Agency workers – Further consultation on implementing the Agency Workers DirectiveThursday, October 22nd, 2009
On 15 October, the Department for Business, Innovation and Skills (BIS) published a new consultation document, supported by draft Regulations, which explains, in nearly final form, how the European Directive on Conditions for Temporary Workers will be brought into UK legislation. The following notes update an article, based on the initial May 2009 consultation document, which appeared in this newsletter in May 2009. It must be noted that further changes may yet be made to the draft Agency Workers Regulations 2010 and that these notes do not necessarily describe the final rules.
The consultation document also analyses the responses to the initial consultation and explains the reasoning behind the Government’s decision in each aspect of the consultation. Readers interested in knowing why a particular approach has been taken should read the new consultation document – the reasoning is not reviewed in these notes.
The European Directive on Agency Workers was approved by the EU member states and the European Parliament in December 2008. In principle, the Directive requires that agency workers have the same basic working and employment conditions as they would have done if they had been recruited to do the same job by the business for which they are actually working.
The Directive allows for a qualifying period of employment before this equal treatment is applicable on the basis of an agreement between social partners at national level. In May 2008, the CBI and the TUC agreed that equality of treatment would apply to agency workers after 12 weeks in a given job.
EU member states are required to implement the Directive by 5 December 2011. The UK Government wishes to have the necessary legislation in place before the end of the current parliamentary session, i.e. by April 2010. However, the Regulations will not be brought into force until 1 October 2011 in order to give both agencies and hirers time to prepare.
Comments on the outstanding issues raised in the new consultation document are sought by 11 December 2009.
The Directive uses the term “temporary work agency” to describe the agency supplying the worker. This equates with the terms “employment business”, as used in UK legislation for agencies that supply workers to hirers on temporary contracts, and “temp agency”, as they are generally known. The worker’s contractual relationship is with the temporary work agency, which is responsible for paying the worker and providing statutory leave and other entitlements. The Regulations do not apply to “employment agencies”, the term used in UK legislation for agencies that introduce the worker, who then becomes an employee of the hirer.
The Regulations apply to “agency workers” who have a full employment contract with the agency or, more commonly, to workers have a contract for services with the temporary work agency and who work on assignment with a third-party hirer. The agency worker would need to do the work personally, and not send a substitute.
The term “worker” is the same as that used in the Working Time Regulations 1998 (WTR), but suitably adjusted to reflect the triangular relationship between an agency worker, the temporary work agency and the hirer. The definitions also ensure that workers who are not subject to obligations of mutuality, such as agency workers subject to zero hours contracts, are included.
The definition of “worker” also includes agency workers who
- are contracted to an “umbrella company” (e.g. where the hirer pays the agency, the agency pays the “umbrella company”, and the umbrella company pays the worker)
- operate a personal service company but are not genuinely self-employed
- are supplied through “intermediaries”, such as Master Vendor (where one agency manages a client’s recruitment and workforce, supplies agency workers, and also supplies agency workers from a number of secondary agencies) or Neutral Vendor (like a Master Vendor but only supplies agency staff from other agencies) and similar “chain” arrangements.
However, “workers” do not include those who are genuinely self-employed, or who work through their own limited company (i.e. there is no direct contract between the worker and the temporary work agency), or are employed on “managed service contracts” (i.e. where the workers are employees of and supervised by the agency).
The Directive allows member states to exclude government training programmes. However, no such programmes are currently identified and the Government’s view is that this exemption would only be considered on a case-by-case basis.
