Labour abuse in security supply chains is a boardroom risk, not just an HR issue

Evidenced fraud within parts of the manned guarding supply chain shows why responsible businesses must look beyond accreditation, policies and supplier declarations.

Labour abuse is often discussed as an employment or human-resources issue. For businesses purchasing manned security services, it is also a procurement, governance and enterprise-risk issue.

Organisations can outsource the delivery of a service, but they cannot outsource all the consequences of what happens within the supply chain delivering it. When officers are underpaid, employed through concealed arrangements or supported by fraudulent payroll records, the risk can travel upwards towards the principal contractor and the end customer.

Most UK security businesses operate responsibly, pay their people through PAYE and take their obligations seriously. However, evidence from inside the sector shows that serious abuse can remain hidden beneath an apparently normal service.

A smooth service can hide a broken labour chain

The structure of manned guarding makes this possible. A customer appoints a principal security contractor. That contractor may use a Tier 2 supplier, labour provider or intermediary. Further companies can then be introduced to provide workers, operate payroll or supposedly act as the employer.

Every layer increases the distance between the organisation buying the service and the individual working the shift. It may become unclear who legally employs the officer, who operates PAYE, who is responsible for employment rights and whether the money shown on a payslip ever reached the worker.

Yet operationally, nothing appears wrong. Officers arrive. Shifts are covered. Incidents are managed and invoices are approved. The continuity of the service can give the customer confidence while unlawful employment, payment and tax arrangements continue underneath it.

The Security Industry Authority’s Operation EMPOWER has targeted concerns including tax evasion, fraudulent employment status, National Minimum Wage breaches, immigration offences and licensing failures. HMRC’s labour supply-chain guidance also identifies the security workforce as vulnerable to cash-in-hand arrangements, employment-status non-compliance, organised labour payroll fraud and disguised or offshore payment structures.

This is not simply a problem at the bottom of the market. It is a risk created by limited visibility and weak verification throughout the chain.

What evidence-led audits have found

SSGC, a UK security company, has spent several years strengthening its supplier-onboarding and audit process. It appointed Tutandos, a risk-management company specialising in audit and supplier assurance, to examine the underlying employment, payroll and payment evidence within its supply chain.

The findings go well beyond incomplete paperwork. Audits undertaken for SSGC have uncovered and evidenced:

• fraudulent timesheets;
• fraudulent payslips;
• cash-in-hand payments;
• breaches of National Minimum Wage requirements; and
• tax fraud.

These are evidenced findings, not general suspicions or assumptions based on a supplier’s corporate structure.

The problems became visible only when different records were compared. Timesheets did not reliably reflect the underlying position. Payslips presented as evidence of compliant employment and payment were found to be fraudulent. Cash payments removed the normal independent banking trail. Reconciliation of hours and pay exposed minimum-wage breaches, while further examination identified fraud affecting the tax position of the labour supplied.

A fraudulent payslip is not an administrative error. It can create the appearance that a worker has been properly employed, paid and subjected to the correct deductions. A fraudulent timesheet can create a false record of who worked, when they worked and what they should have been paid.

When false records are combined with cash-in-hand payments, underpayment and tax fraud, apparently credible documents can become part of the mechanism used to conceal labour abuse.

Why accreditation cannot be the final answer

The SIA Approved Contractor Scheme is an important component of security procurement. It provides an independently assessed standard, and its requirements increasingly address payroll, worker rights and supply-chain due diligence.

However, ACS approval is a voluntary business approval scheme supported by periodic assessment. It is not a continuous, transaction-level audit of every officer, timesheet, payslip, wage payment and corporate relationship operating beneath every customer contract.

Accreditation and workforce assurance therefore answer different questions. Accreditation considers whether a business has demonstrated that it meets the requirements of a scheme. Workforce assurance asks whether the customer can evidence what is happening within its own supply chain today.

A supplier may hold recognised accreditation, maintain appropriate policies and provide insurance certificates. None of those documents, by itself, proves that every officer on a particular contract is employed by the declared business, appears on its payroll and has received the pay recorded on their payslip.

Accreditation is a valuable control. It cannot be the end of the enquiry.

The business risk reaches beyond unpaid wages

Labour abuse first and foremost harms the worker, but the commercial consequences are wider.

Non-compliant operators can undercut responsible security businesses, distorting competition and creating unsustainable pricing expectations. Customers may face employment, tax, insurance, operational and reputational exposure. If workers are inadequately screened, exhausted, unsupported or financially vulnerable, the arrangement may also create risks at the very locations they have been engaged to protect.

There is a governance issue too. Boards and senior leaders may believe that recognised accreditation and contractual delegation provide adequate protection. If nobody has tested the employment and payment evidence, that confidence may rest on documents that have never been independently corroborated.

The question for leadership is therefore not simply whether the supplier passed onboarding. It is whether the organisation has sufficient evidence to understand and defend the labour arrangements operating within its contract.

What active workforce assurance should look like

Effective assurance requires businesses to move from collecting documents to testing evidence.

At a minimum, customers and principal contractors should:

• identify every material business involved between the customer and the operative;
• confirm the identity of the legal employer and the organisation operating payroll;
• reconcile shifts, workers, timesheets, payroll records, payslips and wage payments;
• test whether PAYE and National Insurance information supports the arrangement being represented;
• maintain and enforce contractual audit and information rights; and
• continue monitoring changes in companies, directors, workers, payroll structures, insurance and subcontractors.

The evidential chain should be capable of being followed from the shift worked, to the worker, legal employer, payroll record, payslip, net wage payment, PAYE and National Insurance record, and ultimately HMRC.

Where the evidence aligns, confidence increases. Where it does not, the discrepancy should be investigated. Suppliers that genuinely employ their operatives through a compliant PAYE system should generally be able to demonstrate it.

This does not mean treating every subcontractor as dishonest or every anomaly as criminality. It means recognising that policies and documents are claims until they have been tested against independent evidence.

A leadership responsibility

Industry campaigners are helping expose informal recruitment networks. The SIA has increased its enforcement focus. HMRC has published more detailed supply-chain guidance, and ACS requirements are placing greater emphasis on payroll and workforce due diligence.

These are positive steps, but guidance and accreditation only become effective when businesses act on them.

Organisations purchasing security services should know who is delivering the work, who employs and pays those people, what other companies are involved and whether the evidence supports the arrangement being represented.

Labour abuse in a security supply chain is not somebody else’s HR problem. It is a test of procurement, governance and corporate responsibility.

The central question is no longer simply whether a supplier has been approved.

It is whether anybody has looked underneath it.