Agency Worker Regulations (AWR): What is AWR?

Agency Workers Regulations aim to combat discrimination of people who work for employment agencies, by stating that agency workers should be no less favourably treated in pay and working time than their full-time counterparts, who do the same work.

Similar to IR35, the guidance is designed to ensure fair treatment of contractors and freelancers, and ensure that there are clear distinctions and rules for each type of worker employed or contracted by a company.

This guide looks at how the Agency Workers Regulations works in more detail.

What is AWR?

The term ‘Agency Workers’ will include those individuals who are:

• Workers supplied by a temp agency (called a TWA – Temporary Work Agency) for temporary work.  These Workers must have a contract or agreement with the TWA and will do temporary work for a ‘hirer’ (the company they go to work at), personally, and work under the ‘hirers’ direction or supervision.  (A TWA is a company that supplies individuals to work temporarily, under the supervision and direction of a 3rd party).

• Workers who supply their services through an Umbrella company (called an ‘intermediary’) and find work through a TWA.  Normally these Workers will have an employment contract (‘employee‘ relationship) with the Umbrella company and are often called ‘Contractors‘.

It will not include:

• It was confirmed in December 2013 that agency workers who are working on an ‘indefinite’ and not a temporary basis at the end-hirer are not covered by the Regulations – full details of the case are here.

• Those Contractors/Freelancers who are genuinely self-employed and are in business on their own account.

• Those that have a ‘business to business’ relationship with the hirer or agency (the hirer or agency is the individuals’ client or customer).

• Workers who work for an in-house temporary staffing ‘bank’ where they are employed by the company directly.
• Workers who find direct employment with an Employer through a recruitment agency (e.g. permanent recruitment).  See our new Guide here to Can an Agency Worker ever be a permanent employee here.
• Those who work under the supervision and direction of the ‘supplier’ (TWA) rather than the ‘hirer’.
• Workers/Contractors who are hired via their own Personal Service Company (PSC – also called Limited Company Contractors) if they are genuinely self-employed.  There has been a lot of debate about this group, as to whether LCC’s are included under the AWR or not – some believe that because the work has to be done ‘personally’ (to be an agency worker) this cannot include LCC’s.  It is believed, although not yet tested, that if an LCC falls outside of IR35 they it should fall outside of the AWR.
• Workers who work directly for Managed Service Contractors (MSC) e.g. cleaners, catering staff.  MSC’s provide a service to the customer but the MSC, not the customer, has responsibility for managing and delivering the service and supervising their workers at the customers premises.

What does AWR mean?

If there is a dispute about whether a worker is within the scope of the AWR or not, an Employment Tribunal will decide the relationship between the parties involved.

Contractors and Freelancers need to work closely with their Agency / Umbrella Company / Client to ensure their employment ‘status’ is correct and so any obligations under the AWR are understood.  Contractors and Freelancers cannot, however, agree with any 3rd party to be outside of the AWR when this is not true.

What counts as equal treatment of agency workers?

Equal treatment is right to the same basic employment and working conditions as permanent staff.

They are ‘comparable’ to (at the ‘hirers’ company) as long as they have worked for the client for a period of 12 calendar weeks in the same job.

The terms and conditions included for equal treatment are:

Pay

Agency Workers who are eligible must receive the same ‘pay’ as comparable workers.

Pay includes basic pay, holiday pay, overtime pay, bonuses linked to individual performance, vouchers that have a monetary value e.g. lunch or child-care vouchers, annual pay awards.

In relation to those Workers who work through a TWA via an Umbrella company, their pay must also be comparable but it does not mean they should be paid more i.e. where an umbrella workers receives part of their pay as reimbursement for travel expenses this can be included in the comparable rate (e.g. if a directly recruited worker receives £100 per day, an umbrella worker could receive £80 plus £20 reimbursement).

