cause nervous contractors to leave abruptly often causing havoc to the completion of client projects.