The “principle of equal treatment”, as defined in the Directive, provides that
“The basic working and employment conditions of temporary agency workers shall be, for the duration of their assignment at a user undertaking, at least those that would apply if they had been recruited directly to occupy the same job”
The Directive allows member states to establish derogations, or exemptions, from the principle of equal treatment on the basis of an agreement concluded between representatives of employees and employers at a national level. In May 2008, the CBI and the TUC agreed that there should be a 12-week qualifying period, after which there will be entitlement to equal treatment in respect of “basic working and employment conditions”. These are defined in the Directive as
“working and employment conditions laid down by legislation, regulations, administrative provisions, collective agreements and/or other binding general provisions in force in the use undertaking relating to
- duration of working time, overtime, breaks, rest periods, night work, holidays and public holidays, and
The test as to whether agency workers are receiving equal treatment is that they should be treated “as if” they had been recruited directly into the same job. This “as if” basis applies only to terms and conditions ordinarily included in contracts of employment in the hirer’s business. These would include collective agreements, pay scales and company handbooks or similar, but would also extend to terms generally included in employees’ written employment contracts and other implied contract terms. The draft Regulations expressly provide that, if a comparable permanent employee can be identified and the agency worker receives treatment in relevant aspects that is consistent with that received by that employee, the equal treatment provision is deemed to have been met.
12-week qualifying period
The 12-week qualifying period is 12 calendar weeks, regardless of working pattern, such as part-time and full-time. Any week, during the whole or part of which an agency worker in engaged on an assignment, is counted as a calendar week. A new 12-week qualifying period with the same hirer will only start if
- the worker starts a new assignment in a job that is substantively different, or
- there is a break of at least 6 weeks between assignments in the same job.
The meaning of “substantively different” is not defined in the Regulations and examples of what would be viewed as abuses, such as a change of line manager but not of duties, or a transfer between similar administrative or production functions, or moves within a single, relatively small business unit, will be provided in future guidance. Further views on how abuses of this requirement should be prevented are sought in the new consultation.
Some defined legitimate absences will not count towards the qualifying period. The new consultation document makes the following proposals:
- A period of approved annual leave and certified sickness absence would not count towards the qualifying period. For example, if an agency worker works for 2 weeks in a new assignment, then takes 3 weeks approved leave, then returns to the same assignment, the count at that point is still 2 weeks.
- However, a period of maternity-related absence would continue to count towards the qualifying period. For example, if a woman works for 2 weeks and is then away from work for 3 weeks because of being unable to perform her duties for health and safety reasons, the count on her return to work is 5 weeks.
- Similarly, if an agency worker is also treated as an “employee” for employment rights and meets any qualifying conditions,
- in the case of maternity, paternity and adoption leave, the period of leave would count towards the qualifying period, but
- in the case other time off rights, such as to undertake public duties, or for jury service, the period of leave would not count towards the qualifying period.
In the case of very long absences, in particular due to sickness or jury service, the number of weeks counted towards the qualifying period will be reset to nil after 28 weeks.
The same approach to legitimate absences also applies to breaks between and during assignments after the qualifying period has been reached. If an agency worker has completed 12 weeks and has become entitled to equal treatment, the entitlement would not be lost if the worker returned within 6 weeks to a role with the same hirer that is not “substantively different”. The rules described above for legitimate absences would also apply to the six week break.
Where an assignment lasts for less than 12 weeks, there is no right to equal treatment, but existing entitlements to the National Minimum Wage and to Working Time entitlements remains.
Working time entitlements
Broadly, therefore, equal treatment relates to the provision of the WTR (plus public holidays and overtime pay) and to “pay”. The Regulations, therefore, provide that, after the initial 12 weeks, an agency worker is entitled to equal treatment in respect of duration of working time, length of night work, rest periods and rest breaks, and to be paid at the appropriate rate for overtime. Some hirers and agencies already provide some or all of these entitlements from the start of an assignment.
With regard to holiday pay, the requirement is for agency workers, after the first 12 weeks, to receive the same paid holiday entitlement that they would receive if they were employed and paid directly by the hirer, including an entitlement above the statutory minimum. At least the statutory minimum paid annual leave (i.e. 4 weeks in a holiday year) must be provided, with any additional entitlement in excess of the statutory minimum paid at the time the holiday is take, or as a one-off payment at the end of the assignment, or “rolled-up” into the hourly or daily rate of pay (a practice that is not permitted for the basic 4 weeks minimum entitlement but is permitted for any additional entitlement). No changes to legislation are required for these arrangements.
