UK: Agency Workers Regulations: Additional Costs

Last Updated: 3 January 2012
Article by David Loosemore and Amanda Dorling

The Issue

The Agency Workers Regulations come into force on 1 October 2011 and will change the way in which the hospitality sector view agency workers.

Take the example of a hotel that uses agency workers to cover the busy summer months. At present agency workers often receive the same basic hourly rates as directly recruited staff but are not given the same benefits (transport facilities, overtime, maternity benefits and bonuses for example). However, from the 1 October 2011 this will change.

The Legal Position

After completing 12 weeks of an assignment, an agency worker will be entitled to the same basic working and employment conditions (including pay, working time and holiday entitlement) as they would have received had they been directly engaged to do the same job. The scope of the Regulations only includes terms which are 'ordinarily included' in the hirer's contracts – for example, as part of a pay scale or company handbook.

Breaks of up to six weeks between assignments with the same hirer will not break the 12 week qualifying period. However, the clock will restart if the worker begins a new assignment with the hirer in a 'substantially different' role.

An agency worker's right to equal pay will not apply when the agency worker is employed on a permanent basis by their agency, receives a minimum level of pay in between assignments and signs a contract with the agency prior to the start of the assignment (this is known as a 'derogation contract').

From day one of an assignment, agency workers will have equal access to collective facilities, such as a canteen or transport services; unless different treatment can be objectively justified (cost alone is unlikely to be enough). Agency workers will also have equal access to information on employment vacancies.

Agency workers who believe that they are not receiving equal treatment may ask the agency (and then the hirer if the agency fails to respond within 30 days) for written details of the hirer's basic working and employment conditions.

A reasonable and practical approach

All organisations need to be aware of what is covered by "pay" in terms of the Regulations. Pay includes holiday pay, overtime, shift allowances, unsocial hours premiums; performance bonuses directly related to the work of the individual agency worker, and lunch vouchers.

Pay excludes occupational pension and sick pay schemes; notice pay; redundancy pay; expenses; loyalty bonuses and benefits in kind such as company car allowances and health insurance.

The hotel would be potentially liable for failing to provide agency workers with the same transport service as direct recruits. If any of the agency workers stayed on and worked for 12 weeks they would also gain a right to overtime for the remainder of their assignment if this is provided to permanent workers.

There would, however, be no obligation to provide the loyalty bonus or pay expenses.

Agency Worker Policy

For those employers who rely on agency workers we recommend that you undertake the following:

  • Assess the average length of assignments; the extent to which agency workers and direct recruits are carrying out the same job; and whether agency workers are currently receiving the same pay, working time and holiday entitlement as direct recruits.
  • Put systems in place to respond to information requests made by agency workers.
  • Ensure that systems are in place to make agency workers aware of job vacancies and to inform them about collective facilities.
  • Consider whether to review terms of business with agencies to apportion liability for any employment tribunal claims and to deal with the exchange of information with agencies.
  • If seeking to avoid the impact of the Regulations, consider other options such as limiting the length of agency workers assignments (bearing in mind the anti-avoidance provision below), increasing the number of directly recruited fixed-term employees or using in-house staffing banks.

Potential Risks

Agency workers may be awarded unlimited compensation for a breach of the equal treatment rights with both agencies and hirers potentially liable (although the hirer is solely responsible for any claims regarding "day one" rights).

If an employment tribunal finds that assignments have been structured specifically to deprive an agency worker of equal treatment rights (for example by, rotating 11 week assignments in "substantially different" roles) it can make an additional award of up to Ł5,000.

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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