What stage has been reached on the Temporary Workers Directive (TWD)

The original proposal to give agency workers equal rights was put forward by the European Commission in March 2002. It has proved highly contentious on both a national and European level since that date.

European employment legislation is adopted under a process called the "co-decision procedure". Under this process the agreement of the Council of Ministers is essential and the European Parliament can only block legislation by an absolute majority.

Initially, Council agreement proved elusive and the proposal was shelved for a period. In order to break the deadlock, the future of the TWD was linked to the equally controversial review of the Working Time Directive (WTD). The linking of both Directives enabled a political agreement to be reached by the Council in June this year ending years of stalemate. Briefly:

  1. Under the WTD, the 48-hour opt-out remains, but will be subject to some significant new conditions such as an overall cap of 60 hours; opt-outs not permitted during the first four weeks of employment (subject to limited exemptions); and a new category of inactive on-call time.
  2. Under the TWD, agency workers will have the right to equal treatment with permanent employees from day one. However, a qualifying period can be agreed at national level. This will allow the UK to use a 12-week qualifying period following the agreement it struck back in May with the Confederation of British Industry (CBI) and Trade Union Congress (TUC).

See our alerts Balancing Act: Landmark European agreement on working time and agency workers and The Agency Workers deal: Is this "the right deal for Britain"? for further background.

The draft TWD has now been accepted by the European Parliament as submitted. The key provisions are:

Basic working and employment conditions for temporary agency workers compared to permanent workers from day one (including pay, holidays, working time, rest periods and maternity leave), unless social partners agree otherwise – in the case of the UK the 12 week period has already been agreed

Equal access to collective facilities (such as canteens, transport services and child care facilities)

Agency workers to be informed about permanent employment opportunities with the end-user

Improved access to training both during and between assignments

Penalties for non-compliance by agencies and end user employers

However, occupational benefits will be excluded from the definition of equal treatment.

What will this mean?

All EU member states are now required to incorporate the provisions of the TWD into their national law within three years. Over the summer, it had been hinted that the provisions would be implemented in the UK sometime in 2010. However, in light of the current economic crisis, the full three year implementation period may be used.

A key factor in getting UK agreement to the TWD was the possibility of excluding assignments lasting 12 weeks or less. The CBI's press release states: "This directive will not be welcomed by employers, but it is less damaging than previous proposals as key flexibilities that underpin UK competitiveness have been protected. More than half of agency assignments last less than 12 weeks and will be unaffected. And while pay is included, occupational benefits that recognise the long-term relationship permanent staff have with an employer, like sick pay and pensions, are rightly excluded."

The impact may be greatest in relation to the lower paid end of the agency worker market. Many highly skilled contractors and consultants will already be paid premium rates in their field.

In workplaces that rely mainly on agency workers it may be difficult to establish who will represent the directly employed comparator. The compliance burden is likely to fall on the agencies and there are fears that this will lead to an increased level of bureaucracy, as agencies will require updated details of pay and conditions from the end user. Employers may also have to hand over more information to the agencies than they would feel comfortable with.

However, the provision of these new rights may bring about a decrease in the number of employee status claims, although that is likely to be offset by new claims for unequal treatment by agency workers.

Pensions & Agency workers

The exclusion of occupational benefits such as pension contributions under the TWD has been welcomed by the CBI. However, while pensions are excluded, employers need to be aware of domestic proposed legislation which will impact upon pensions and agency workers.

The Government is expected to pass the Pensions Bill into law later this month to become the Pensions Act 2008. Among other things, from 2012 this will require automatic enrolment into a "qualifying workplace pension" for all workers, including agency workers, from the first day of work unless:

  • they are under 22 (in which case it applies when they turn 22); and/or
  • they earn under the minimum earnings threshold (which is currently £5,035 but this will rise each year). Again, the duty to enrol will kick in if the worker starts to earn above the threshold.

This will be enforced by the Pensions Regulator, who will have the power to fine employers up to £50,000. There will be a limited ability for workplace schemes meeting a quality test to have a waiting or eligibility period of up to three months. This will only apply if the scheme has a high enough level of DC contributions or a high enough rate of accrual in a DB scheme to warrant the deferral of membership.

Agency workers provide service under a contract with an agency, but provide services to an end user. The question raised is who will be responsible for paying the pension contributions? The Pensions Bill states that whoever is responsible for paying the worker should pay the contributions, and, if no one is responsible then whoever as a matter of fact pays the worker will be responsible.

For more information regarding the Pensions Bill please see our alert Pensions Act 2008 - How will this affect you?

What about the Working Time Directive?

Political agreement over the TWD was possible in light of agreement also being reached over amendments to the WTD and the controversial issues of the 48 hour working week limit and "inactive" on call time. The revision of the WTD is not, however, having an easy passage through the European Parliament.

On 5 November, the Employment and Social Affairs Committee of the European Parliament rejected the Council's and Commission's "common position". The Committee has instead backed a report by a Spanish MEP which calls for the complete removal of the 48 hour opt-out within three years, for "inactive" on-call time to be counted as working time and some minor changes to the provisions regarding compensatory rest breaks.

The rejection of the agreement reached by the Council appears to be a negotiating tactic. The Committee's meeting was brought forward from its original 2 December date "to allow time for informal negotiations with the Council with a view to reaching a possible compromise ahead of the vote" before the full European Parliament in December.

As mentioned above, under the "co-decision procedure", the agreement of the Council is essential and the European Parliament can only block legislation by an absolute majority. Should the MEPs block the "common position" text, negotiations would then need to recommence with the WTD continuing in force in its current form – including continued use of opt-out without the new agreed restrictions. Note - irrespective of the outcome of the Parliamentary vote on the WTD, TWD is now agreed and cannot be undone. Accordingly, the "common position" is likely to be agreed largely as drafted. However, we shall have to wait and see whether the WTD review that has been going on since 2003 will reach a conclusion or go back to the drawing board!