UK: Still Time To Get Ready For Agency Workers Regulations

Last Updated: 16 November 2011
Article by Charlotte E. Walker-Osborn and Laura Friend

What? We are aware that many agencies and hirers have yet to respond to the Agency Workers Regulations 2010 ('the Regulations') or are only just starting to do so. Others may mistakenly assume that the Regulations do not apply to their circumstances.

So what? For further details on the obligations imposed by the Regulations, please see our guide Responding to the Agency Workers Regulations 2010.

When? The Regulations will come in to force on 1 October 2011 and in to full effect from 25 December, as workers begin to satisfy the 12-week qualifying period.

Clearly, the first issue to address is whether the Regulations apply, ie by identifying the nature of your temporary labour. If you believe they do (or even may) apply, it is important to understand where any difference in treatment arises, as between agency workers and direct recruits. This will help to identify areas of greatest risk but also suggest certain options you may wish to consider. The agencies with whom you contract will be likely to work with you in this but there are questions you can (we would say, should) be considering in advance.

Do the Regulations apply?

Be careful. The Regulations apply to any situation where workers are supplied to work under the supervision and direction of the hirer. They are not limited to those provided by an employment agency as you might commonly understand it. For example, if your company is part of a group and employees engaged by one company undertake work for others, this could give rise to an agency worker scenario. Furthermore, some of the possible arguments or mechanisms for avoidance that we have come across are unsafe and are unlikely to comply with legal requirements.

Consider also the period of engagement. If assignments are very short term (ie of less than 12 weeks' duration) and are infrequent, the workers may not qualify for the majority of rights under the Regulations (excepting day one rights, such as access to facilities). But watch for repeat assignments: re-engaging such workers within a period of six weeks or on more than two occasions (without a genuine business reason, such as seasonal need) is likely to be seen as unlawful avoidance and can attract a financial penalty.

Where are your key risk areas?

Identify comparator workers

Consider issues such as how many agency workers you engage and the roles in which you place them. Who and where are the potential comparators?

What are the differences in pay, holidays and other benefits?

Many benefits associated with employment status are excluded from the Regulations but this should be clarified. Consider your pay and benefits structure. For some, this will be a straightforward comparative exercise but, for those with many and varied grades or pay scales, it may be more complex. Are there differences in pay and benefits between the agency workers you engage and employees undertaking the same work?

What on-site or off-site facilities do you offer employees?

Access to a subsidised gym or to staff discounts are often emotive areas for any organisation and, in the main, are not available to agency workers as of right under the Regulations. It is nonetheless essential that hirers carry out a thorough review of what they offer staff. Applying the Regulations, not all outcomes will necessarily be as you expect for agency workers. These rights are also not subject to the 12-week qualifying period but apply from day one of assignment.

Possible solutions

Leaving aside the inevitable option of revisiting your use of agency labour generally, with a view to mitigating the effects of the Regulations, if your answers to the above questions highlight disparity between those workers and your comparator employees, what can you do?

Changing comparators

If your risk assessment identifies large numbers of comparators and potentially significant pay differentials, it may be possible to narrow the areas of work in which you engage agency labour, thereby reducing the pool of comparators. It may even be possible to use agency workers in unique roles for which there is no comparator. Tread warily , however. Unless handled extremely carefully, this may not result in the desired outcome. It will also not alleviate responsibility for offering terms that are commonly available to employees.

Differences in pay rates

Under the Regulations, following 12 weeks' service, agency workers will be entitled to equality in basic terms and conditions including pay (which includes some bonuses). For some organisations, the preferred option will be to introduce parity of pay but, for others, this will not be operationally or financially feasible.
Other options may include:

  • Introducing a new-starter pay scale. Adopting this for new recruits to the business can result in the same rates of pay for agency workers undertaking the same role.
  • 'Swedish derogation'. An alternative business model that has been widely talked about. The Regulations specifically make provision for agencies to employ agency workers and guarantee their pay (at reduced level) between assignments, subject to certain limitations and requirements. This is a more expensive option for the agency (which acquires the liabilities of an employer) but, through negotiation, and for the appropriate sector or class of worker, could offer a viable alternative for both agencies and hirers.

What about bonuses?

Pay that is genuinely offered as recognition of long service by employees or as an incentive for loyalty is generally excluded from the Regulations. Most other elements of pay, including many contractual bonuses paid to employees (other than for those two clear reasons) will apply to agency workers.

An option may be to:

  • Revise a bonus (and similar) scheme. Revising schemes to make clear the purpose of payment may be an option, providing this does not breach pre-existing contractual terms. Consider, however: if a bonus is intended to incentivise, might that be reason enough to extend it to agency workers also?

Access to facilities

The Regulations provide that, from day one of an assignment, an agency worker must be treated no less favourably than a comparator in relation to collective facilities, such as transport services, shower facilities, mother and baby room, prayer room and canteen facilities. For some organisations, this will not present an onerous or prohibitively expensive obligation. Even so, cost alone is unlikely to present a legitimate ground upon which to justify refusing access.

Issues to consider include:

  • The right is to the same access as comparable employees. Any qualifying condition, such as a waiting list or service requirement, will therefore apply to agency workers too.
  • A right of 'access' is not the same as 'equal rights in respect of'. Agency workers do not, therefore, accrue automatic right to any subsidy that the business offers, such as subsidised meals. Whether it is administratively workable to operate differing pricing will depend on the facility. It is also important to bear in mind how visitors would be treated, as singling agency workers out alone could potentially give rise to detrimental treatment.
  • Access to information about vacant posts at the hirer is a right to information only and does not require any change in selection process or favourable treatment to agency workers.

Commercial contracts

There is limited opportunity for organisations to review and revise their terms and conditions with agencies. Some will need to do little more than tweak existing contracts (for example, where they are content that they have done what they can to review and mitigate the effect of the Regulations). Others may adopt a more radical approach and decide to consolidate or change supplier.

It is important that the contractual terms reflect what the parties believe the position to be in terms of risk, sharing information and apportionment of cost. If relationships with existing agencies are being ended, consider the terms of the current contacts. Do they contain notice provisions? What 'temp to temp' or 'temp to permanent' fees become payable (subject to compliance with the Conduct Regulations)?

Also, consider whether TUPE will apply to employed agency workers or the account manager employer of the agency.

Final thoughts

The above options are by no means exhaustive. Consider also the relevance (or appropriateness for your business) of an in-house staffing 'bank', managed service contracts or the engagement of genuinely self-employed workers (mindful in the latter case that the contract reflects the reality).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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