Recruitment agencies could be held liable for mistakes made by the contractors they supply if Alan Johnson MP, the employment relations minister, decides to include personal service companies (PSCs) in the revised Employment Agencies Act Regulations.

PSCs are small companies, typically consisting of one person, that often find work through agencies in areas like IT.

Johnson told Professional Recruiter that he is considering whether to include PSCs in the new Employment Agencies Act, to protect them from unscrupulous agencies that refuse to shoulder the burden when projects go wrong.

He said: ‘We will have another look at that - currently they [PSCs] don’t get any protection whatsoever.’

Although they are covered by the existing Regulations, under the planned law the contractors would not be responsible for the work they produce. Instead, agencies would be liable for any mistakes made by the contractors during the course of the work.

Industry bodies opposed including limited company contractors in the Regulations because they believed it could lead to more costs for agencies and make the rules unworkably complicated.

Ann Swain, chief executive of the IT recruiters’ body ATSCo, said: ‘I am surprised and very concerned that the government is looking to add more complications to legislation that is already known to be badly drafted.’

Marcia Roberts, director of external relations at the REC said: ‘This could cause a lot of problems, because IT work can be very complicated and based around specialist knowledge held by the contractor.’

The Act will not come into force before parliament’s summer recess but will be in place before the end of the year, Johnson said.