The fundamental principle of the agency workers regulations is to provide agency workers with the same basic working and employment conditions of a comparable permanent employee after a qualifying period; this being just 12 weeks. The regulations were implemented on 1st October 2011.
The agency workers regulations will create a re-shift in the way temporary workers are managed; whether via a recruitment agency, an umbrella company or directly with the end client, which is why HB&O, independent chartered accountants that specialise in contractor accounting, decided to include this information.
The fundamental principle of the agency worker regulations is to protect lower paid agency workers from being exploited by unscrupulous hirers. As soon as they start an assignment, day 1 rights are available, which include the agency worker having access to facilities and also having access to information on job vacancies. It is the hirer, or end client who is responsible for ensuring that the agency worker has access to these facilities. If a dispute was to arise, there would be no liability on the recruitment agency. However, after 12 weeks, there are other rights which the recruitment agency must comply with.
Equal treatment after 12 weeks
After a qualifying period of 12 weeks, the agency worker has the right to receive the same basic working and employment conditions of a comparable permanent employee, such as:
- Pay & bonuses
- Duration of working time
- Annual leave
Should a dispute arise over these additional rights, it is the temporary worker agency that is responsible (a temporary worker agency can be seen as the recruitment agency, Umbrella Company or master vendor). All parties will be responsible for any breach, to the extent that they are responsible for the infringement.
What impact will the AWR have?
To identify what impact the AWR will have, we initially need to establish who is considered ‘in scope’ and ‘out of scope’ of the regulations.
‘In Scope’ – Agency workers operating through a temporary worker agency (TWA) will be in scope (a temporary worker agency includes recruitment companies, umbrella companies and master vendors’). The agency worker would be able to use the AWR if they feel that their right to equal treatment has been breached.
Is anyone excluded from the regulations?
An individual that is genuinely self-employed or in business on their own account will not fall within the scope of the agency workers regulations.
Limited Company contractors will be excluded from the regulations where the contract the individual has with the temporary work agency has the effect that the status of the temporary agency/ end client is that of a client or customer of the limited company or self-employed contractor.
AWR only affects only umbrella company contractors of those working inside of IR35.
Firstly we need to establish who the Agency Workers Regulations apply to, these are:
- Temporary Work Agency (TWA) – individuals or companies involved in the supply of temporary agency workers, either directly or indirectly, to work temporarily for and under the direction and supervision of a hirer
- Agency Worker – individuals who work as temporary agency workers
- Hirers – the end user.
Contractors, freelancers and consultants who are in business on their own account will generally not be within the scope of the regulations.
There is a possibility that hirers will include indemnity clauses within their contracts allowing them to pass all liabilities back to the recruitment company (if an agency worker makes a claim). We suggest that recruitment agencies carefully analyse each contract that they sign for such indemnities as the liabilities could be significant.
What happens if a worker brings a claim?
Any claims of non-compliance under the AWR will be heard by the Employment Tribunals. A worker has to bring a case within 3 months of becoming aware of the issue or 3 months from the end of the contract or assignment.
NB: The guidance makes it clear that all parties should attempt to resolve any disputes before bringing a case to the tribunal.
Cases brought for non-compliance to equal treatment rights after the 12 week qualifying period will be able to include all parties as potentially liable. The minimum award will be equal to two weeks pay with no maximum.
Additionally, the tribunal also has the ability to award penalties where they feel anti avoidance tactics or intentional abuse.
How can recruitment agencies minimise risk?
There are a number of steps a recruitment agency can take to minimise the risk of AWR. We suggest the following steps should be taken:
- Advise your temporary workers of the comparator data and confirm that their rate is comparable and compliant.
- Where you are unable to confirm comparable pay , you can use a Swedish Derogation umbrella, which will ensure that they receive pay between assignments. (this ensures the worker cannot claim for equal pay).
- If you have a worker operating through their own limited company, ask them if they are in business in their own account.
- Ensure workers that your workers have a contractual obligation to let you know of any shortcomings directly to you as soon as they know of any.
How can S&S Umbrella minimise the impact of AWR?
S&S Umbrella is providing a solution in response to AWR. We offer:
Umbrella Payroll Solutions
Over many years as specialist Umbrella to the contractor market, we have found that our role as a link between end-user, freelancer and agency has become an increasingly important part of our business. Obviously, our primary duty is to our contractor clients, but we can fulfill our role most effectively where we also have an on-going relationship with recruitment businesses (and often with end-users) so that we understand their operating methods and can carry out due diligence where necessary to ensure that everything is fully compliant.
As an independent firm, we can ensure our contractors receive the best advice tailored to their individual needs. It is inevitable that AWR will have an impact on the industry, however, we believe that we can work closely with agencies and contractors to minimise this impact.
Whether you work through an umbrella company, directly with an end client or even through your own limited company, it is important that you understand the fundamental principles of AWR and how it could affect you. Although commendable, the AWR is not suitable for all types of agency worker and in the majority of instances, it will not have much impact on agency workers as in most instances equal treatment is already present.