Guide to the Agency Workers Regulations 2010

Anyone working through a Recruitment Agency, who is under the direct supervision, direction and control of the hirer, will fall under the scope of the Agency Workers Regulations, also known as AWR (a legislation that came into force in October 2011).

It also applies to individuals who have their own Limited Company (PSC) and whose working practices fall inside IR35. It was widely believed that the Agency Workers Regulations reinforced the IR35 legislation and strengthened HMRC’s case against those whose contract was not an accurate reflection of their working practices.

HMRC AWR Guidance

Guidance issued in June 2011, stated:

“If the arrangements do not reflect the reality of the relationship (e.g. despite the wording of the contract, the actual reality is that the individual is not in business on their own account and they work under the supervision and direction of the hirer) or are an avoidance tactic, then individuals are likely to fall into scope of the Regulations.”

Unlike the Conduct of Employment Agencies and Employment Businesses Regulations (Conduct Regs) there was/and still is no opt-out from this legislation.

The Swedish Derogation Model vs Match Pay Perm

Until April 2020, the only exemption was from Section 5 which relates to equal pay and this was only if your preferred Umbrella Company had implemented the Swedish Derogation Model rather than a Match Pay Perm or Pay Comparator model.

Contractors, as employees of the umbrella, are already entitled to a range of statutory protections, provided by the Working Time Regulations, National Minimum Wage legislation etc. The Agency Workers Regulations simply gave additional protection and rights equal to those of permanent employees in comparable positions and this has not changed.

Some rights available from day one at a client’s site look at accessibility to site facilities and information on job vacancies. Ensuring that these provisions have always been made the responsibility of the hirer who would be liable for any breach of the obligation.

For instance, if the company has parking facilities, which are available to all its employees, those facilities would also need to be made available to temporary workers. However, it does not mean that they would be entitled to preferential treatment so, if the company had only 5 parking spaces which were available to the longest serving members of staff, the temporary worker would not be able to jump the queue.

Off Site Facilities

The client or hirer is not obliged to give access to off-site facilities, which they do not directly provide such as subsidised gym membership or the opportunity to purchase discounted company goods. The legislation was not intended to give enhanced rights but to ensure that treatment should be ‘no less favorable than a comparable worker’ i.e. one doing the same or a similar job at the same location.

Day 1 Rights

Listed below are the types of facilities that should be made available from the first day at a client site. The list is not exhaustive, as available facilities will vary from site to site.
• Canteen facilities
• A workplace crèche
• Bathroom/shower facilities
• Staff common room
• Mother and baby rooms
• Prayer rooms
• Food and drinks machines

The hirer is also obliged to provide information about any relevant job vacancies that the client has that would be made available to a comparable worker. Again the intention is not to give preferential treatment and the client will still have complete freedom with regard to qualification or experience requirements and how applicants are treated. The right to information will not apply when there is a genuine headcount freeze or when internal moves are required to restructure or avoid redundancy.

AWR Rights After 12 Weeks

The Legislation makes other new rights available after a qualifying period of 12 weeks, with the same client, in the same role:
• basic pay, including holiday pay, overtime and bonuses linked to your performance (unless operating under the Swedish Derogation Model)
• life of working time – for example, not being expected to work more hours a week than those who are directly recruited
• annual leave (where this is above your legal entitlement you may receive an additional payment, as part of the hourly rate or at the end of the assignment, instead of the additional leave)
• night work
• rest breaks and rest periods paid time off for ante-natal appointments

The 12-week period refers to 12 calendar weeks irrespective of how many hours are actually worked in that 7-day period. The qualifying period is also not altered by a change of Employment Agency; it refers solely to the time spent working at a particular client site.

Qualifying Period

The qualifying period should be ‘re-set’ when a new assignment begins for a new client or when a new assignment begins for the same client but in a new role or when there is a break between assignments of 6 weeks or more. Breaks of more than 6 weeks may sometimes merely ‘interrupt’ the qualifying period e.g. sickness or annual leave. Moving from one site to another within the same company, unless the role is completely different, cannot break the qualifying period.