Pay is defined as basic pay, plus other contractual entitlements directly linked to the work undertaken by the worker while on an assignment, namely holiday pay (including paid time off in relation to public holidays), payment for overtime, shift allowances, unsocial hours premiums and bonuses, payments for difficult or dangerous duties, and bonuses that relate directly to personal and individual performance. Qualifying for such additional payments would depend on workers fulfilling the conditions that they would have had to have fulfilled as permanent staff, such as working over and above standard hours to qualify for overtime pay, or meeting a piecework target that would have triggered a bonus payment if they had been permanent employees.
However, the following bonus payments are specifically excluded from the scope of equal treatment if they
- are awarded in the context of a performance appraisal pay system aimed at the long-term management, motivation and retention of staff,
- relate purely or partly to company performance, or
- would not be due for payment within the period of the assignment if the agency worker concerned had been recruited directly as an employee.
Specifically excluded are financial participation schemes (defined as distribution of shares, share options and profit sharing), occupational pensions and occupational sick pay. Other benefits, such as the rights to contractual notice pay, contractual redundancy pay and benefits-in-kind such as company car allowances and health insurance, are also not brought into the definition of “pay”. (However, under the provisions of the Regulations that relate to the introduction of pension personal accounts from 2012, agency workers are specifically included in the definition of workers who will be entitled to automatic enrolment and employer contributions if all of the qualifying conditions are met.)
Liability, compliance and enforcement
After the 12 weeks have elapsed, agency workers can request a written statement from the agency about any aspect of equal treatment which they do not believe they are receiving and the agency must respond within 28 days. If the agency does not respond, the hirer may then be asked for the information and the hirer also has 28 days to respond. In the case of access to employment and collective facilities, agency workers must request a written statement directly from the hirer as the agency has no responsibility for the provision of those benefits.
There is no separate right of enforcement if any agency worker does not receive these details. But if the agency worker goes on to make a claim under the regulations, the Employment Tribunal can draw an adverse inference from the fact that the written statement was not provided. There is no specific timescale for the agency to obtain information from the hirer as this is likely to vary in different circumstances.
Agencies have responsibility for any breach of a right in relation to equal treatment related to basic working and employment conditions but will have a reliable defence if they have taken “reasonable” steps to obtain the necessary information from the hirer and acted “reasonably” in determining the agency worker’s basic working and employment conditions. Any party in the “chain” of relationships can be named at the outset or joined to a claim and would be liable to the extent that they are to blame for the infringement. However, the Regulations make no provision for an agency and the hirer to have joint and several liability, which would have given Employment Tribunals the job of determining who is responsible for the breach.
Liability in relation to access to employment and collective facilities is the sole responsibility of the hirer as the agency has no role in delivering these entitlements.
The Regulations enable an agency worker to bring a claim to an Employment Tribunal and make an appeal to the Employment Appeal Tribunal. To help resolve matters without the need for court intervention, Acas can deliver pre- and post-claim conciliation.
If a tribunal upholds an agency worker’s complaint, it will generally be able to order compensation (without any statutory cap), make a declaration setting out the agency worker’s rights in relation to the matters to which the complaint relates and/or recommend that the hirer/agency takes certain action to remove the adverse effect on the agency worker.
Another permitted derogation, or exemption, from the right to equal treatment in circumstances where agency workers are permanent employees of the agency and are paid by the agency during gaps between assignments. This is a common practice in some member states but relatively uncommon in the UK. One current UK example is the employment by agencies of highly skilled IT specialists whose services the agency does not want to lose between assignments.
The conditions proposed in the consultation document for the use of this exemption are:
- the agency worker has a permanent contract of employment with the agency
- the terms and conditions of the employment will include details of the minimum pay rates the worker will receive from assignments, locations where the worker can be expected to work, the minimum and maximum hours the worker is prepared to accept, and the type of work the worker can be required to perform
- the level of pay between assignments is
- at least 50% of the greater of (1) the pay received in the last pay reference period (i.e. a pay period that is not longer than one month) in the previous assignment, and (2) the pay in a pay reference period in the previous 12 weeks of work, but
- not less than the national minimum wage
- the contract cannot be terminated without the agency worker having received at least 4 weeks of pay between assignment, which period would not include any termination notice period
- the agency will take reasonable steps to find a suitable new assignment during gaps between assignments.