Rest Breaks, Night Work, Working Hours and Annual Leave

Where companies provide contractual arrangements for rest breaks, hours of work and annual leave that are more generous that the statutory minimum, then an ‘Agency Worker’ who is eligible must receive these enhanced benefits.

Agency Workers must, for example, have the same amount of working time and annual leave as those who are directly employed workers e.g. if normal working hours are 35 per week, then the Agency Worker must also work these hours after 12 weeks.

Agency temps must receive the same holiday entitlement as permanent employees but any holiday that exceeds the statutory minimum of 28 days can be paid in lieu, we understand.

Paid time off for ante-natal appointments

For pregnant ‘Agency Workers’ that are eligible, the hirer/employer of the pregnant worker will be asked by the TWA to perform a health and safety risk assessment.

If the worker can no longer safely complete the duties of the assignment (and/or the hirer cannot make adjustments to the workplace) for health and safety reasons they will need to be found alternative work, at the same rate (or higher) than the original assignment.

If this is not possible then the pregnant agency worker will have the right to be paid by the agency for the remaining expected duration of the original assignment.

The ‘Equal Treatment on Pay’ Exception that is written into the regulations says that the Equal Treatment provisions on Pay (only) will not apply to an Agency Worker:

• Who has a new, permanent contract of employment in place with their Agency, before the first assignment under the new contract (with terms and conditions that will apply across all their temporary assignments).   A tribunal case in 2012 clarified this ‘new’ contract in more detail, you can see the details here.  And
• Who is paid between assignments at least 50% of the highest basic pay they received in the last 12 weeks of the previous assignment (as long as this is above the National Minimum wage).

These opt-outs are being referred to as the Swedish Derogation Model (SDM), and are being used by some hirers/Agencies/Umbrella companies to steer clear of the new regulations in terms of ensuring the agency worker receives equal pay.

In September 2013 the TUC lodged a formal complaint with the European Commission against the UK Government, for failing to enforce EU rules in respect of the Swedish Derogation model.

If this minimum pay is paid for a period of at least 4 weeks after the end of the last assignment and the agency has taken reasonable steps to find another suitable assignment for the worker during that period, the Agency can terminate its contract with the Agency Worker without being subject to the equal treatment provisions on pay.

How many hours a week should the permanent agency contract offer?

Some Agency Workers have been offered very low hours contracts.  The Regulations give no guidance on what ‘minimum’ hours are acceptable apart from saying that ‘zero’ hours contracts are unacceptable.

The positive aspect for agency workers of an SDM permanent contract is that you are then an employee so have employees rights – which include the right to claim unfair dismissal after 1 years continuous employment (or 2 years if your permanent contract starts on or after 6th April 2012) and the right to a redundancy payment after 2 years continuous employment.

An SDM permanent contract cannot exclude other equal treatment rights (e.g. to holiday entitlement, see above).

What does counts as equal treatment under AWR?

The terms and conditions that this right to equal treatment DO NOT apply to are:

• Bonuses (that relate to the hirers corporate performance or are given to award long service)
• Loans
• Expenses
• Company Pension Schemes (Agency Workers will be covered by new automatic pension enrolment schemes that will be phased in by the Government from October 2012)
• Health or Life Insurance/Assurance schemes
• Share Option Schemes
• Family-Leave related pay that is above the statutory minimum
• Occupational Sick Pay schemes (Agency Workers already have a right to receive Statutory Sick Pay)
• Payment for time-off for Trade Union activities
• Occupational Maternity/Paternity/Adoption pay
• Redundancy Pay
• Notice Pay (either statutory or contractual that is linked to the loss of employment).

The Regulations also do not require Agency Workers to be integrated into the hirer’s performance appraisal systems.

How the 12 weeks are calculated

• You must work for the same Client (‘hirer’) in the same job for a total of 12 calendar weeks from 1st October 2011.
• It does not matter how many hours you work each week, it can be part-time.
• It also does not matter if you have worked for the Client (‘hirer’) through more than 1 agency during these 12 weeks.

