Agency Workers Regulations: Employers’ 10 key questions answered

Regulations due to come into force in October give agency workers rights that are similar to permanent employees. John Charlton summarises the main areas to consider. 

Employers’ 10 key questions on the Agency Workers Regulations answered

Many directors probably think that there are already more workers’ rights than you can shake a stick at, but more people will have them come October when the Agency Workers Regulations (AWR) come into force.

The big day is 1 October and directors and HR departments should be readying themselves now, especially if they regularly use agency workers. And do not think this applies only to bodies supplied by temp agencies. The AWR cover PAYE temps, workers who supply their services through an umbrella company and those who are supplied by a temp agency.

Temporary workers who aren’t covered by the AWR include:

• the genuinely self-employed;
• those working under the supervision and direction of the supplier rather than the hirer;
• workers who are hired via their own personal service company if they are self-employed; and
• workers – such as cleaners – who work via managed service arrangements.

Nick Siddall, barrister, Kings Chambers, says: “Businesses that have traditionally relied on employing large numbers of temporary staff should urgently review contracts and business processes relating to agency workers. From October, any changes made to the terms and conditions of permanent employees must be replicated in the contracts of temporary staff who have achieved the 12-week service requirement.”

When the AWR are in force, a worker who falls within their scope will be entitled to equal treatment on the same basis as if he or she had been hired directly by an employer. This covers: annual leave; pay; night work; rest periods; working hours; and rest breaks.

Affected workers will also, from 1 October, be entitled to use collective facilities, such as canteens and childcare facilities, on the same basis as employees, although access to some, such as car parking, may be denied if there is a waiting list. They will also have the right to apply for internal vacancies, the right not to suffer a detriment for asserting their rights under the regulations and some limited unfair dismissal rights.

Basically these apply when an agency worker is employed – probably by an agency – and can show that he or she was dismissed for reasons connected to the AWR. David Brown, associate at Simpson Millar, says it is the relationship between workers covered by the AWR that is key to any claim for unfair dismissal. He explains: “The claimant must be able to show that he or she had a direct contractual relationship with the respondent and, in the case of an unfair dismissal claim, that they have been employed under a contract of employment for at least 12 months.”

The regulations exclude some benefits from the equal treatment requirements. These include: loans; expenses; company pension schemes; occupational sick pay; health and life insurance or assurance; share option schemes; and family-leave-related pay above the statutory minimum.

It’s important to note that the AWR do not give agency workers employee status although there will be comparator issues should there be the risk of a discrimination claim. If there is some argument over what is meant by equal treatment, agency workers will be able to compare their rights to those of directly employed workers doing similar, although not necessarily the same, type of work.

What wriggle room is there for employers that wish to avoid falling foul of the AWR?

The key to this is the relationship between the employer and the worker. “Employment agencies and businesses that use agency workers”, says Brown, “often seek to avoid entering into a formal employment relationship with them through written terms in the agreements between the parties and in the working arrangements in practice. This can be by ensuring that a particular agency worker is not obliged to provide personal service or to accept work if it is offered, and is not integrated into the end-user’s organisation to the same extent as its employees.”

Christopher Fisher, partner, and Purvis Ghani, partner and associate at Mayer Brown International, believe employers could take “advantage of an exception in the AWR that provides that the equal treatment provisions on pay will not apply to an agency worker who has a permanent contract of employment with an agency and is paid between assignments”.

Employers’ 10 key questions on the Agency Workers Regulations answered

1. What areas are covered by equal treatment under the AWR?

Chris Welham, counsel Hogan Lovells, says: “An agency worker is entitled to ‘the same basic working and employment conditions’ as they would have received had they been recruited directly by the end-user to do the particular job. Basic working and employment conditions are those that relate to pay and working time (including annual leave, rest breaks, rest periods and night work).”

