Is the Agency Workers Regulations (AWR) Swedish Derogation
Model necessary?
Now that the Agency Workers Regulations 2010 or 'AWR'
are being introduced on 1 October 2011, the various parties
potentially affected are looking at the practical issues of the
legislation.
The AWR is an EU led piece of legislation aiming to ensure
temporary agency workers receive the same benefits from their
clients as their directly employed colleagues enjoy. To
summarise the main points, the AWR will provide the following
rights for temporary agency workers:
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FROM DAY 1 OF THE ASSIGNMENT
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FROM WEEK 13
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ACCESS TO CLIENT SITE JOB VACANCIES
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YES
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ACCESS TO GENERALLY AVAILABLE EMPLOYEE FACILITIES
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YES
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EQUAL PAY TO COMPARABLE EMPLOYEES
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YES*
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EQUAL WORKING & EMPLOYMENT CONDITIONS
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YES
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PAID MATERNITY APPOINTMENTS & FULLY PAID MATERNITY
LEAVE
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YES
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*can be exempted under Swedish Derogation opt out
In the consultation period for the legislation, the Swedish
delegation negotiated an 'Opt Out', which has commonly become
referred to as the 'Swedish Derogation' model.
This article aims to explain exactly what the Swedish Derogation
is, and more importantly, how it affects you the
contractor.
Swedish Derogation Model
If an umbrella company providing agency workers to an agency can
demonstrate that certain circumstances have been met in their
relationship with the agency worker, then the Swedish Derogation
model can apply and the agency becomes exempt from the basic pay
regulation. These circumstances are:
- The agency worker must have agreed to sign an ongoing,
permanent employment contract with the Umbrella Company prior to
their first placement
- The agency worker must be paid in-between assignments - even if
they are not generating income for the umbrella company
- Where an agency worker is between assignments, they must be
paid at least 50% of their contract rate (the highest rate of pay
received in the previous 12 weeks of work) for at least 4 weeks
before a contract can be terminated
Pay Between Assignments
While this may sound fantastic on the surface, when you look a
little deeper it doesn't look quite like the golden ticket it may
have first appeared.
Where the above circumstances are in place, the following issues
may arise:
For Agency Workers who are
PAYE
In return for accepting up to 4 weeks of 50% normal pay between
assignments, an agency worker will give up the right to get equal
or higher pay if their contract were to last more than 12
weeks.
In order for their agency to be able to cover this 'pay between
assignments', they would have to reduce the Agency Workers normal
pay to hold back sufficient funds for this pay should they find
themselves out of assignment. If the temp does not have a
'between assignments' period off work, then they will be entitled
to the deductions made from their pay to be paid back to them.
It is unlikely that agency workers will like this model, as for
the same income, albeit spread over a slightly longer period, they
give up the right to be paid more.
For End Clients
On the whole we do not see this as a major concern for End
Clients. Most agency workers not only work alongside
permanent staff under the same conditions, but many are even paid
at a higher rate than permanent colleagues as is
the nature of temporary work.
The maternity rights will however need to be a consideration for
End Clients. If a pregnant worker is not well enough to
complete their assignment, she will still need to be paid in full
for the duration of her contract.
HR and Procurement departments at End Client businesses will
need to liaise with each other to ensure that any agency worker on
the books for longer than 12 weeks are receiving basic pay and
holiday pay in line with directly recruited perm staff.
For Temporary Worker
Agencies
The AWR are going to require an even closer working relationship
between agency and end client. They are likely to lead to a
more qualitative role, whereby the preferred agent is closer to
their client so as to understand their systems, HR and pay
structure. This could hopefully lead towards higher quality agency
work being rewarded with stronger margins.
The agency IT software providers will need to build in pay
variables to cost for those agency workers who are working beyond
the 12 week qualifying period so as to ensure the pay and holiday
pay is in line with that of the client's permanent staff carrying
out similar roles. This will be required regardless of the
Swedish Derogation model being adopted as only basic pay will be
exempt.
A model may even develop whereby a lot of 12 week temporary
contracts are followed by a 'temp to perm' fee, which is not likely
to cause huge detriment to agencies.
Where the agency is working with agency workers under the
'Swedish Derogation' model, they must also carry out compliance
tests on their umbrella company providers to ensure that the agency
is not liable where the Swedish Derogation conditions may not have
been met by the umbrella company.
For Umbrella Companies
In order to achieve the conditions of the Swedish Derogation and
so exempt the agents and clients from complying with the equal pay
element of the AWR, the umbrella company is going to have to take
from the agency worker with one hand, and give back with the other.
They will either have to raise their weekly fees to the contractor
or hold back some of the agency workers salary to pay it back to
them during the 4 weeks in-between assignments.
Where temps working under the Swedish Derogation do not have
gaps in their placements, the Umbrella Company will probably profit
from the funds held back for the potential 4 week gap.
To Summarise
Overall, the Swedish Derogation is only likely to apply where
there is a large pay discrepancy at the end client company between
temporary workers and permanent employees. As all the other
AWR conditions (holiday entitlement, working conditions, bonuses
etc.) must still be complied with and as there will be resistance
on the part of agency workers to accept less money and less rights,
we foresee plenty of reasons against it becoming a mainstream
model.
The Government has provided a very good guidance document for
anyone who would like to read further about the Agency Workers
Regulations. We have included a link to the document
here.