The continuity of these 12 weeks will not be broken if you stop working for the Client (but return later to the same job) because:

• You have a break of up to 6 calendar weeks – when you return to the Client to do the same job you start re-counting towards the 12 weeks after your return.
• You are sick or injured and incapable of work or are doing jury service – up to a maximum period of 28 weeks.
• You take a break due to pregnancy or maternity – this time off is ‘protected’ from the start of the pregnancy up until 26 weeks after childbirth (or when you return to work), for as long as the assignment was originally intended to last.
• You take a break on statutory maternity/paternity/adoption leave – where you are entitled to this – you are protected for up to 26 weeks after childbirth (or when you return to work) for as long as the assignment was originally intended to last.
• You take accrued holiday entitlement.
• If the ‘hirers’ workplace is shut (e.g. for Christmas or because of industrial action).

N.B.  A pregnant agency worker does not have any further rights under the AWR beyond those they are already entitled to (see our Guide to the Equality Act and our Guide to Maternity) and they do not have an automatic right to return to work after maternity leave.

The continuity of the 12 weeks will be broken, however, if an agency worker:

• Starts a new assignment with a different client.
• Has a 6-week or longer break from the same (original) client – you can, for example, work in the same assignment for 10 weeks then not work for the same client for another 4 weeks, but if you then return to the same client in the same job you would be entitled to equal treatment rights two weeks into the second assignment.
• Starts a new role with the same (original) client that is substantially different from the previous role (e.g. different skills are needed, hours are different, pay is different, different location, different line manager).

Comparable Workers

Agency Workers will have a right to equal treatment to those relevant terms and conditions above and in relation to facilities and accessing vacancies (see points 2 and 3 below) that are given to an actual ‘comparable’ worker.

Who is a directly employed, permanent member of staff who does similar, although not necessarily the same, type of work and generally at the same location.

If there is not a comparable worker then consideration needs to be given to published pay scales or pay agreements etc that are in place to determine pay/conditions.

In deciding who is to be the ‘comparable’ worker the BIS guidance says that if skills and qualifications influence the rate of pay for direct employees, the same must apply for agency workers.

The Guidance, however, does not address whether length of service or quality of performance should be taken into account.

An Employment Tribunal case in 2013 did confirm that quality of performance issues should be taken into account and the CBI have called on the Government to streamline the complex definition of pay in the legislation, to allow for easier comparisons.

The other Equal Treatment provisions that came into force from 1st October 2011 are called ‘Day-One’ provisions which mean, of course, they are available from Day One of the assignment (you do not need 12 weeks service).

These are:

1. Vacancies: Agency Workers will have the right to be told of any relevant vacancies at the client’s organisation during their assignment (in whatever is the normal way that direct workers are informed of internal vacancies) and have the right to apply for such vacancies.  The only exception is where internal vacancies are ‘ring-fenced’ for existing staff due to redeployment / restructuring /redundancy situations.
2. Benefits: Agency Workers have the right to be treated no less favourably than a comparable worker in relation to collective facilities and amenities at the hirers workplace, which could include canteens, toilets/shower facilities, childcare facilities and parking facilities (if there is a waiting list for any such facilities the Agency Worker would join the waiting list along with the hirers direct employees).
3. Rights: Agency Workers will also have the right not to suffer a detriment for asserting their rights under the Regulations (see below).
4. Unfair Dismissal: Agency Workers will have some limited unfair dismissal rights relating to a dismissal that they can show was related to reasons connected to the AWR (i.e. they were dismissed because they either alleged an agency or hirer had breached the regulations or they had bought a claim to Employment Tribunal under the Regulations).

Ensuring compliance of Agency Worker Regulations

The hiring Employer should provide the Agency (TWA) with information about the relevant terms and conditions and the Agency is responsible for ensuring the Agency Worker receives these terms and conditions when the Agency Worker completes their 12 week qualifying period.

