Running a Temp Desk: Where the Margin Leaks and How to Stop It

On a permanent desk, the placement normally creates a single fee.

On a temp desk, the placement starts a weekly operating cycle.

The worker completes the assignment. Their hours must be captured and checked. The employment business must calculate and arrange payment, account for the relevant employment costs, invoice the hirer and collect the money. Changes to rates, working hours and compliance status also need to be recorded as the assignment continues.

That process repeats for every worker, every week.

The important legal point is that an employment business remains responsible for paying a temporary work-seeker for all the hours they have worked, even if the hirer has not yet paid the agency or has not authorised the worker's timesheet.

A missing approval can therefore delay the agency's invoice without necessarily delaying its obligation to pay the worker. That is why weak temp administration creates more than inconvenience: it creates margin leakage and a working-capital gap.

A temp desk does not protect its margin once, at placement. It protects it repeatedly—from the rate agreement to the final payment of the invoice.

Start by understanding what the margin actually is

The difference between the worker's headline pay rate and the client's charge rate is not automatically the agency's profit.

Suppose a worker is paid £20 an hour and the client is charged £28 an hour.

The £8 difference is the initial spread, but it may still need to cover costs such as:

• Employer National Insurance contributions
• Employer pension contributions
• Holiday pay
• Apprenticeship Levy, where applicable
• Statutory-pay exposure
• Payroll or umbrella administration
• Insurance
• Finance or invoice-funding costs
• Bad-debt risk
• Other direct costs attached to supplying the worker

The correct calculation depends on how the worker is engaged and paid.

For a PAYE agency worker, the employment business may be responsible for payroll and applicable employer costs. Temporary and seasonal workers can also fall within workplace-pension duties, depending on their age and earnings.

For an irregular-hours worker, holiday entitlement and pay must be calculated under the applicable rules. Rolled-up holiday pay is permitted for qualifying irregular-hours and part-year workers, but it must be calculated and shown correctly rather than treated as an invisible deduction from an agreed wage.

Where an umbrella company is used, it is essential to distinguish between:

• The assignment rate paid to the umbrella
• The umbrella's employment costs and margin
• The worker's gross taxable pay
• The worker's eventual net pay

Government guidance illustrates that the assignment rate paid to an umbrella may need to fund employer National Insurance, employer pension contributions, Apprenticeship Levy, holiday-pay provision and the umbrella's margin before arriving at the worker's gross pay.

Confusing these figures is an easy way to quote an apparently healthy placement that produces a much thinner return than expected.

Margin and markup are not the same thing

Agencies also need to use financial language consistently.

If the direct cost of supplying a worker is £20 an hour and the charge rate is £28:

• The cash spread is £8.
• The markup on cost is 40%.
• The gross margin on revenue is approximately 28.6%.

The formulas are:

Markup percentage = spread ÷ cost Gross-margin percentage = spread ÷ charge rate

Those percentages answer different questions. Calling a 40% markup a 40% margin overstates the profitability of the assignment.

More importantly, the calculation should use the total direct cost, not merely the worker's basic pay rate.

A useful placement-level calculation is:

Contribution per hour = client charge rate − total direct worker cost − other variable assignment costs

The business may use a more detailed accounting definition internally, but everyone involved in agreeing rates should use the same one.

Leak one: building the rate incorrectly

Many margin problems begin before the worker starts.

The consultant agrees a pay rate and charge rate, but the calculation does not account correctly for the engagement model, holiday treatment, pension cost, overtime or a client-specific cost.

Common rate-setting errors include:

• Treating an umbrella assignment rate as though it were the worker's gross pay
• Calculating margin from the basic PAYE rate without including employer costs
• Forgetting that overtime attracts a different pay or charge rate
• Applying a single margin percentage to every pay route
• Failing to include an agreed rebate, discount or vendor-management fee
• Recording a daily rate but calculating margin as though every day contains the same number of billable hours
• Allowing a client or worker rate to change without updating both the placement and downstream billing records

The control is not merely a spreadsheet formula. It is an approval process.

Before a placement becomes active, the system should show:

• Worker pay or assignment rate
• Client charge rate
• Engagement and payment route
• Expected direct employment costs
• Standard and overtime rates
• Expected contribution per hour or day
• Gross-margin percentage
• Who approved the commercial terms
• When the rates take effect

Any later rate change should be dated and versioned. Overwriting the original rate makes it difficult to explain why a historic invoice or payment was calculated differently.

Leak two: timesheets that arrive late, incomplete or wrong

Timesheets connect work performed to worker pay and client billing.

