AWR Information for Clients

1. Background

The Agency Workers Regulations 2010 (‘The Regulations’) will come into force in England, Scotland and Wales on 1st October 2011. The Department of Business, Innovation and Skills (BIS) is currently working on guidance to assist clients and agencies to implement the Regulations correctly. The REC is working closely with BIS on this guidance which should be released in April 2011.

The Agency Workers (Northern Ireland) Regulations 2011 will come into effect on 1st December 2011. The Department of Employment and Learning (DELNI) are currently consulting on the NI regulations (these are almost identical to the UK regulations) and will produce separate guidance later this year.

Therefore it is imperative that hirers:

  • understand the Regulations,
  • assess the impact the Regulations will have on their business,
  • start to work closely with their agencies to minimise the costs and limit the potential disruption the implementation of the Regulations may cause to their business, and
  • put effective systems in place to adhere to the Regulations.

2. What are the Agency Worker Regulations?

The Regulations stem from the EU Temporary Workers Directive 2008 which gives agency workers the right to the same pay and other working conditions enjoyed by a hirer’s own workers. Importantly however, the Regulations do not alter agency workers’ employment status i.e. they do not make an agency worker an employee of either the hirer or the agency. Whilst in other parts of the EU, this right to equal treatment comes into effect from day one of an assignment, the UK has secured a derogation period of 12 weeks (this was agreed by the TUC and the CBI in May 2008). This means that an agency worker will only be entitled to equal treatment once s/he has completed 12 weeks’ of service in the same role with the same hirer (there are two exceptions, the Day One rights, which are detailed later).

3. Who is an agency worker for the purposes of the Regulations?

The Regulations do not apply to workers who have found a ‘perm’ job with a client, even if they were introduced by an agency. 

The Regulations apply to agency workers regardless of whether they are on a contract of employment or a contract for services. The defi nition of an agency worker in the Regulations stems from the Working Time Regulations 1998 and is intentionally widely defi ned to cover most temporary agency workers. However, workers who are genuinely in business on their own account (i.e. genuinely self-employed) will not be within scope. Workers engaged via umbrella companies or other intermediaries will be in scope unless they are genuinely self employed.

 Workers working on managed service contracts (i.e. those where the supplier rather than the hirer, manages or directs staff such as in an outsourced IT contract or catering contract) are excluded. However they will be within scope of the Regulations if either (1) in reality, the hirer, rather than the managed service supplier, supervises and directs the staff or (2) they are supplied by another agency to the managed service provider.

4. What is a ‘temporary work agency’ for the purposes of the Regulations?

The Regulations use the term ‘temporary work agency’ rather than employment agency or business which is used in other legislation. A temporary work agency includes the agency which supplies the worker to the hirer, any umbrella companies and any master or neutral vendors in the supply chain. This is important for the purposes of liability under the Regulations and means that all those suppliers are responsible for ensuring that the agency worker receives his/her entitlements. It is important therefore that contracts between hirers and master or neutral vendors deal appropriately with the Regulations and in particular with the flow of information down the supply chain.

5. When does an agency worker qualify for equal treatment?

Except for the Day One rights (detailed below) the agency worker will be entitled to equal treatment once s/he has worked for 12 weeks in the same role at the same hirer. This is irrespective of the working pattern (e.g. full time or part time). It is also irrespective of which or how many agencies supplied the agency worker to do the same role at the hirer.

A new qualifying period will begin only if a new assignment with the same hirer is substantively different (and that does not mean simply changing a job title), or if there is a break of more than six weeks between assignments in the same role. The qualifying period will be paused (rather than stopped) if the worker takes:

  • a break of less than 6 weeks,
  • certified sick leave for no more than 28 weeks,
  • a break related to pregnancy childbirth or maternity and the agency worker is within
  • ‘protected period’ (i.e. from the beginning of pregnancy to 26 weeks from childbirth),
  • statutory/ contractual maternity, adoption or paternity leave, or
  • time off for public duties (including jury service).