2. How is the 12-week period calculated?

Basically, says Welham, once an agency worker has worked in the same role for the same end-user for 12 continuous calendar weeks (regardless of how many hours he or she works each week) they will qualify for equal treatment. It does not matter whether he or she has completed the 12 weeks in a single assignment or in a number of assignments, and whether it is through the same agency or different agencies.

3. What about holiday pay entitlement?

Michael Delaney, partner at Matthew Arnold & Baldwin, says that if the agency worker remains employed with the agency then they will be entitled to the minimum holiday pay of up to 28 days a year, pro rata, depending on hours worked and calculated in accordance with the Working Time Directive. If the agency worker works 12 weeks with the same hirer, after the 12 weeks his or her holiday pay should be calculated on the same basis as a permanent employee doing the same job engaged directly by the hirer. For example, if the permanent employee is entitled to 28 days a year, the agency worker would be entitled to the same after 12 weeks. The liability to pay holiday pay in practice will probably rest with the agency, recovering it as part of their fees from the hirer.

4. What rights will temporary agency workers (TAW) have to paternity leave?

According to Delaney, the agency worker must accrue 26 weeks’ service ending 14 weeks before the week of childbirth before exercising the right to paternity leave under existing paternity leave Regulations, if employed by the agency or hirer. However, paternity pay is excluded from the AWR.

5. What rights will agency workers have in relation to job vacancies at the hirer?

Agency workers (regardless of whether or not they have satisfied the qualifying period) have the right to be informed of relevant vacant posts within the hiring organisation, says Welham. “This is designed to give them the same opportunity as a comparable worker to secure permanent employment.”

6. Will agency workers be entitled to the same bonus arrangements as permanent staff?

Welham says: “The concept of ‘pay’ includes bonuses, so agency workers who have completed the qualifying period may be entitled to bonuses. Whether this is the case or not will depend on the nature of the bonus scheme. For example, bonuses that are not ‘directly attributable to the amount or quality of work done by a worker’ and ‘which are given to encourage loyalty or reward long-service are specifically excluded from pay, so do not have to be offered’.”

7. Where does liability lie when it comes to having appropriate and sufficient indemnity insurance and similar?

Paul McQuade, senior employment law solicitor at Brodies, says: “The new Regulations do not change the employment status of agency workers – they continue to be employed by the agency, rather than the hirer, provided that appropriate agreements or arrangements are in place confirming this. This means there is no change arising from the new regime in respect of insurance. Hirers are not required to take out employers’ liability insurance in respect of agency workers as they do not employ them. But they must ensure insurance cover is in place in respect of public and occupiers’ liability.”

8. What maternity leave rights will agency workers have once they’ve passed the 12-week milestone?

McQuade says: “After completing 12 weeks on an assignment, a pregnant agency worker will now be allowed time off to attend antenatal appointments and classes. If they can’t complete the duties of the assignment on health and safety grounds the agency will be required to identify alternative work paid at the same rate or higher than the original assignment for them. If no alternative work can be found the agency is required to pay the worker for the expected duration of the original assignment. The pregnant agency worker does not receive any additional rights under the Regulations beyond those that they are already entitled to, nor do they have a right to return to work after maternity leave.”

9. What about unfair dismissal?

According to Delaney, the agency worker can bring claims against the agency and or hirer for failure to pay him or her on the same basis as an employee engaged directly by the hirer, and or breach of contract. “Alternatively if assignments are structured in a way to prevent the TAW from accruing 12 weeks’ service a claim can be brought on this basis. Compensation will be calculated upon a just and equitable basis and not normally less than two weeks’ pay. In the case of structuring assignments to prevent 12 weeks from accruing, compensation of up to £5,000 may be awarded.”

10. How long a break can an agency worker take without “breaking” the 12-week rule?

A break between assignments of six calendar weeks or fewer will not break continuity between assignments, says Welham. “If an agency worker worked on an assignment for 10 weeks, then had four weeks where he was not working for the end-user and then returned to the same job, he would be entitled to equal treatment two weeks into the second assignment.”