Is it a scam when a contract employer asks me to forward money to other workers through my bank?

This is definitely a scam, and it's a variation of the 'money mule scam' scam, where they send you a check, asking you to deposit it and then send a portion back to them or on to one or more others.

You could VERY easily find yourself in deep legal hot water if what you're being asked to do is interpreted as money laundering, and almost certainly that's what this is. What better way to "wash" dirty money than to use unsuspecting but trusting dupes to receive the dirty money and then 'clean' it through their bank accounts?

So far it sounds as though you haven't done anything that could get you into trouble, and you were smart enough to seek advice, so please heed it - get away from this thing as fast as can move and click your mouse.

Don't correspond with these people any further, don't delete any records of emails or other correspondence you've had with them (for your own wellbeing you want to hang on to this stuff for awhile), and don't do anything further as far as the job goes.
Having you open an account at a "well-known and reputable" bank is just another part of the scam for other victims most likely, since others might be more trusting (or at least less likely to ask questions) if they trust or know the bank.

I know people are advising you to ask for the money you've already earned, but I would get away from this as quickly as possible and with as little fuss as I could manage. Whatever you walk away from in terms of earnings should be considered the cost of learning a more valuable lesson about how and what to look for these kinds of situations in the future. And be thankful you didn't do anything foolish, like make money transfers for them, before figuring out (correctly) that these people are crooks.

Even if their goal was to get free work out of you, walking away from whatever you should have been paid is still cheaper than the risk you run having anything further to do with them.

when I first gave them the IBAN for the bank account they said they were not collaborating with that (admittedly minor) bank and asked me to open an account with another bank from a list (all of them reputable and well known banks.)

IBAN is a universal payment method, and is standard for all companies hiring employees. Different payment methods may apply for contractors.

Now, here is a catch. UK, despite leaving EU, is (very likely still) a member of the SEPA, Single European Payment Area, which by the way includes countries that will never dare joining EU like Switzerland. Money can flow via SEPA-IBANs seamlessly thanks to the inter-banking networks.

As soon as your bank is member of the SEPA, their IBAN is not less worth than major banks.

I don't have an explanation for the employer requesting you to open accounts at another bank to launder money (because we are talking about a scam). Indeed, scammers love to use accounts open on the name of unaware individuals. Well, I might have sorts of possible explanation but I will refrain from speaking on grounds of responsible disclosure.

I recall being involved in a nonprofit organization where someone had used a personal PayPal account to collect conference registration feeds and then forwarded it to the organization; it ended up being a major finding the next time there was an internal audit (which lead to a very tense meeting about the organization's finances).

Point being, it is not normal for companies to allow (far less encourage) commingling funds like that (either by having employees "directly" receive payment like that or having them directly distribute money to coworkers from their personal account without even having it pass through a corporate account at any point) - this creates a serious risk of losing money through embezzlement and a nightmare for the accounting department trying to keep track of where the money is going. Have fun paying taxes or reporting financial results to investors or even knowing what your cash flow is if you operate like that. There are very good reasons that legitimate companies just don't do that.

Also, the claim that they don't "collaborate with" minor banks seems quite strange - I can't imagine why the fact that it's small would make any difference for them if they're paying you by any conventional means.

While there are good answers, I feel one aspekt is missing: Regularly (at least once in eight weeks, doublecheck your local/bank rules) check your bank account for any irregular withdrawels.

As the setting you described screams "illegal activity", they could try to fake a sepa direct debit mandate to get your money. When you notice anything like that quickly enough you can talk to your bank and receive your money back.

Also, while the advice "just walk away as fast as you can" might suit your needs well, you could try to get the money they owe you (in which case you probably need to continue doing you legit translation work) - if you hit dead ends contact a lawyer (or immediatly).

Also, as a citizen who dislikes crime, you could try to contact the appropriate authorities so this instance of scamming can be stopped, maybe that could help you getting (some) of your money. As the UK is usually considered a state with a working judication, this should be possible.

It's a classic scam with extra "theater" added on

Their ultimate goal is to either swindle you out of money, or use you as a "money mule" to launder money they have obtained via other means, like hacking other people's bank accounts.

Typically they will ask you to forward money to them through an irreversible means, after they send money to you in a way that can be reversed.

But of course, you would say "no way" if they asked you to do that straight-out!!!

They know that.

So they are creating a bunch of "theater". They are having you do many tasks which are designed to immerse you in the idea that the job is genuine. The purpose is to raise your confidence that this is a "real job". And then, your guard will be down - and when they ask you to the very same above thing, it won't feel like a scam.

It's still a scam.

And they work this scam on many, many people, which is why it was worth it to them to build out all that web infrastructure that makes it seem like a real company.