Thus it is clear that an agency worker does not have to work for 12 consecutive weeks via the same agency to qualify for the right to equal treatment. They can accrue the 12 weeks’ qualifying service over a much longer period of work and through more than one agency. There are concerns about how agencies will effectively monitor workers who have a series of ad hoc assignments with the same hirer and the REC will continue to engage with BIS for further guidance.

6. What does equal treatment mean?

Agency workers will be entitled to the same basic working and employment conditions after 12 weeks of service in the same role with the same hirer. The entitlements include pay, duration of working time, night work, rest periods, rest breaks and annual leave. Pay has been specifically defined as ‘any sums payable to a worker of the hirer in connection with the worker’s employment including any fees, bonus, commission, holiday pay or other emolument referable to the employment, whether payable under a contract or otherwise…’ The definition of pay includes holiday pay, shift allowances, unsociable hours premia, overtime rates, vouchers with a fixed monetary value, stamps and bonuses directly related to quantity and quality of the work carried out. The REC has stressed the need for detailed guidance on the issue of pay and bonuses in particular. As stated above, the Regulations will not change the employment status of agency workers. Therefore they will still not have the right to claim for unfair dismissal, redundancy pay or maternity leave whichare entitlements reserved for employees. Nor will agency workers be entitled to benefits such asoccupational sick pay, company pension schemes, share options schemes, loans, expenses, health/lifeinsurance, financial participation schemes and bonus payments based upon organisational or companyperformance. These are considered a reflection of a long term relationship between an employeeand an employer. Agency workers will therefore remain a flexible labour resource for hirers.

Finally, many hirers worry that the Regulations mean that if an agency worker is paid more than their ownemployees they will have to either decrease their rate of pay to that of employees or increase the rate ofpay to employees. Neither of these is true. The Regulations provide for equal treatment for agency workerswhen their pay is lower and they do not enjoy the same level of working conditions as comparable employeesor workers.

7. Day One rights

As mentioned above, there are two rights to which agency workers are entitled from the first dayof an assignment.

Firstly, hirers must inform agency workers of existing vacancies in their organisation. Hirers do nothave to actively seek out each agency worker and tell them individually of the vacancies but theymust ensure that they have the same access to information about vacancies as other workers.Secondly, agency workers will also be entitled to access collective on-site facilities such as crèche andchildcare facilities, canteen facilities, car parking and the provision of transport services. However,access to facilities can be refused if there are ‘objective grounds’ for doing so. In practice this meansthat if there is a waiting list for childcare facilities or a car park space, an agency worker is notautomatically entitled to a place but can be subject to the same criteria to access the facility assomeone directly recruited by the hirer. ‘Amenities’ such as subsidised gym membership and seasonticket loans are out of scope as they are considered to be a reflection of the long term relationshipbetween an employee and a hirer which will not be appropriate for agency workers. The BIS guidancewill give more detail on the facilities and benefits an agency worker is entitled to or not.

8. Who is liable for establishing equal treatment?

The Regulations will require a qualifying agency worker to be treated as if s/he had been recruiteddirectly by the hirer to do the same job. On a practical level, this means that equal treatmentwill need to be established in respect of the terms and conditions that apply to a comparableworker or a comparable employee engaged in the same role or broadly similar work.

For example on a factory production line, the agency worker may be working next to a worker recruiteddirectly. The direct recruit could serve as a ‘flesh and blood’ comparator to establish parity in pay and workingconditions. In these circumstances, the hirer and the agency will be deemed compliant with the regulations.If a ‘flesh and blood’ comparator cannot be found, then there may be an identifiable pay scale or a startingrate which could be used as a reference point. Therefore, pay scales and benefits outlined in companyhandbooks and any collective agreements must be taken into account when establishing equal treatment.The temporary work agency will be responsible for any breach of a right in relation to equaltreatment (except for breach of the Day One rights which are the sole responsibility of the hirer).However, the agency will have a defence if it has taken ‘reasonable steps’ to obtain the necessaryinformation from the hirer, and has acted ‘reasonably’ in determining the agency worker’s basicworking and employment conditions. An employment tribunal will examine the where the faultfor the breach lies and will apportion liability, and any financial sanctions, accordingly.