Agreements to vary the equal treatment rules
A further derogation allows for agreements to be reached to vary the treatment of agency workers by means of collective (unionised) agreements or workplace (non-unionised) agreements. The draft Regulations include an exemption for workforce agreements (based on the structure in the WTR) and collective agreements if the agency workers receive the same overall level of protection as they would otherwise have received after 12 weeks.
For example, an agreement could require agency workers to work longer shifts than permanent workers but they would have to be compensated by, for example, additional paid time off or a higher rate of pay.
Liability for such variations would lie with the hirer, who is required to disclose the existence of an agreement to the agency. The agency, in turn, is responsible for enquiring whether there is such an agreement and providing the agency workers affected with the details.
Protection of pregnant women and new mothers
The draft Regulations extend to temporary agency workers to “paid time off” rights that are available to permanent employees who are pregnant, have recently given birth or are breastfeeding. The rights are only available once the agency worker has satisfied the 12-week qualifying period. The pay in each case is based on the “week’s pay” rules. There are no changes to the equivalent rights for permanent employees.
Paid suspension from work
Hirers are expected to make adjustments to protect an agency worker who is pregnant or a new mother from identified risks. If that is not possible, the agency is required to end the supply of the agency worker and endeavour to find suitable alternative work (with the original hirer or another hirer) that is appropriate to her and on terms and conditions, including pay, that are not less favourable than the original assignment. If that is not possible, she must be paid her usual pay for the period that the assignment was expected to last.
Paid time off to attend ante-natal appointments
An agency worker who is pregnant and has provided, on request, evidence of pregnancy to the agency and/or hirer and evidence of an ante-natal appointment, is entitled to paid time off during the worker’s working hours to attend the appointment.
Access to employment, collective facilities and vocational training
The Directive requires agency workers
- to have the same access to vacancies for permanent positions as permanent employees of the hirer
- to be protected from any restrictions on becoming a permanent employee of the hirer
- not to be charged a fee by the agency for arranging permanent employment with the hirer
- to be given access to amenities and collective facilities provided by the hirer to permanent employees, in particular canteen facilities, childcare facilities and transport services, unless the difference in treatment can be justified by objective reasons
- to be provided with training by the agency.
The draft Regulations make provision for requirements (a) and (d). In both cases the requirements apply from the start of an agency worker’s assignment, not after the 12-week qualifying period. Requirement (b) will involve a separate amendment to the Conduct of Employment Agencies and Employment Businesses Regulations 2003 that will require any transfer fees or any extended periods of hire as an alternative to paying the transfer fee to be reasonable. Requirement (c) is already covered in the Conduct Regulations, and the Government’s view is that (e) is not a matter for legislation.
Employers are required, under a number of statutory provisions, to consult with representatives of their workforce on matters such as setting up works councils, changes to pension schemes, transfers of undertakings and collective redundancies. The requirement to consult depends on whether the number of employees in the business exceeds a specified threshold. The Agency Worker Directive requires temporary agency workers to count towards the threshold that applies to the agency or to the hirer.
Following consultation, the Government decided that agency workers should count towards the threshold of the agency. The draft Regulations make the appropriate changes to the relevant legislation. An agency worker who is on the books of two or more agencies is counted towards the threshold for each agency. Only those agency workers who have been supplied to a hirer are counted. Where the count of employees towards a threshold that is based on an average number during a reference period, or takes part-time work into consideration, the same rules apply to the count of agency workers.
A related requirement of the Directive is for hirers, whose businesses fall within the various information and consultation provisions mentioned above, to provide information about agency workers to the relevant workers’ representatives. The draft Regulations make the necessary changes so that, where information is provided on the employment situation in the business, information is also provided on the use of agency workers.
Sponsored by Learn Payroll