Managing the impact of the Agency Worker Regulations

The Government recently published its draft guidance on the Agency Workers Regulations, which are due to come into force on 1 October 2011.

Key aspects of the Regulations

The main feature of the Regulations is that agency workers will be entitled to the same basic working and employment conditions as if they had been recruited directly by the end-user client (“equal treatment”). However, to qualify for equal treatment rights, the agency worker must have been working in the same role with the client for a period of 12 continuous calendar weeks. Continuity will be broken if an agency worker starts a new assignment with a different client, has at least a six-week break with the same client (either during or between assignments) or starts a new role with the same client that is substantially different from the previous role.

The right to equal treatment applies only to those terms and conditions of employment that are specifically set out in the Regulations, for example, pay (which will include basic pay, holiday pay, overtime pay and bonuses linked directly to individual performance), rest breaks and annual leave. The Regulations also set out those terms and conditions to which the right to equal treatment does not apply. These include bonuses that relate to the client’s corporate performance, pension and occupational sick pay.

The Regulations also provide agency workers with the right to be told of any relevant vacancies at the client’s organisation during the assignment and the right to be treated no less favourably than a comparable worker in relation to collective facilities and amenities. These rights will be available to agency workers from day one of an assignment (“day-one rights”).

The end-user client will be solely responsible for any breaches that relate to day-one rights. The agency is responsible for setting the agency worker’s terms and conditions and will be liable for any breach of equal treatment rights to the extent that it was responsible for the failure to provide equal treatment.

How might clients manage the impact of the Regulations?

It is anticipated that the bulk of the additional costs arising from agency workers’ equal treatment rights will be passed by temporary work agencies to the end-user clients.

Key points

Agency workers will be entitled to equal treatment rights after a 12-week qualifying period.
Clients and agencies will be responsible for a failure to provide equal treatment rights to the extent that they caused the failure.
Clients may limit the impact of the Regulations by using agency workers for fewer than 12 weeks and using other employment relationships where appropriate.
Clients may seek to engage agencies that agree to utilise the exception in the Regulations concerning the provisions of equal treatment on pay.

One measure that clients could consider to manage the impact of the Regulations is to engage agencies that agree to take advantage of an exception within the Regulations that provides that the equal treatment provisions on pay will not apply to an agency worker who has a permanent contract of employment with the agency (with terms and conditions that will apply across assignments agreed) and is paid between assignments. For the exception to apply, the agency must take reasonable steps to seek and offer a suitable new assignment to the agency worker and, during any period between assignments, it must pay the worker at least 50% of the highest basic pay (but not below the national minimum wage) that they received in the last 12 weeks of the previous assignment. If the minimum pay is paid for a period of at least four weeks after the end of an assignment and the agency has taken reasonable steps to find a suitable assignment during that period, an agency could terminate its contract with the agency worker without being subject to the equal treatment provisions on pay. In such circumstances, a client could reach an agreement with the agency to share any costs of having to pay the agency worker the minimum pay between assignments.

Other measures that clients could take to avoid or mitigate the impact of the Regulations include:

limiting the use of agency workers for assignments to a period of fewer than 12 weeks, although there are anti-avoidance provisions in the Regulations that address situations where a pattern of assignments emerges that is designed deliberately to deprive an agency worker of his or her entitlements;
increasing the use of employees on fixed-term contracts;
engaging self-employed contractors instead of agency workers;
creating an “in-house” bank of casual staff or workers on zero-hours contracts;
increasing overtime available to existing staff;
using fewer agencies to keep costs down and attempt to negotiate exclusivity deals in exchange for agencies agreeing to absorb some of the additional costs; or
outsourcing any discrete services that are performed by agency workers, although additional risks and costs may arise as a result (for example, as a result of TUPE).

Christopher Fisher, partner, and Purvis Ghani, associate, Mayer Brown International LLP.