The obvious failure is a missing timesheet. Less obvious failures include:

• Overtime being recorded at the standard rate
• Breaks being deducted incorrectly
• Expenses being omitted or duplicated
• A worker using the wrong assignment or cost centre
• A manager approving hours they were not authorised to approve
• A corrected timesheet not reaching payroll or billing
• Approved hours being re-keyed incorrectly into the invoice system
• A client disputing hours after the worker has already been paid

The legal position makes this particularly important. An employment business cannot simply refuse to pay for hours actually worked because the hirer has not authorised the timesheet.

That does not mean the agency must accept every unsupported claim without investigation. It means the process needs a way to establish what was worked without making a signed timesheet the only possible evidence.

A well-controlled timesheet workflow should:

1. Generate the correct timesheet for the worker and assignment.
2. Show the expected days, hours, rates and permitted expenses.
3. Route it to an authorised hirer contact.
4. remind the worker and approver before the cut-off.
5. Escalate missing or disputed entries to a named person.
6. Lock the approved version while retaining an audit trail of corrections.
7. Pass approved units into billing without re-keying.
8. Keep payroll and invoicing informed when a dispute remains unresolved.

The important measure is not simply the percentage of timesheets eventually approved. It is the time between the end of the working period and a clean, billable approval.

Leak three: paying correctly but billing incorrectly

A desk can pay every worker accurately and still lose money when the invoice does not reflect what was supplied.

Examples include:

• Approved overtime not reaching the invoice
• An old charge rate remaining in the billing record
• Expenses being paid to the worker but not recharged to the hirer
• A shift being attached to the wrong client or purchase order
• An invoice being sent to the hiring manager rather than the client's accounts-payable system
• Missing cost-centre, purchase-order or portal information causing rejection
• Credit notes being issued without the underlying placement record being corrected
• An invoice being generated but never submitted

This is why "timesheet completed" and "invoice created" are not enough as operational statuses.

A useful workflow distinguishes between:

• Hours worked
• Hours submitted
• Hours approved
• Hours approved with an exception
• Hours included in payroll
• Hours ready to invoice
• Hours invoiced
• Invoice accepted by the client
• Invoice paid

Approved but unbilled hours should appear on an exception report. They represent work the agency may already be funding but has not yet converted into a receivable.

Leak four: payroll exceptions and employment costs

Temp payroll contains large numbers of small calculations. A recurring error affecting several workers can become expensive quickly.

Controls need to cover more than the basic hourly rate.

Depending on the arrangement, the agency or payroll provider may need to manage:

• PAYE and National Insurance
• Holiday accrual or qualifying rolled-up holiday pay
• Workplace-pension assessment and contributions
• Statutory payments
• Overtime and shift premiums
• Expenses
• Attachments of earnings or other deductions
• Changes in tax code
• Leavers and final payments
• Corrections to earlier pay periods

Temporary status does not remove workplace-pension obligations. Employers must assess seasonal and temporary workers and enrol those who meet the relevant conditions.

Agency workers also have rights under the Agency Workers Regulations. From the first day of an assignment, they have rights concerning access to shared facilities and information about vacancies. After completing the 12-week qualifying period in the same role with the same hirer, qualifying agency workers are entitled to equal treatment in relation to pay and basic working conditions.

That creates another operational requirement: the agency needs to know when a worker is approaching the 12-week threshold and obtain current information from the hirer about comparable pay and conditions.

A system that calculates the original placement margin but ignores later equal-treatment changes can continue displaying a margin that no longer exists.

Leak five: confusing booked margin with earned margin

A margin agreed at placement is a forecast.

It assumes:

• The expected number of hours will be worked.
• The agreed rates will remain unchanged.
• The assignment will run for the expected duration.
• Overtime and expenses will be treated as planned.
• All direct costs have been included.
• Every billable unit will be invoiced.
• The client will pay.

A useful temp desk therefore needs more than one margin figure.

Booked margin

The expected contribution based on the agreed rates and anticipated hours.

Accrued margin

The expected contribution from hours that have actually been worked or submitted.

Approved margin

The contribution supported by approved timesheets.

Invoiced margin

The contribution represented by invoices issued to the client.

Collected margin

The contribution attached to invoices the client has actually paid, adjusted for credit notes, bad debt and relevant financing costs where the agency measures them at assignment level.

These figures answer different questions.

A placement can have a healthy booked margin while producing poor cash flow because approvals are late. It can have a healthy invoiced margin while the client disputes or never pays the invoice.

Margin and cash are connected, but they are not interchangeable.

Leak six: the gap between paying the worker and collecting from the client

Many temp desks pay workers weekly while clients pay invoices on longer terms.

That creates a working-capital gap even when the assignment is profitable.

For example, the agency may fund several weeks of:

• Worker pay
• Employer costs
• Payroll charges
• Pension contributions
• Tax liabilities
• Umbrella invoices

before collecting the corresponding client invoice.

