Written by
Changeboard Team

Published
18 Apr 2010

The Agency Workers Directive and what it means for UK businesses

18 Apr 2010 • by Changeboard Team

Introduction to the Agency Workers Directive

One of the most popular questions I hear from businesses and staff alike is: Why do we need an Agency Workers Directive? The truth is that the legal status of temporary workers is currently unclear in UK law, and the market as a whole is largely unregulated.

As regards the workers status, in some cases a temp will be an employee of the agency, in some cases the client user is the employer and in others, the agency will define the temp as self-employed. This means that in practice, the temp is often outside a number of important employment laws applying to permanent staff, such as unfair dismissal claims and redundancy payments. Indeed, some agency staff even fall outside the Working Time Directive. Likewise, the fact that the recruitment industry continues to be unregulated means more often than not, rogue recruiters are able to get away with paying agency workers less than they should expect for the job that they are doing.

Thus, the main purpose of the AWD is to ensure the appropriate protection of temporary agency workers, irrespective of their legal and temporary status, and to address the unnecessary restrictions and prohibitions on the use of agency work.

These include:

Confederation of British Industry (the CBI)
Federation of Small Businesses (the FSB)
Institute of Directors (the IOD)
Professional Contractors Group
Chartered Institute of Personnel and Development (the CIPD)
British Chambers of Commerce (the BCC
Trades Union Congress (the TUC)

Recruitment and Employment Confederation (the REC). And it is one of the few pieces of legislation which cannot be affected by the up and coming general election. At most, it could be delayed, but whether we like it or not, the final version is set to change the nature of temporary agency recruitment forever.

History of the Agency Workers Directive

The EUs Agency Workers Directive was approved by the EU Parliament in October 2008 and was published in its second format in De??cember 2009. It was first drafted in 2000 when Greece (who had virtually outlawed temporary agency work??ing) chaired the principal EU meetings. In previ??ous years, the directive was debated on and off in the EU, and representations against it were made by UK business organisations to the UK Govern??ment and to the European Commission.

For much of 2009, the Government was in con??sultation with industry representatives discussing the detail of the directive, as some points required clarification. For example, what part of a remuneration package should be regarded as pay was yet to decided, as was whether or not 12 weeks referred to four months or 12 consecutive weeks. Similarly, what definition should be ap??plied to a break between assignments and when a week technically starts, were still being discussed. Today, there continue to be arguments over how the regula??tions governing the implementation of the AWD, will be worded.

In January this year, the details that had not been agreed on, included:

  • How the word pay will be defined.
  • How the regulations will affect the fees that are paid to a recruitment firm when a tempo??rary/contract worker becomes a permanent one.
  • How the regulations will affect those who work on a regular basis for several different employers.
  • How to limit the impact of the regulations on spe??cific sectors where repeat assignments are common, such as driving and social care.
  • How to protect the interests of recruitment firms recruiting high salaried personnel, as well as interim management firms, by clarifying is??sues relating to self-employment.
  • How to ensure a level playing field for public and private sector suppliers in relation to the new regulations.

But with the final version of the regulation expected any time soon (due during the first quarter of 2010), the biggest question that still remains is: what will the Agency Workers Directive mean for UK businesses?

The AWD in practice

By putting temporary agency workers on equal terms with permanent workers with regard to pay and conditions, the AWD presents an enormous Challenge for the recruitment industry and companies alike who recruit agency staff. Compelling organisations to gain tighter control of their agency suppliers, not to mention the pay rates the temporary staff are working to, will lead to a weighty administrative burden for client users and put strain on resource, not to mention inducing some heavy indirect costs. Meanwhile, agencies may need to increase charge rates and bring in more of their own staff if they are to make a profit and cope with the extra paper work respectively.

Of course, the other huge concern comes from the fact that the UK will be affected by this European directive more so than any other country in the EU. Not only do we have more temporary agency workers than any other EU state, but we have more temporary recruitment agencies as well. With all member countries of the EU required to implement the AWD by 5th De??cember 2011, companies and agencies in the UK are awaiting the final draft of the bill any day now. If implementation is going to run smoothly, the hope is that the final draft will incorporate most if not all of the recommendations put forward by the interested organizations above.

The recommendationsin detail

Recommendation 1

The scope of equal treatment should be limited to basic salary and other basic statutory rights.

A simple definition of what equal treatment covers is essential in order to avoid the kind of uncertainty, bureaucracy and cost that would impact on the viability of agency work in the UK.

The definition of pay should be limited to a basic hourly rate. Occupational Benefits and financial participation schemes that vary from one user enterprise to another should be excluded.

Agency workers are already entitled to the statutory holiday pay which is rising to 28 days.

Any extension of holiday pay to equivalents in the user enterprise would add bureaucracy and complexity with agencies having to establish different holiday entitlements for each temporary assignment.

Recommendation 2

Equal treatment must be easy to establish.

Where no such formal provisions governing pay or working time exist in the user enterprise, it is extremely difficult to find a basis on which equal treatment can be established.

The text of the EU Directive does not refer to comparables. Therefore, equal treatment should not be established on the basis of an existing comparable worker, a predecessor to that role or a hypothetical comparable worker.

