With the first twelve weeks of the AWR finishing on 23rd December 2011 – when in theory all agency workers will have ‘equal’ treatment rights to pay, holidays, hours of work etc. – we take a look at the impact of the Agency Workers Regulations so far – what’s good, bad and downright dodgy!

Yesterday we examined the good points so far for temps, freelancers and contractors, employers (hirers) and agencies / umbrella Companies. Today we’re looking at the negative impact of the AWR so far on the employment landscape.

What’s bad – for employers (hirers)

Businesses of all sizes, and employment agencies have been concerned at the inevitable ‘rights creep’ that temps will gain and have spent several months in 2011 working out how they might manage this (this could be good news for limited company contractors – see ‘Specific issues for Contractors’ in yesterday’s article).

Obviously how the Regulations will impact on businesses depends on how employers use temps – for short or long (effectively permanent) assignments. All organisations who use temps will find the Agency Workers Regulations bring extra costs:

  • In fulfilling ‘Day 1’ requirements (access to canteen facilities, child care, transport arrangements)
  • The administrative burden and cost of compliance with the AWR (flow of data to the agency and back, tracking temp assignments, especially those that are repeat and short-term)
  • More expenses for the arguably more important ‘equal’ treatment rights to pay, holidays and hours of work (after 12 weeks service).


Anti-avoidance measures

Regulation 9 of the AWR is called the ‘Structure of Assignments’ and is an anti-avoidance measure aimed at employers (hirers) and agencies.

If assignments are structured in such a way that a worker works less than 12 weeks and has up to a 6 week break before they start again at the same assignment with the same employer – this can happen twice under the AWR but if it happens a third time an Employment Tribunal could take a view that the assignments are being structured in such a way to avoid the agency worker gaining rights under the AWR.  This is called a ‘prohibited’ structure and the Tribunal can give Employers additional fines.

The anti-avoidance provisions in the AWR are tight and potential ways to restrict temps’ rights are limited to:

  • The Swedish Derogation Model of a permanent contract offered by the agency to a worker. This avoids the need for the employer to provide ‘equal’ treatment of pay (see below in ‘What’s bad – for agencies’ – but hirers will need to ensure that the agencies / umbrella companies they use have the financial strength to honour the ‘non-assignment’ payment obligations under the Swedish Derogation Model)
  • The employer returning to an in-house temp / casual ‘bank’ of staff or taking on more permanent employees (where there is no ‘equal’ right to pay parity with other permanent staff, apart from taking into account Equal Pay legislation).
  • Commercial outsourcing of functions (Managed Service functions).


Or hirers employ those who are genuinely self-employed (sole traders or limited companies).

What’s bad – for Temps

  • We’ve heard from quite a lot of temps who were ‘sacked’ on 30th September without any notice (a slightly extreme reaction from the hirers!)
  • There is nothing in the Regulations to stop employers hiring agency workers for under 12 weeks, or for this to be usual practice in a business.


Disadvantages of the Swedish Derogation Model for temps

  • One aspect of the Swedish Derogation model that was initially unclear was the need for the new ‘permanent’ contract of employment between the agency and the temp to be entered into “before the beginning of the first assignment under the contract”. What happens if an agency worker has been working for the same employer / hirer before the permanent contract starts (by the same or different agency)? We’ve been advised that this is acceptable as long as the ‘old’ contract ends and the ‘new’ permanent contract starts.
  • We’ve also heard of many instances where such permanent contracts were not in place during October or November and some not even in December – many workers are being offered new ‘permanent’ contracts with their existing agency that will start in January 2012, after their temp assignment with the employer ‘ended’ on the Christmas 2011 ‘shut-down’ of the business and before they reached the end of the first twelve weeks (on 24th December). The new contract will come into force with ‘equal pay’ excluded in January. We have been advised this is acceptable under the legislation because of the timing. The rights to equal treatment for holiday pay and hours of work do not accrue until 12 weeks into the ‘new’ assignment / contract.
  • Threats from an agency and hirer that if the SDM contract is not signed by a temp they will have no further work (this does not seem to be illegal).
  • A well-known ‘high-street’ agency insisting that if the temps work under the SDM permanent contract model they are NOT entitled to ‘equal’ treatment of holiday entitlement after 12 weeks.  This is illegal.
  • Very minimum hours SDM contracts. The AWR give no guidance on what ‘minimum hours’ are acceptable apart from than that ‘zero’ hours are unacceptable and it should be for more than 1 hour!
  • Another unclear aspect of the Agency Workers Regulations is the grounds on which the permanent contract can be terminated by the agency and when payments between assignments are due – this will depend to some extent what efforts the agency has made to find alternative ‘suitable’ work and whether the worker has been available to do that work. Assuming agencies will want to keep making money this could help the continuity of work coming towards the temp or contractor as the agency seeks to diminish the impact of paying the temp/contractor between assignments.


What’s bad – for agencies / umbrella companies

The Swedish Derogation Model!

There have been so many comments on this derogation in 2011 – is it really going to be beneficial to businesses and how widely will it be used? Some commentators believe the SDM may not be widely used but Workline has received a lot of queries from effected workers about it. Tesco, Morrisons and Argos have already been in the news by insisting their temps work under this model.

The SDM is thought to be most widely used in the transport, logistics and food manufacturing sectors so far and it appears to be the larger employers who are using it. If an agency is dealing with a client the size of Tesco then who has the bargaining power to insist on this type of arrangement? Ultimately, if as an agency you do not have that bargaining power then surely the long-term cost to the agency has to be passed on and paid by the end-user? The agency may have no choice but to agree to the SDM for big clients, or face losing their business.

The costs for agencies / umbrella companies come because they need to provide the worker with a permanent contract of employment that specifies expected hours of work, location and the nature of the work – and need to provide a minimum payment between assignments when there is no work. The minimum payment must be 50% of the average assignment earnings over the previous 12 weeks (and not less than the National Minimum Wage) and this must be paid between assignments for a minimum of 4 weeks.

If an agency uses the Swedish Derogation Model permanent employment contract then they ultimately will be subject to other rights that their permanent workers will accrue – the right to claim for unfair dismissal (after 12 months of continuous service, although this will potentially change to 2 years from April 2012) and the right to redundancy pay (if they have 2 years continuous service).

What’s bad – for temps and agencies

We’ve heard that some small firms are refusing to provide pay details of their permanent employees to agencies, as the AWR requires – a very difficult situation, so it will be worth watching what happens if such an issue comes to Tribunal.

Please note that the advice given on this website and by our Advisors is guidance only and cannot be taken as an authoritative or current interpretation of the law. It can also not be seen as specific advice for individual cases. Please also note that there are differences in legislation in Northern Ireland.