Employment law

The Swedish Derogation Model – what is it?

The Swedish Derogation Model – what is it? Image of Swedish flags

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    The Agency Workers Regulations (AWR) came into force on 1st October 2011 to bolster the rights of so-called “vulnerable” agency workers – and the Swedish Derogation has been mentioned a lot. What does it mean?

    Under the AWR once an agency worker has worked at a client/hirer employer for 12 weeks they are entitled to the same pay (and basic conditions) as a ‘comparable’ permanent employee (working at the same employer).

    However, when the Agency Workers Directive was negotiated at EU level, a Swedish delegation negotiated a clause that said:

    Where ‘agency workers’ are employed on a permanent contract by their TWA, or ‘Temporary Work Agency’ (a Recruitment Agency or Umbrella Company), and receive pay in-between assignments (i.e. when they are not working for a client) , the AWR rights to equal pay after 12 weeks for an agency worker no longer exists (so the client/Employer does not have to ensure the Contractor/Agency Worker receives equal pay to a comparable employee). This is the Swedish Derogation Model.

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    For the Swedish Derogation Model (SDM) to apply correctly, however:

    • The permanent contract of employment with the TWA must be in place before the start of the agency workers first assignment and the employment must be genuine. This means that an agency worker working through an Agency at a client/Employer on a standard contract of services for agency workers can have this contract terminated one day and start a new assignment with a permanent contract of employment with the same Agency (working at the same client/Employer) the next.  An important Tribunal case in 2012 clarified this more, see the details here
    • A TWA using the SDM will have a legal obligation to pay agency workers between assignments a minimum amount for no less than four calendar weeks. The minimum amount that can be paid is 50% of the workers' average basic pay for the last 12 weeks (or at least the National Minimum Wage)
    • The minimum amount the TWA must pay between assignments must be set out in the contract (either the minimum scale or rate or the method of calculating it).
    • The expected hours of work during any assignment must be set out in the contract
    • In November 2018 in Twenty-Four Seven Recruitment Services Ltd v Afonos & 190 others, the Employment Appeal Tribunal held that the Contract provided by Twenty-Four Seven Recruitment to 191 claimants (!) did not properly comply with the SDM requirements (because they did not set out the number of hours to be worked; the original Employment Tribunal had found the contract did not specify the pay adequately but the EAT disagreed with this) - therefore the SDM did not apply and all the workers were entitled to the same pay rates as permanent workers (after 12 weeks)
    • The TWA must take reasonable steps to seek suitable further employment for the worker when their assignment ends and make sure it is offered to the worker.

    However, this does mean your employment can be terminated by the TWA after four weeks where you have no assignments, if there is no further work.

    And of course the SDM only applies to Pay – it doesn't remove the equal treatment rights to working hours, holidays etc. So, the client/employer is still liable for ensuring you receive these after 12 weeks in the new assignment (if you’re in scope).

    There was initial debate about how many hours per week a TWA would need to employ agency workers to be compliant with the Regulations. The Regulations say that a ‘zero hour’ contract is not allowable but the guidance, although referring to contracts of greater than one hour, doesn’t confirm the minimum amount of hours the contract should be for. It does warn TWAs against acting outside the spirit of AWR “by structuring contracts that deprive agency workers of the protection provided by pay between assignments”.

    Changes incoming

    In November 2018, the government were reported to be considering repealing the Swedish Derogation Model, and in February 2019 the government announced that the Swedish Derogation/pay-between-assignments contract would be made unlawful on 6th April 2020.

    The reason for the government repealing this is apparently to encourage more employers to take on permanent employees (we can see a huge flaw in that argument!....). This repeal will mean that all agency workers, once they have worked at the clients/employers for 12 weeks are entitled to pay parity with permanent employees.

    This also means that by no later than 30th April 2020, TWA’s must provide agency workers, who are employed on existing contracts that contain the Swedish derogation, with a written statement telling the workers that with effect from 6th April 2020 those provisions no longer apply. If the TWA does not provide this statement on time, the agency worker can bring a claim to an Employment Tribunal. When we know more about what this actually means, we’ll update this article!

    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.

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