The Agency Workers Regulations: adding up the cost

Laura Chamberlain examines what the cost of the impending Agency Workers Regulations (AWR), coming into force 1 October 2011, will be for employers.

The AWR have been churning through the cogs of government since the European Parliament approved the Agency Workers Directive in 2008. Yet, in March 2011, a survey by recruitment company Randstad found that 37% of employers were completely unfamiliar with the regulations.

Although some liability will lie with recruitment agencies, which face increased payroll and administration costs alongside a potential rise in tribunal claims, under-prepared employers could face a rise in costs too.

Under the AWR, temporary workers will have the right to the same basic employment and working conditions, such as pay and holidays, as permanent staff once they have worked for 12 weeks in the same role for the same hirer.

From day one of their appointment, they will be entitled to the same access to job vacancies as permanent members of staff and collective facilities such as staff canteens, childcare facilities and transport services.

This has obvious implications on running costs for employers that frequently use temporary workers. However, according to the Government’s impact study on the AWR, 50% of all temporary assignments are less than 12 weeks and, according to estimates from the Recruitment and Employment Confederation (REC), only 13% of temps are currently paid less than if they were directly hired.

What’s included

  • Basic pay.
  • Annual leave.
  • Rest breaks.
  • Bonuses linked to performance.
  • Access to job vacancies (day one).
  • Access to communal facilities (day one).

So, many employers may find the financial impact on their organisation is less than they expected.

However, companies that do use agency workers on a long-term basis will need to look at how the AWR will affect them before they come into force.

Nigel Toon, HR director at Allied Milling and Baking, speaking at this month’s REC AWR summit, explained that doing nothing in reaction to the Regulations would cost his organisation £2 million.

He looked at the current usage of temporary workers and found that managers were hiring them to meet flexible workplace demands, sometimes overstaffing so that they were not left short if a worker didn’t turn up; less effort was taken to assess their capabilities, as agency workers were seen as a short-term solution.

Toon explains: “Issues in our business are about ‘flexing’ labour to meet our needs on a daily basis.”

It was clear to Toon that a “substantial chunk” needed to be taken out of their current usage.

“It’s not an option to do nothing. I’m not going to pay the permanent staff bill for temporary workers that we haven’t invested the same time and care in.”

The bakery rejected the idea of removing agency workers completely or stopping temporary assignments before they reached 12 weeks. They decided that an entirely permanent workforce would not provide the flexibility they needed and cutting off placements at 11 weeks would rely too heavily on a large pool of agency staff available for work and could damage their reputation as a good employer.

Instead, they decided to focus on giving front-line managers more power to handle the resources they needed and to recruit good team members. They also looked at the flexibility of permanent contracts already in place – and whether or not they were used to their full advantage – and reduced agency costs by replacing “permanent temps” and managing the use of agencies through a consolidator.

What’s not included

  • Genuinely self-employed workers.
  • Bonuses for loyalty or long service.
  • Occupational pensions or sick pay.
  • Financial participation schemes.

Employers such as Allied Milling and Baking, who face a large bill when the AWR come into force, wouldn’t be blamed for trying to find ways around the Regulations.

Recruitment and HR solutions company Adecco says that employers will be able to implement an “11-week only” assignment without falling foul of the AWR.

Andy Smith, head of regulation and employment at Adecco, explains: “Even if it is deliberate avoidance, simply terminating an agency worker’s assignment before 12 weeks to avoid qualification is not made unlawful by the Regulations.

“The anti-avoidance provision in the Regulations is targeted at patterns of engagement intended to deny an individual agency worker equal-treatment rights, particularly where a worker has completed two or more assignments with a hirer or has worked in more than one role at the same company.”

REC director of policy and professional services Tom Hadley agrees that employers will be able to introduce what he calls “the churn factor”, but warns employers to look at the pros and cons first.

“Do the impact assessment in your organisation,” he says. “Ask if it will really be worth it. Most will find it’s not.”

Indeed, Darren Newman, employment lawyer at In Company Training, says that employers may find it difficult to do this without tripping up over the Regulations.

“Even without the anti-avoidance measures, there are so many gaps that will pause the clock rather than reset it that it would be incredibly difficult to manage things in such a way that you were confident that no one had hit the 12 weeks,” Newman explains.

“In fact, in a large organisation, such as a local authority, you could have workers engaged by different agencies popping in and out to take on different admin roles, which are essentially the same, in different parts of the organisation. They could build up the 12 weeks without anybody realising they were doing it.”

Many employers will also be worried about the potential for agency workers to take them to tribunal if they feel they are not receiving equal pay.

What does “same role” mean?

An agency worker works in the same role unless he or she moves to a different hirer, or starts a new role with the same hirer in which work or duties are “substantively different” to those in the previous role.

Source: REC

The hirer will be liable if they don’t give the agency worker day one rights, such as the use of collective facilities, but both the hirer and agency could be held liable for pay and conditions rights after 12 weeks.

Newman explains: “Basically, it is for the tribunal to decide whose fault it is that the agency worker didn’t get paid the right amount.

“The agency would get sued as they pay the worker, but if they want to say ‘we’re paying you what the hirer said was the right amount’ they could put forward the defence that they’ve taken reasonable steps to discover what the right level of pay was and the hirer could be joined to the claim.”

However, Newman believes that the Regulations will not see a huge surge in claims. “Generally speaking, it will be such a small amount of money that people will settle it, a deal will be done and the appropriate hourly rate will be paid,” he argues.

Mike Emmott, adviser on employee relations for the Chartered Institute of Personnel and Development, says that employers and agencies will need to make sure that they communicate with each other.

“Agencies are going to look to the employer to be open and straightforward about it,” he comments. “I think there’s a lot of choice for employers. There’s no point putting their heads in the sand, so they should set out to comply with the Regulations.”

Indeed, according to the TUC, an “open” policy will also be beneficial when working with unions.

Sarah Veale, director of employment policy at the TUC, says: “We certainly wouldn’t encourage unions to start going to tribunal about this unless they have not been able to resolve it through discussions.

“We would ask unions to be helpful to employers and would encourage employers to be very open with unions and give them the information they need.”

Therefore, it seems that, although organisations with a large temporary workforce could face a sizeable bill, employers will not be subject to a large and costly surge in tribunal claims if they set out to comply with the Regulations.

However, with the clock ticking down till the Regulations come into force, it may be time for the 37% of employers unfamiliar with them to start taking a look at their own temporary-work procedures.

Detailed information on the Agency Workers Regulations 2010 can be found on XpertHR.

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