Have you heard of the 12 week rule?
Are you a bit puzzled about the Swedish Derogation?
This article is here for you, to clarify it all! If you’re wondering…
- What is the Agency Workers Regulation (AWR) and what are the agency workers’ rights under the AWR?
- What does the AWR mean for employers and recruitment agencies?
- What are the Swedish derogations and umbrella companies?
- Why are there difficulties and controversies around the AWR?
- Will the AWR be revisited after Brexit and what are the latest developments in this area?
… you’re in the right place!
What is the Agency Workers Regulation (AWR)?
It is also sometimes called Agency Workers Directive as it is an adaptation of a European Directive, the Directive on Temporary Agency Work, approved in 2008 by the European Parliament.
The objective of this Directive is to ‘improve protection for [temporary] workers while giving greater flexibility to companies.’
In a British context, as described by Acas, the UK Advisory, Conciliation and Arbitration Service, the AWR is there to ‘improve pay and conditions of agency workers’.
What is an ‘Agency Worker’?
The definition from the UK government is crystal clear: ‘you’re an agency worker if you have a contract with an agency but you work temporarily for a hirer.’
Beware though of one subtlety in the definition – if you employ a temporary worker who has found work through a recruitment agency but has their own limited company or are an employee of an umbrella company, they’re not considered an ‘agency worker’, but ‘self-employed’.
You can learn more about these differences and how it affects the temporary workers’ rights, protection and pay in this blog if you’re interested.
What are the agency workers’ rights under the AWR?
- From day 1 of their assignment: Agency workers should have access to your facilities (e.g., canteen, childcare facilities) and access to information on the job vacancies of your company.
- After a 12-week ’qualifying period’ (in the same job with the same hirer, no matter how many hours per week the agency worker works): Agency workers have access to the same basic pay and conditions as comparable employees – this is also called ‘equal treatment’. This includes an ‘equal treatment’ in terms of pay (basic pay, overtime payment, shift allowances, bonus or commission payments, vouchers, payment for annual leave above the statutory minimum) and basic working conditions (e.g., annual leave, rest breaks…).
What does the AWR mean for you, as an employer of agency workers?
First, you need to understand the status of the temporary workers placed by recruitment agencies in your company
- If their status is PAYE, you have to comply with the AWR.
- If their status is “umbrella” or “limited company”, the AWR does not apply.
How do you check the status of temporary workers placed by recruitment agencies?
Either you ask your recruitment agency when you sign the booking (i.e., the temporary employment contract).
Or, you use TempaGoGo – when you post of job request on our platform, and start receiving CVs from recruitment agencies, you can immediately see the status of the candidates. It is also clearly presented on your booking.
No confusion, no worries. It’s all transparently displayed!
What do I need to do as an employer of agency workers under the AWR?
- From day 1, you have to ensure that the agency worker can access your facilities and has information on your job vacancies.
- If you hire the agency worker for 12 weeks or more (‘the qualifying period’), you have to provide the recruitment agency with up-to-date information so that the agency workers can receive ‘equal treatment’ after 12 weeks.
What does the AWR mean for you, as a recruitment agency placing agency workers?
If your agency worker is placed for 12 weeks or more (‘the qualifying period’), you need to ask the hirer for information about pay and basic working conditions to ensure that agency workers can receive ‘equal treatment’ after 12 weeks.
Why are there difficulties and controversies around the AWR?
The difficulty – for employers, it can be really hard and time-consuming to estimate how much agency workers should be paid after 12 weeks
As described by Kevin Green, the former CEO of the Recruitment and Employment Association, the trade association of recruitment agencies at the time it was implemented, ‘it will be a pain for employers because there is bureaucracy and complexity associated.’
The controversy #1 – the ‘Swedish derogations’
What are the ‘Swedish derogations’?
The Swedish derogations are basically an exception to the ‘equal treatment’ rules from the Agency Workers Regulations.
Under the AWR, as you’ve understood, agency workers have access to the same conditions of pay and working conditions as employees of the company in which they have been placed, after a 12-week ‘qualifying period’.
