A Swedish Derogation contract is the popular term that has come to describe a specific type of agency worker contract which complies with regulation 10 of the Agency Workers Regulations 2010 (AWR). In relation to certain employment conditions, the AWR provide agency workers with the right to receive at least equal treatment with what they would receive if they were engaged directly by the client they are supplied to work for, to do the same job.
Regulation 10 of the AWR gives an exception to this principle of equal treatment in relation to pay. It states that agency workers who have a permanent contract with their agency (an employment contract with full employment rights), which provides for them to be paid between assignments, are entitled to equal treatment regarding some employment conditions but not pay. This was believed to be based on a practice used in Sweden – hence the name Swedish derogation.