The longer the timesheet approval, invoicing and client-payment process takes, the more cash is tied up.

Late payment can disrupt cash flow even where the underlying work was profitable. The Office of the Small Business Commissioner recommends agreeing payment expectations clearly, ensuring invoices contain the correct information and are submitted through the client's required process, monitoring payment status and contacting the customer promptly when an invoice becomes overdue.

Before supplying a new client, a temp agency should therefore establish:

• The legal entity being invoiced
• Credit status and credit limit
• Agreed payment terms
• Purchase-order requirements
• Invoice format
• Submission email address or portal
• Billing frequency
• Timesheet approval process
• Who can resolve an invoice dispute
• Whether the agency can suspend further supply if debts become overdue

Commercial pressure can make agencies reluctant to challenge a slow-paying client. But increasing the number of workers supplied to that client also increases the agency's exposure.

Revenue from a client that cannot or will not pay on time may require more funding than the apparent margin justifies.

Leak seven: invoice disputes that are allowed to age

Not every late payment is a credit-control problem. Some invoices are not paid because the client disputes them.

The dispute may concern:

• Hours
• Rate
• Worker identity
• Purchase order
• Assignment dates
• Expenses
• VAT treatment
• Duplicate billing
• Missing documentation

A dispute should become an owned operational case, not a note in someone's inbox.

The system should record:

• The amount disputed
• The reason
• The undisputed balance
• Who owns the resolution
• What evidence has been supplied
• The next action and deadline
• Whether payroll or future supply is affected
• The eventual outcome

Where an undisputed invoice becomes overdue, businesses may have rights to statutory interest and debt-recovery compensation under the late-commercial-payment rules, subject to the contract and circumstances.

Whether an agency chooses to exercise those rights is a commercial decision. The more basic control is knowing immediately which invoices are overdue, which are disputed and why.

Leak eight: compliance information that is inaccurate or out of date

Temp compliance is not one document generated at placement.

It is a connected set of obligations concerning the worker, the hirer and the particular assignment.

The terminology matters.

Key Information Document

Under Regulation 13A of the Conduct Regulations, an employment business must give a new temporary work-seeker a Key Information Document before agreeing terms with them. It explains how the worker will be engaged and sets out key pay-related information.

Terms of engagement

Regulations 14 and 15 concern the employment business's terms of engagement with the work-seeker and the minimum information those terms must contain.

The terms include the type of work to be sought, how the worker will be engaged, the undertaking to pay for work performed whether or not the hirer pays, remuneration, pay intervals, notice and holiday entitlement. These terms must be agreed before the employment business provides work-finding services.

This is why describing every assignment confirmation simply as a "Reg 15 document" is imprecise. Regulation 15 is principally about the content of the agreed terms of engagement.

Assignment information

Under Regulation 18, the agency or employment business must obtain sufficient information from the hirer about the assignment. This includes the identity and business of the hirer, start date, likely duration, type and location of work, hours, risks, required qualifications and expenses.

Under Regulation 21, the relevant assignment information must then be supplied to the work-seeker when the position is offered. Where the exact rate was not already agreed, it must also be confirmed at that stage.

Right to work

A right-to-work check must be completed in the prescribed manner before employment begins if the employer wants to establish a statutory excuse against a civil penalty.

Where the worker has time-limited permission, a follow-up check is required on or before the permission expires if the person will continue working. Evidence of the check must also be retained in accordance with Home Office guidance.

Agency Workers Regulations

The system also needs to track the worker's qualifying period and any relevant breaks or linked assignments so that equal-treatment obligations are identified at the appropriate time.

Compliance affects margin when:

• A worker cannot start because a check was missed.
• An assignment must be paused unexpectedly.
• A pay entitlement changes but the client charge does not.
• Incorrect documentation creates a dispute.
• Staff spend hours reconstructing an audit trail.
• A client refuses an invoice because agreed compliance evidence was not supplied.

The correct goal is not merely "documents complete." It is evidence that the right checks, terms and information were provided at the right time and remain current.

Leak nine: nobody owns the exceptions

Automation can move a standard timesheet through submission, approval and invoice creation.

The real operational burden sits in the exceptions:

• The worker says the hours are wrong.
• The manager is on leave.
• Two approvers disagree.
• The rate changed halfway through the week.
• The client's purchase order has run out.
• The worker moved from PAYE to an umbrella.
• The timesheet missed payroll cut-off.
• The invoice has been rejected.
• A right-to-work permission is approaching expiry.

A system can identify and route these cases. It cannot make them disappear.

Every exception needs:

• A status
• An owner
• A deadline
• A clear next action
• Escalation when it remains unresolved
• A record of the final decision

A temp desk with high automation but no exception ownership can look efficient while unresolved problems accumulate underneath.