With the Swedish derogation, temporary workers are:
- still eligible to the same working conditions
- but not eligible to the same conditions of pay and holiday pay after 12-week of qualifying period.
When can the Swedish derogation apply?
Only if the recruitment agency offers temporary workers a permanent contract of employment and ‘pay them between assignments’.
Temporary workers become employees of the recruitment agency – they’re not any more considered as ‘agency workers’.
In this configuration, the recruitment agencies have to pay their employees at least
- 50% of their average on-assignment pay in the past 12 weeks
- and not below the National Minimum Wage.
Why is it called Swedish derogation?
Because the derogation was introduced at the request of the Swedish government, when the Directive was discussed by the European Parliament.
Why is it so controversial?
Because some employers are seen as encouraging recruitment agencies to hire their temporary workers as permanent employees under the Swedish derogations rules to avoid paying them higher pay rates after 12 weeks.
The controversy #2 – the complexity of the employment status of temporary workers
As you can see, the temporary workers in the scope of the AWR are ‘agency workers’:
- not employees in a ‘pay between assignment contract’
- and not self-employed workers who find work through a recruitment agency.
Some recruitment agencies might encourage temporary workers to set-up their own limited company or use umbrella companies not to fall into the scope of the AWR, as they would be considered as ‘self-employed’, not as ‘agency workers’.
What are umbrella companies
There are approximately 430,000 temporary workers who are paid through umbrella companies in the UK.
Umbrella companies are limited companies who employ temporary workers, often contractors, who work on temporary placements, typically through recruitment agencies.
Why are temporary workers using umbrella companies?
There are 2 advantages for temporary workers to use umbrella companies.
- One, it allows them to work for different recruitment agencies at once. That’s why it’s a setup that typically suits IT contractors or freelancers well, as they can work on different temporary assignments at once.
- Secondly, it’s useful for contractors who don’t what the hassle of setting up their own limited company. Temporary workers become PAYE employees of the umbrella companies who in turn deal with their payroll and statutory payments.
Why are umbrella companies controversial?
While the use of umbrella companies is legal, there’s been a fair amount of bad press on umbrella companies recently.
Encouraging temporary workers to work through an umbrella company has been seen as a way for hirers and recruitment agencies to avoid the AWR and prevent temporary workers from accessing ‘equal pay’.
Also, some unreputable umbrella companies have been seen forcing employees to pay their own National Insurance (NI) contributions as well as the employers’ NI contributions and to deduct their holiday pay from their pay.
What are the recent developments on the AWR, Swedish derogations?
There’s been quite a lot of consultations, reports and debates about the AWR and the Swedish derogations recently.
The government has commissioned an independent review in 2016 called the ‘Taylor Review of Modern Working practices.’
The report, published in July 2017, was very explicit in his recommendations against the Swedish derogations: ‘The Government should repeal the legislation that allows agency workers to opt out of equal pay entitlements’.
Matthew Taylor, the Chair of the Review, added, when the report was published: ‘it’s clear [the Swedish derogation] is being abused and we think the flexibility that employers and agencies want can be found without using that derogation’.
In November 2017, The Work and Pensions and Business, Energy and Industrial Strategy Committees publish a joint report and draft Bill which stated: ’the loophole that enables agency workers to be paid less than permanent employees doing the same job must be closed.’
However, Neil Carberry of the CBI employers’ group warned that ‘the committees have brought forward proposals that close off flexibility for firms to grow and create jobs’.
The response from the UK government to the Taylor Review was published in February 2018 and said: ‘before taking a final decision on how to respond, the government will therefore consult further to establish clearly the extent of abuse [of the Swedish derogations].’
These consultations are currently taking place and will close in May 2018 – in a nutshell, watch this space!
If you want to know more about the AWR and your rights, I recommend you read the government AWR guidance on the topic.
Is there anything else you need to know about the AWR? What’s your experience dealing with it?
Caroline from TempaGoGo