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Employers must pay agency workers the same as direct recruits

A major change in employment law aimed at improving the rights of agency workers is to come into force next April.

The Agency Workers (Amendment) Regulations 2019 repeals what is known as the ‘Swedish derogation’ contract commonly used to employ at least ten per cent of the UK’s 800,000-plus agency workers.

The change will affect all employers who use agency workers.

Crucially, it means that after a new 12-week qualifying period, employers will have to pay agency workers the same rate as direct recruits.

The cost of increased wages could be up to £380 million each year to hirers across the UK, according to government estimates.

What is a Swedish derogation contract?

The official name is a ‘pay between assignments’ contract. The worker employed has a permanent contract with their agency, not the end client, which allows them to be paid between assignments but not necessarily to receive the same wage and employment benefits as the end client’s permanent staff.

Though widely used and legal, such contracts have been criticised as an easy way for companies to avoid paying agency workers fairly.

Loopholes

Law Society president, Christina Blacklaws, supports the change. “Until now, companies have been able, intentionally or not, to use loopholes and the lack of clarity in the law undermines workers’ rights,” she said.

“Agency workers can now be confident that they have a legally enforceable right to be treated and paid equally to colleagues employed directly by the employer.”

What does the change in law entail?

From 6 April 2020, the new rules will give agency workers a right to pay parity with direct employees once they have undertaken the same role with the same hirer for 12 continuous calendar weeks.

It includes certain bonus payments, holiday pay, overtime, shift allowances, unsociable hours premiums but doesn’t include company sick pay, maternity/paternity/adoption pay or pension and redundancy pay.

Also excluded are bonuses not directly attributable to the amount or quality of work done, for instance bonuses aimed at encouraging loyalty or rewarding long term service.

It is expected there will be an implementation period to allow employers time to adapt to the reforms.

For help and guidance about this area of the law, please contact Wards Solicitors’ Employment team, Business Employment team or Employment Law Specialist Solicitor Julia Beasley directly.

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