Equal treatment for temporary staff after 12 weeks of an assignment must be established with reference to what they would expect if recruited directly by the employer to occupy the same job.

Recommendation 3

The 12 week-qualifying period must be easy to administer.

Ensuring that the 12-week period is easy to administer will avoid unnecessary bureaucracy and will limit the number of assignments that are terminated prematurely.

There should be recognition for a genuine break between assignments. It's recommended that a break of four weeks should constitute a legitimate break.

Although temporary workers in sectors such as social care and supply teaching may only do one or two days a week, the qualifying period should be 12 calendar weeks regardless of the amount of work carried out during those weeks.

The 12 week period should apply to a specific job in a specific location and unit rather than to any role within the user enterprise.

Recommendation 4

Liability must rest with the end-user as well as the agency.

The specific responsibilities of end users and recruitment agencies must be made clear in the regulations.

The agency should be expected to take reasonable steps to establish equal treatment but should not be held responsible if that information turns out to be incorrect. There must be an element of compulsion on the user enterprise to provide relevant information to the agency.

Liability issues linked to other employment structures such as umbrella companies and master and neutral vendors will need to be considered in detail.

Recommendation 5

Measures to limit the increase in employment tribunals must be promoted.

Enforcing equal treatment should be through the Employment Tribunal System. However, informal ways of resolving disputes before a case reaches an Employment Tribunal should be encouraged (although the regulations should not be prescriptive on this).

The Agency Work Commission will actively work with ACAS and TUC to propose informal methods of resolving disputes around equal treatment. The key is to provide agencies and employers with a range of options rather than one prescriptive formula.

Recommendation 6

The provision of the directive should be limited to individual workers.

Professional flexible workers such as interim managers and IT contractors supplied through limited companies/umbrella arrangements are often paid more than permanent workers. They are not the individuals that the legislation is aiming to protect and should be excluded in order to avoid unnecessary bureaucracy for agencies and user enterprises.

The Agency Work Commission proposes that Personal Service Companies be excluded as they are providers of business services and not engaged as workers.

The recruitment industry will continue to support initiatives to address instances of bogus self-employment.

Recommendation 7

UK regulations must support legitimate means of derogating from the principle of equal treatment.

The Agency Work Commission welcomes the option of being able to form workplace agreements which would avoid the bureaucracy of establishing equal treatment for each assignment.

Agencies that employ their temporary workers directly and pay them between assignments should also derogate from the principle of equal treatment.

Welfare to Work services should be excluded.

Recommendation 8

A clear communication strategy is essential for effective implementation.

Proceeding with implementing the directive without clear communication and understanding will result in confusion and a massive increase in disputes with associated costs for all involved. A comprehensive communication campaign aimed at user enterprises, agencies and job seekers must therefore be a key part of the implementation process.

There should be a minimum 12-month lead in time between the regulations being published and formal implementation. This will allow for the publication of guidance and the necessary systems to be put in place and for end users to be reassured about the application of the directive.

Recommendation 9

Implementation must be delayed until October 2011.

The implementation of the regulations should be delayed until October 2011 because of the worsening economic climate. In addition, this will allow for employers and agencies additional time to fully prepare for the new regulations.

Any eventual economic upturn will be seriously hampered by restrictions on the flexibility of the national workforce.

What you need to know about the AWD

Evidently, there have been relentless debates regarding the necessity of the Agency Workers Directive and continued concerns that this EU-derived piece of legislation is not adapted to meet the demands of the UK labour market. The main worry is that it could limit job opportunities at a time when a flexible workforce is crucial to the UKs recovery from the recession.

The debate, however, is over, and the focus is now directed towards the implementation and effects on UK businesses. Although the legislation does not come into force until October 2011, organisations need to begin preparation now, and consideration needs to be given as to how they are going to place temporary agency workers within their business in the future to ensure they can still maintain an efficient, cost effective, flexible workforce, without breaking the rules.

What you should already know about the AWD:

  • The type of worker that will fall within the scope of the regulations.
  • How the AWD will affect umbrella workers and limited contractors.
  • A temporary agency workers rights to equal pay.
  • The qualifying period for equal rights and when the clock will be restarted.
  • The provisions included for training.
  • Who is liable for compliance.
  • What anti-avoidance measures the Government are planning.
  • How you will calculate comparable pay.
  • How you will measure the time period of a temporary agency worker.

Knowing your temporary agency workforce:

To tackle the implementation of the AWD you must have control and management of your current temporary agency workforce. This control will enable organisations to benchmark their permanent pay rates against their temporary pay rates by skill set, allowing them to forecast adequately for the future. The very basics you need to know include:

  • Your current temporary agency spend.
  • The percentage by skill set.
  • The pay by skill set.
  • Whether supplying recruitment agencies are operating on different pay rates for the same job.
  • Any regional variances for the same job.
  • The average time worked by your current temporary agency worker.
  • The frequency of return by a temporary agency worker.

For more information on the AWD, visit our website: www.depoel.co.uk or email our marketing department: marketing@depoel.co.uk