Agency Workers’ Regulations: the use of temps may need a rethink

The introduction of the Agency Workers’ Regulations will mean changes to working practices.

If your company engages agency workers to maintain flexibility and keep costs down, you may need to rethink the structure of your workforce.

The Agency Workers’ Regulations come into force on 1 October 2011. That seems like a long way off, but the potential implications for UK business are such that the government has issued regulations well in advance so companies have sufficient time in which to adjust their working practices.

Supported

Following consultation on the first draft of the regulations, a final version was laid before parliament on 21 January 2010. These regulations will be supported by guidance likely to be issued later this year.

The regulations will introduce the principle of ‘equal treatment’ for agency workers after they have been in an assignment with the same hiring company for a qualifying period of 12 weeks. This ‘equal treatment’ principle is designed to ensure that in many respects agency workers will receive same the pay, benefits and working conditions as if they had been recruited directly by the hiring company to do the same role.

The regulations will apply to most workers who are provided by an agency to a hiring company. Even individuals provided through a personal services company as individual contractors are likely to be in scope unless a hirer can persuade a tribunal that they are genuinely self-employed.

Once the 12-calendar-week qualifying period (applicable to both part-time and full-time staff) has been triggered, these agency workers will be entitled to equal treatment unless the role changed substantially during the term of the assignment.

Impact

Hiring companies will be able to reduce the impact of the regulations by restricting the length of any agency worker assignment to under 12 weeks. However, the costs of having to regularly retrain agency staff to do the job would need to be considered before this route is adopted.

Those who are rapidly trying to think of ways around the regulations should be aware that the government is keen to prevent “avoidance” by the “unscrupulous”. For example, to stop hiring companies from avoiding the regulations by terminating a worker’s assignment just before the 12 weeks is up and then re-engaging them, they have introduced a minimum break period of six weeks before the clock will be reset after a short break.

There will also be grounds for a claim if a “structure of assignments develops” that is designed to deprive the workers of equal treatment – for example, where workers with 11 weeks’ service are constantly shunted into substantively different roles. As a deterrent, tribunals have the power to make an additional award of £5,000 in respect of such claims, and so anyone attempting a ‘creative’ approach to sidestep the regulations should use great caution.

Cost

So how much is it going to cost? Under the regulations, agency workers who have completed their qualifying period will be entitled to the same pay as permanent employees in relation to all pay and benefits related to the actual work being done, including pay, contractual holiday entitlement, overtime, luncheon vouchers, shift allowances, and even bonuses where these relate to the individual’s performance in meeting short-term targets.

They will not be entitled to equivalent treatment in respect of share schemes, occupational pension schemes, sick pay, contractual notice, contractual redundancy pay, contractual maternity or paternity rights, or any bonus arrangements designed to reward loyalty or long-term service and which is not directly attributable to the amount or quality of the work performed.

In addition to equal pay and benefits, the regulations will also extend equal treatment from day one to agency workers in respect of access to facilities including childcare, canteens and transport.

Identify

In practice, at the outset of an assignment expected to last 12 weeks or more, the hiring company will need to identify what an equivalent permanent employee would be paid, and then pass that information on to the agency, which will then set the level of the worker’s pay. The increased costs of equal treatment will no doubt have to be absorbed by the hiring company. If a worker does not receive equal treatment, the agency will be on the hook for liability unless the information provided by the hiring company was incorrect. The hiring company will be directly liable for any failure to provide a worker with equivalent facilities.

The regulations have a worthy aim in ensuring that low-paid workers are not exploited by comparison to their permanent counterparts. However, the potential increase in costs created by having to fund equal treatment will probably have a significant effect on profitability. Hiring companies should consider whether it is economically viable to staff via an agency to reduce the risk of workers being found to be employees or whether it is time to employ these workers direct. Hirers should also consider inserting provisions in their contracts with agency workers to apportion liability that may flow from a breach of the regulations.

Chris Wellham, senior associate, Lovells

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