Union agency Esca Services is one of a number of labour suppliers using a pay-roll company called Gabem to avoid paying full national insurance contributions and tax.
Under the scheme, Gabem forms a limited company for workers, which pays them a minimum weekly wage. The rest of their earnings are derived from a weekly "dividend" provided by the company. Electricians using the scheme pay less national insurance and income tax than directly employed workers. Gabem deducts £16 a week from each worker's pay packet.
The union national officer Paul Corby said he was appalled to discover that Esca Services, the agency in which the union has a stake, was operating in this way. He said: "I am aghast that Esca is involved and I will take it up with them immediately."
The Electrical Contractors Association is joint owner of Esca Services with the AEEU.
Gabem is also managing the pay-roll for 70 electricians working at the £154m Pfizer plant in Kent.
Balfour Kilpatrick which is carrying out the £18m electrical contract at the plant has about 150 electricians on site, but 70 of those have been supplied to Balfour by labour supplier Morson, which is paying its workers through Gabem.
The electricians at the plant are against the scheme as those directly employed by contractors lose out.
They say that the Gabem electricians are paid different rates from those laid down by the Joint Industry Board, which governs electrical work in the industry.
Balfour's electricians said they had complained to the electrical union AEEU but added that the union had failed to take any action against Balfour Kilpatrick or Morson.
One Balfour electrician said: "These people are earning more than £100 per week more than the rest of us because of this scheme, which is bogus self-employment. We want to know why our union is allowing these people on site when they're breaking the JIB agreement.
"All the union did when we complained was insist they be taken into our shop (which enables them to vote on site pay packages), yet none of them are covered by the national wage deal. It's ridiculous."
Corby, who has spoken out against the illegal use of labour agencies and taken the issue up with government, said he was outraged and would launch an investigation.
Corby said: "This is totally outside the JIB procedures. Why are these men are in the shop too? The union official should be putting Balfour through official dispute procedures.
" He added: "I have been fighting this issue [of bogus self-employment] nationally and I don't want to be undermined by the union in a local dispute."
Balfour Kilpatrick and Morson were unavailable for comment.
A spokesman for Gabem said: "The Revenue is happy with the way the scheme operates and that is all that counts. We are involved in an industry where a lot of people bend the rules; this is an industry that tries to avoid the taxman if it can. We have discovered a loophole, but surely some taxation is better than none."