Agency Workers have the right to request information from their agency or hirer to ensure they are receiving equal treatment.

• They can ask the Hiring Employer for information about Day 1 Provisions (above) and the Employer should respond within 28 days, in writing, stating the rights to which comparable employees must have access to, and the reasons for the agency workers treatment in relation to those rights;
• They can ask their Agency for information in relation to their equal treatment for basic employment terms and conditions, as soon as they have completed the 12 week qualifying period.  The Agency should respond within 30 days of the request.  If the Agency does not reply the Agency Worker can request the same information from the Hiring Employer.  The Hiring Employer must respond within 28 days of receiving the request, in writing, setting out information relating to the relevant basic employment conditions of its workers.

If an Agency Worker believes the hirer or agency has breached the key provisions of the AWR, i.e. that:

• they have not received the same basic working and employment conditions as a comparable worker (the Agency and Hiring Employer can both be responsible for this), or
• they have not been able to access facilities or be informed of permanent vacancies (Day 1 provisions, see above – only the Hirer can be responsible for this), or
• they have been subject to a ‘detriment’ in relations to the Regulations, then

The Agency Worker can bring a claim to an Employment Tribunal, within 3 months of the ‘breach’.

A Tribunal can order payment of compensation and/or make recommendations for action to be taken and can make an award of up to £5,000 against a Hirer or Agency where they have ignored the anti-avoidance measures in the Regulations (see below).

AWR does not change the employment status of agency workers

The impact of the AWR will not change the employment status of agency workers. For now they will continue to be employed by the agency rather than the hirer.

An Italian case that went to the European Court of Justice in June 2013 ruled that agency workers do not have rights under the EU Fixed-Term Work Directive.  Agency Workers are not specifically excluded from these Regulations and there are calls for the UK Government to tighten up this aspect.

Agency temps and Contractors already have rights under The Conduct of Employment Agencies and Employment Business Regulations 2003 – see our new Guide here.

The Government have anticipated that hirers and agencies may try to avoid the impact of the AWR by limiting the use of Agency Workers for assignments periods of less than 12 weeks – although there is nothing in the Regulations that say an Agency Worker cannot be hired for 11 weeks.

To help this situation the Regulations include ‘anti-avoidance’ provisions that address situations where a pattern of assignments emerge that are designed deliberately to deprive an Agency Worker of their entitlements by not allowing them to reach 12 weeks in the same assignment (IR35 part two, anyone?).

For example – if assignments are structured in such a way that a worker works less than 12 weeks and has up to a 6 week break before they start again at the same assignment with the same Employer.

This can happen twice under the Regulations but if it happens a 3rd time a Tribunal could take a view that the assignments are being structured in such a way to avoid the agency worker gaining rights under the Regulations.

This is called a ‘prohibited’ structure and the Tribunal can give Employers additional fines.

Changes to TUPE due to Agency Workers 

With the introduction of the Agency Workers Regulations in 2011 the TUPE regulations were amended to change Employers’ information and consultation obligations under TUPE.

Previously, Employers will required to provide information about the fact, date, reason, legal, social and economic implications of the transfer.

Since 2011 Employers also need to provide information on the number of agency workers working temporarily for and under the supervision and direction of the employer and the part of the organisation where they agency workers are working and the type of work the agency workers are carrying out.

This includes information about all agency workers working for the employer, not just the part of the business that is ‘transferring’ and is subject to TUPE.

Agency Workers discrimination rights

From 8th March 2013, to comply with the Parental Leave (EU Directive) Regulations, an agency worker who has at least one year’s service and has returned from unpaid parental leave,  has the right to request flexible working. As your employer is likely to be the agency not the client (end-hirer) it is their decision, although this is complicated as they will need knowledge of whether this is acceptable to the client!

Please note that the advice given on this website is guidance only and cannot be taken as an authoritative or current interpretation of the law. It can also not be seen as specific advice for individual cases. Please also note that there are differences in legislation in Northern Ireland.