Recruitment businesses often find the summer period challenging on their cashflow

As the summer has ended we reflect on the cashflow challenges that the recruitment industry faced during this traditionally quiet period. With most employees - whether they are full time, part time or a contract worker – taking their main holiday during the summer months, recruitment businesses often find this period particularly challenging on their cashflow.

The natural slowdown in the market during the holiday months leads to the usual reduction in the need for agency workers. The slow market conditions will in turn cause a significant reduction in billing by recruitment businesses and when you add to that the fact that many temporary workers will chose this period to claim their holiday pay, whilst they are not working, then cashflow is squeezed even further.

Temporary workers are legally entitled to take paid leave, the amount of which depends on their contract and the hours they work but it is the recruitment agency’s responsibility to reimburse this holiday pay. Furthermore, the agency cannot invoice anyone in respect of the agency worker while they are not working and so cannot create availability through their invoice finance facility to fund the holiday pay gap.

Technically speaking recruitment agencies should be including holiday pay in their weekly invoice to the employer throughout the agency worker’s employment in order to cover holiday pay later down the line. However, in reality, the holiday pay inevitability gets used up on other parts of the business growth - new software, extra equipment or additional employees etc.

In addition to its traditional Invoice Finance products the Recruitment Finance Division of Lloyds TSB Commercial Finance offers a back office and payroll finance solution that can take care of all the key administrative tasks involved with temporary worker holiday pay, including calculating the holiday pay due per temporary worker, invoicing the employer and paying the agency worker correctly and on time. One of the added benefits of our payroll finance offering is that we can advise the agency on what their holiday pay liability is at any stage of the holiday pay cycle. 

Our back office and payroll finance solutions are fully outsourced and made up of a comprehensive payroll management service, a factoring facility and a credit insurance policy but the best thing about this type of finance is that it is suitable for businesses of all sizes.