The numbers a temp desk should watch

A weekly operations review should show more than placements and revenue.

Useful measures include:

Timesheets

• Missing timesheets at cut-off
• Average submission delay
• Average approval delay
• Percentage approved without correction
• Disputed hours
• Approved hours not yet invoiced

Payroll

• Payroll exceptions
• Rate corrections
• Off-cycle payments
• Holiday-pay corrections
• Pension-assessment exceptions
• Workers approaching relevant entitlement thresholds

Billing and cash

• Invoices awaiting submission
• Rejected invoices
• Credit notes
• Overdue invoices
• Debtor days
• Cash tied up in active assignments
• Client exposure against credit limits

Margin

• Booked contribution
• Approved contribution
• Invoiced contribution
• Collected contribution
• Difference between expected and actual margin
• Placements below the agency's minimum threshold

Compliance

• Workers unable to start because of missing checks
• Time-limited right-to-work permissions approaching expiry
• Missing assignment information
• Missing or outdated terms and Key Information Documents
• Workers approaching the Agency Workers Regulations qualifying period
• Records or documents requiring review

The objective is not to produce a larger dashboard. It is to surface a problem while someone can still correct it.

Where ATSpro fits

ATSpro connects the operational records that a temp desk needs to keep aligned:

• Candidate
• Hirer and contact
• Job and booking
• Pay type and rates
• Shifts
• Week-ending dates
• Timesheets
• Worker submission
• Hiring-manager approval
• Placement margin
• Invoices
• Compliance records and expiry dates

Its timesheet workflow allows hours to move from worker submission to the appropriate approver and towards invoicing without repeatedly entering the same information.

That connected record matters more than any individual feature.

When the approved timesheet, placement rate and invoice are held separately, staff must reconcile them manually. When they share the same underlying booking and rate information, the system can flag the exception rather than relying on someone to notice it.

ATSpro can also display expected contractor margin from the recorded pay and charge information. That figure should be treated as a management control, not as a substitute for payroll or accounting records. The most reliable view of profitability remains one that compares the original expectation with approved hours, actual costs, invoices, credit notes and cash received.

A practical weekly control cycle

A tightly run temp desk can organise its week around a consistent cycle.

Before the working week

• Confirm active assignments and expected shifts.
• Check rate changes and expiring purchase orders.
• Review upcoming right-to-work and compliance dates.
• Confirm new starters have the required terms, information and checks.

During the week

• Capture changes to hours and assignments as they happen.
• Record absences, overtime and expenses.
• Resolve queries before the timesheet cut-off.
• Monitor client credit exposure.

At the timesheet cut-off

• Identify every missing worker submission.
• Identify every submission awaiting approval.
• Escalate disputes to a named owner.
• Separate ordinary late approval from genuine disagreement about hours.

Before payroll

• Confirm the hours to be paid.
• Check rate and pay-route changes.
• Review payroll exceptions.
• Record any difference between paid and client-approved hours for resolution.

Before invoicing

• Reconcile approved units against billable units.
• Confirm charge rates, expenses, purchase orders and client references.
• Submit invoices through the correct route.
• Flag approved hours not included on an invoice.

After invoicing

• Confirm invoices were accepted rather than merely sent.
• Review upcoming and overdue payments.
• Resolve disputes early.
• Compare expected and actual contribution.

The process is repetitive by design. Consistency is what prevents a small weekly error from becoming a recurring loss.

The takeaway

Temp recruitment is not only a sales activity. It is a repeated pay, billing, credit and compliance operation.

Margin leaks when:

• The rate is built from the wrong cost.
• Markup is mistaken for margin.
• Hours are not captured or approved promptly.
• Payroll and billing use different rates.
• Approved work is not invoiced.
• Client requirements cause invoice rejection.
• Entitlement and compliance changes are missed.
• Debts remain unresolved while supply continues.
• Exceptions have no owner.

The answer is not simply more administration.

It is a connected process in which information is entered once, changes are versioned, standard work is automated and exceptions are visible to the person responsible for resolving them.

A well-run temp desk still has problems. It finds them before they repeat across every worker and every pay cycle.

**Sources: Department for Business and Trade, *Overview of the Conduct Regulations 2003*; GOV.UK, *Employment agencies and businesses*; Department for Business and Trade, *Providing a Key Information Document for agency workers*; Department for Business and Trade, *Agency Workers Regulations 2010: guidance*; Home Office, *Right to work checks: an employer's guide*; GOV.UK, *Holiday pay and entitlement reforms*; The Pensions Regulator, *Employing seasonal or temporary staff*; Office of the Small Business Commissioner, *Building good payment practice*; GOV.UK, *Late commercial payments: interest and debt recovery*; user per month.*.**