After the qualifying period has been completed pregnant temporary workers will be entitled to take paid time off for antenatal medical appointments and antenatal classes. In cases where the original assignment cannot be completed for Health and Safety reasons it will be necessary for another assignment to be found. Under certain circumstances it may be necessary for the client to carry out a risk assessment to determine whether or not the role is still appropriate. If a risk assessment determines that the original placement is unsuitable, a suitable alternative must be offered and cannot be unreasonably refused. If an alternative role cannot be provided by the Employment Agency, they will be obliged to pay the contractor at the same rate for the duration of the terminated assignment.

Swedish Derogation Model

Up until April 2020, some umbrella companies operated using a Swedish Derogation contract; an agreed opt-out from section 5 of the regulations, which related to equal provision of pay. The Worker entered into a permanent Contract of Employment with the umbrella company, who was responsible for paying the contractors’ salaries and for maintaining continuity of assignments.

In order to guarantee full compliance with the Agency Workers Regulations, this type of Contract of Employment was always signed and returned to the Umbrella Company before any assignments commenced.

The Contract of Employment included the following information:
• Client details
• Minimum pay rates and their basis of calculation
• Location of work, reflecting where you will be willing to travel
• Minimum and maximum expected hours
• The nature of the work to be undertaken

The SDM Contract would usually contain a statement which confirmed that the individual becomes an employee of the Umbrella Company and therefore accepts­ the exemption from section 5 of the Agency Worker Regulations, which relates to equal treatment provisions on pay.

The rest of the legislation still applied, which meant individuals still had an entitlement to equal treatment in respect of duration of working time, night work, rest periods, rest breaks and paid annual leave. Under this type of Contract of Employment, there was also entitlement to Statutory Maternity Pay, Paternity Pay, Adoption Pay and Sick Pay.

The Taylor Review – Good Work Plan

In 2019, the Government unveiled its Good Work Plan describing this type of contract as a ‘legal loophole’. They stated that the Swedish Derogation excluded agency workers from the principle of equal treatment in relation to pay under the Agency Workers Regulations (AWR) 2010.

After consultation it was determined that new legislation, based around The Taylor Review would look revoke this type of model stating that it was used to abuse worker’s rights, in particular to the lower paid. Some umbrella companies work with contractor’s who are deemed to be able to demand a higher rate and were therefore happy to sacrifice this element of the AWR in return for increased daily or hourly rates.

The practice is legal as it stands, but has faced criticism for allowing recruitment companies to exploit lower paid agency workers. It is believed that once the repeal has been passed that agency workers can be confident that they have a legally enforceable right to be treated and paid equally to colleagues employed directly by the employer.

Compliance with AWR

In order to comply with the legislation, Clarity’s contractual arrangement with their employees ensuring equal rights with regards to pay, under the Match Pay Perm or Pay Comparator Model.

Upon registration with Clarity Umbrella; we will ensure that contractor’s are fully aware of their position in regards to the Contract of Employment they are signing.

We will also contact you, the agency, to ask that you to provide us with detailed information with regards to the assignment. This will be in the form of a Pay Comparator questionnaire, which will need to be returned, and in place by the 12th week of employment.

We would ask that any comparator details are provided to us by return, this looks at an equivalent salary or earnings potential for an individual employed by the business undertaking work that is deemed to be the equivalent role. Should there be no equivalent role within the business then we will need to be notified in writing, so that we can keep this on the employment file for each employee.

If there are comparator details, then we will check to ensure that the rate given matches that of the comparator, should this not be the case then we will need to request an uplift in the hourly or daily rate for the employee to comply with the legislation.

Should no uplift be available, we will advise the agency and worker that under temporary employment rules, it will become untenable to continue employment.