On 1 October 2011 the Agency Workers Regulations come into force in the UK. Employers of the estimated 1.3 million agency workers in the UK take note!
What is the effect of the Regulations?
Day one rights
From day one all agency workers will be entitled to information about relevant vacancies in the hirer’s organisation and also access to collective facilities and amenities. This would extend to canteens and on-site gyms.
Equal treatment rights
The real teeth in the Regulations, however, are in the provisions intended to provide parity as between agency workers and employees working for the same employer, regarding pay and “basic conditions” including pay, duration of working time, night work, reset periods, rest breaks and annual leave. The test to be applied is what pay and conditions would workers have had if they had been directly employed? If there are people directly employed doing the same work then that will be the correct comparison although differences may be justifiable if they are referable to differences in skills, qualifications or experience.
Equal treatment - “pay”
In drafting the Regulations the government took the view that the right would be to claim equal treatment for in terms of pay for work actually carried out. This approach excludes incentives and benefits reflecting a qualitative difference in the relationship between employee and employer. It includes any sums payable to a worker “in connection with the worker's employment, including any fee, bonus, commission, holiday pay or other emolument referable to the employment, whether payable under contract or otherwise but excluding, for example:
- occupational sick pay;
- pension or retirement related payments
- payments in compensation for loss of office
- maternity, paternity or adoption pay
- redundancy pay
- payment or rewards under financial participation schemes;
- payment for time off for carrying out trade union duties etc);
- advances for a loan or an advance of pay
- expenses payments;
- any payments made otherwise than in that person’s capacity as a worker.
Bonuses, incentives etc.
Some bonus and incentive arrangements are excluded from the definition of pay and the agency worker would therefore not be entitled to them. These are those which are not directly attributable to the amount or quality of the work done by a worker, and which is given to a worker to encourage the worker’s loyalty or to reward the worker’s long-term service.
The Guidance to the Regulations (See Resources below) provides examples of bonus payments which do and do not fall into the category of “pay”. For example, commission payments linked to sales or bonuses paid to workers who meet specific individual performance targets or basis of individual performance fall within the definition of pay. However, bonuses determined by reference to the overall performance of the company and not based on any individual performance are not. So too, bonuses designed to reward loyalty and service to the organisation and not based on individual performance are not “pay”.
In reality, making a distinction may prove difficult. For example a retention bonus offered only to employees carrying out strategically important key work for the employer is presumably related to the quality of work carried out whereas one offered to all employees is not.
When do Agency Workers become entitled to these new rights?
The right to claim equal treatment in pay and working conditions and certain other rights under the Regulations do not come into effect until the agency worker has been working in the same job for 12 weeks (although, as noted above, some rights apply from the day the agency worker starts with the hirer).
In order to determine whether the agency worker has 12 weeks service it is not as straightforward as simply looking for an unbroken 12 week period. Certain breaks only stop the continuity clock running, such as breaks of less than 6 weeks in duration and breaks for maternity/paternity leave. If the worker moves to a different role in the company then the clock is restarted but there are anti-avoidance provisions to prevent the hirer stopping the agency workers accruing the qualifying period. The continuity rues are not straightforward and employers will do well to keep a close record of when agency workers are providing services which count for the purposes of the Regulations.
If requested to by an agency worker both the hirer and the agency must provide the agency worker with details regarding pay, working time, annual leave and overtime and some additional information regarding the employees of the hirer whose work is comparable to that of the hirer’s.
The employer can be liable to pay compensation up to £5,000 per agency worker if a Tribunal is of the opinion that the employer has used artificial schemes to ensure that that the agency worker does not acquire the new rights. For example, the agency worker is hired for a period of less than 12 weeks. They are then given a break of longer than 6 weeks and then rehired.
In the event that there is a failure to provide the same conditions to agency workers as are received by employees then unlimited compensation may be awarded against the hiring employer to the extent it is responsible for the infringement. The agency may also be liable for wards unless it can show that it took reasonable steps to obtain the necessary information from the hirer and to treat the agency worker accordingly.
For employers that make use of agency workers to any significant degree the impact of these Regulations will need to be carefully reviewed. All but the shortest engagements will need to be monitored. Equally care should be taken to not to infringe the anti-avoidance provisions. Where bonus schemes are in place the possibility that agency workers may be able to establish a right to participation will need to be reviewed.
The result of these measures is additional costs and administration for the employer.