The agency and the hirer must cooperate with each other to ensure that an agency worker receives his/her rights. An agency can assist the hirer by asking the right questions at the right time – whether thisis on receipt of instructions to supply a worker or when it is clear that the assignment will last longerthan 12 weeks. The REC has prepared an impact assessment form which REC member agencies can usewith their clients to establish what constitutes equal treatment for any particular agency worker.As mentioned above, all intermediaries in the supply chain are responsible for ensuring the agencyworker receive his/ her entitlement. Therefore even if a worker issued a claim against their supplyingagency only, the agency can join any other party to that claim if they have contributed to the breach.

9. Pregnant agency workers

Pregnant agency workers will be entitled to paid time off to attend medical appointmentsand antenatal classes once they have achieved the 12 weeks’ qualifying service.In addition, if an assignment is terminated on pregnancy related health and safety groundsthe agency will have to find suitable alternative work on terms which are not substantially lessfavourable than the previous assignment. If the agency cannot find suitable alternative work theagency will be required to pay the worker for the remainder of the original assignment unless sheunreasonably refuses the assignment. Agencies and hirers should ensure that an assignment is notterminated solely on the grounds of pregnancy as this would constitute direct sex discriminationagainst the pregnant agency worker. Compensation for direct sex discrimination is unlimited. 

10. Are there legitimate ways to derogate from the Regulations?

Yes. Regulation 10 provides that where an agency worker has a contract of employment with the agency(which meets the specific conditions set out in Regulation 10) then that worker is not entitled to equalpay. However, the agency worker will still be entitled to equal treatment in respect of working conditionsand the ‘Day One rights’. Many hirers have expressed an interest in their supplying agencies adoptingthis model but it is not suitable for all supplies. Importantly, where an assignment has terminated, theagency must take reasonable steps to find suitable alternative employment for the agency worker.Where the agency cannot find suitable alternative work, the agency must pay the agency worker atleast 50% of what they were being paid in their previous assignment provided the amount is not lessthan the National Minimum Wage (‘NMW’). The agency must do this for a minimum of 4 weeks beforeit can terminate the contract of employment. Therefore this will be an expensive option where hirerscannot guarantee volume of work to the agency or where the basic rate of pay is close to the NMW.

11. Anti-avoidance measures

The Regulations contain anti-avoidance measures to prevent agencies and hirers from structuringassignments in a way to prevent the agency workers from reaching the 12 week qualifying period.This includes supplying a worker to connected hirers, rotating workers or repeatedly terminating andrecommencing assignments when the most likely explanation is to prevent the agency worker fromaccruing the 12 weeks’ qualifying period. In the event that the Tribunal finds that the Regulationshave been deliberately avoided they can award an agency worker compensation of up to £5000.

12. What are the financial penalties for breach of the Regulations?

The Tribunal can award compensation to an agency worker where they have suffered as a result of a breachof the Regulations. The compensation will normally be based on their losses but will be not less than 2 weeks’pay. In any event, the compensation will be just and equitable. The hirer and the agency will need to worktogether to ensure that the agency worker receives equal treatment after the 12 week qualifying period.The REC’s impact assessment form will assist our members and their clients implement the Regulations. 

13. Next steps

The REC is working with BIS on the development of the guidance to the Regulations. The guidance isexpected around April 2011. In addition, the REC has an implementation support programme for itmembers. This will include detailed factsheets, presentations, an impact assessment form, model contractsand a series of workshops throughout 2011. Therefore hirers can be confident that REC members haveat their disposal all the tools they need to ensure a successful implementation of the Regulations.

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