No, I'm prepared to say I'm 97% sure this will be wrong.
An employee employed through an agency to another company is invariably an employee of that agency. The agency has no choice in that matter - it's the way that HMRC interpret it that is important.
There's info here you may wish to chew your way though.
http://www.hmrc.gov.uk/employment-status/index .htm#7
As such the agency has to operate PAYE and deduct NI and tax, and more importantly, fork out for the employer's NI and give holiday pay.
This agency is pulling a fast one.
Get your son to ask them what the HMRC says the employment status of their workers is. Should put the wind up them. Or suggest he lets them know that HE is checking with HMRC what his emplyment status should be.
They are diddling the 11% employers NI, which will been included within the rate negotiated with the end organisation your son is actual working with.