Legal Q&A: The Agency Workers Regulations 2010

The Agency Workers Regulations 2010 come into force on 1 October 2011. The Regulations give agency workers certain rights from the first day of an assignment and the same “basic working and employment conditions” (including pay) as a comparable directly engaged worker after a 12-week qualifying period working at an organisation. This article addresses some common misconceptions about the Regulations.

The Government has recently worked with several organisations, including law firm Osborne Clarke, on guidance to help companies understand their obligations under the Regulations. Although this guidance is helpful, it is not legally binding and, until case law develops, there will be some uncertainty over how the Regulations will be applied.

The Government is likely to update the guidance as case law develops and “best practice” becomes clear.

Q What is the risk in assuming that the Agency Workers Regulations do not apply?

Breach of the Regulations could lead to uncapped liability. Users of agency workers will be solely liable for breaches of day one rights, whereas both hirers and/or temporary work agencies can be liable, to the extent to which they are responsible, for a breach of a post-qualification right.

Key points

  • From 1 October 2011 agency workers will be entitled to certain rights from day one of an assignment as well as further rights after completing a 12-week qualifying period.
  • The definition of an “agency worker” may cover a wide range of individuals including contractors providing their services through their own companies or umbrella companies.
  • Some managed service arrangements may be supplies of staff rather than services meaning that the Regulations may apply.
  • Although there are ways to mitigate the impact of the Agency Workers Regulations it is important not to rely on untested solutions such as the “Swedish derogation”.

Q What should my organisation do now to prepare for the Regulations?

It is important that before 1 October 2011 you are confident that:

  • you know which (if any) workers working in your organisation will have new rights;
  • you have agreed arrangements with temporary work agencies to ensure compliance with the Regulations;
  • you do not use agency workers; or
  • you have mitigated risk to a level commercially acceptable within your organisation.

The best way to tackle the above is to carry out an impact assessment. Even if you are confident that your organisation does not use agency workers it is possible that some externally supplied workers, such as those supplied through consultancies or outsourcing arrangements, may fall within the scope of the Regulations. It is worth checking with each department, including procurement and HR, to make sure no potential “agency workers” are missed. It is better to start by including all non-employed workers and then eliminating them because they do not fall within the definition of agency workers than to assume that they are not exempt.

Once all staffing arrangements have been identified you will be in a position to assess whether or not the Regulations apply to some or all sections of your workforce.

Q Do the Regulations apply to managed service contracts?

The Agency Workers Regulations may apply if someone is supplied to your organisation by a different company to work temporarily for and under your supervision and direction. The supplying company does not need to be an agency.

You should check that managed service arrangements clearly show that the service provider (and not the end user) is responsible, contractually and in practice, for supervising and directing staff providing the services. There can be a fine line between supplies of service and supplies of staff. If your organisation supervises and directs staff working under a managed service the Regulations may apply.

Q Will someone working through a personal service company be an “agency worker”?

A personal service company contractor who is genuinely in business on his or her own account will not be an agency worker. However, if a contractor is expected to provide services personally under the hiring organisation’s supervision and direction, this poses a risk under the Agency Workers Regulations. Personal service company contractors are often paid at higher rates than comparable employees. Where this is the case, the risk of claims is likely to be lower, but the risk should still be factored into any impact assessment.

Individuals working through employed contractor models (often called umbrella companies) will usually be agency workers even though they are already employed by the temporary work agency.

Encouraging individuals to set up personal service companies to circumvent the Agency Workers Regulations is a risky strategy. Unless they are genuinely in business on their own account they may be agency workers. Significantly, there is also risk of personal tax liability (under the managed service company tax legislation) for board members and controlling shareholders of companies who encourage inappropriate personal service company arrangements.

Q What is the Swedish derogation?

The so-called “Swedish” or “pay between assignments” derogation means that agency workers’ pay does not have to be equalised after 12 weeks if they have a contract of employment with the agency and are paid between assignments.

Q Is this a solution for hiring organisations looking to avoid the impact of the Regulations?

No, the derogation only removes equal pay obligations; the other rights under the Regulations continue to apply. Also, until case law develops, it will be unclear what a supposed “derogation provider” must do to satisfy the requirements of the Regulations.

If you are considering this model, carefully check that you are satisfied that the provider’s arrangements fulfil the derogation. The consequence of relying on a non-compliant model is that the agency worker will be entitled to pay equal to that for a comparable directly engaged worker. Models based on one-hour-per-week assignments are likely to be challenged.

Frances Lewis and Kerry Viner, Osborne Clarke

XpertHR FAQs on the Agency Workers Regulations 2010





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