On 1 October 2011, the Agency Workers Regulations 2010 (the Regulations)[1] come into force and will impact all businesses that use agency staff (Hirers), employment agencies that supply temporary staff to businesses (Agencies) and agency workers. Hirers and Agencies should be reviewing arrangements and contracts now in preparation for October and we advise businesses to carry out a general review of the use of agency staff and whether they will offer the same advantages going forward.

Purpose of the Regulations

To provide qualifying agency workers with the same basic working and employment conditions as employees of the Hirer and to prevent them being treated less favourably. The purpose is not to give agency workers employment status or the right to claim unfair dismissal.

Who will be affected?

"Temps" supplied by employment agencies. However, the Regulations go further and catch workers supplied through an umbrella company for tax purposes and potentially secondments. Individuals supplied through personal service companies would not generally be caught.

What are the immediate rights?

Unless the Hirer can objectively justify the exclusion, agency workers will be entitled to access to collective facilities and amenities provided by the Hirer, such as a canteen, workplace crèche, mini-bus pick-ups etc.

There is also a right to be told about relevant vacancies at the Hirer during the assignment. Hirers should review arrangements for the accessibility of this information.

Hirers should consider providing "welcome packs" to agency workers setting out this information.

Entitlement to 'basic working and employment conditions'

Generally, once an agency worker has carried out the same role with the same Hirer for 12 continuous calendar weeks they are entitled to the same basic working and employment conditions as apply generally to direct recruits.

Continuity will be broken if the agency worker starts a substantively different role or there is a break of at least six weeks between assignments. If the agency worker is to start a substantively different role, they need to be sent written details of that role.

Continuity will not be broken if there is a break of up to 28 weeks because the agency worker is, amongst other things, incapable of work due to sickness or injury or is taking an entitlement such as annual leave (during this time it will simply be suspended). Hirers may need to be more inquisitive as to the reason that an agency worker is returning to an assignment with them after a prolonged break.

Continuity will continue to accrue if the agency worker takes maternity, adoption or paternity leave or if the worker is absent for certain reasons relating to pregnancy, childbirth or maternity for a protected period of up to 26 weeks after the birth of the child.

What is the entitlement?

After the qualification period agency workers will be entitled to the same pay, annual leave, working time, night work, rest breaks and rest periods as if they had been hired directly. "Pay" would normally include basic salary (including the right to any pay increments), overtime pay, shift allowances, vouchers or stamps with monetary value and certain bonuses and commissions.

Hirers can breathe a sigh of relief that amongst the exclusions are occupational pensions; sick pay; notice; maternity; redundancy pay; and benefits in kind, e.g. health insurance and company car allowances; share schemes and some bonuses.

Bonuses and commissions

Agency workers will be entitled to equal treatment in respect of bonuses and commission payments that are directly attributable to the amount or quality of the work done. It may be necessary to carry out some form of modified appraisal process. Where bonuses are calculated on a number of criteria, one of which being personal performance, this proportion will need to be identified. This might be easier said than done!

There is an exemption from the right to equal treatment with regard to pay (including holiday pay) where the agency worker has a permanent contract of employment with the Agency and is paid a minimum amount between assignments.

The cost of avoidance

Hirers should think twice before agreeing structures which avoid the scope of the Regulations. Anti-avoidance measures are in place to "catch-out" such arrangements. The Employment Tribunal is entitled to award agency workers an additional £5,000 where it deems such measures have been used.

What is "equal treatment"?

The test is that, in respect of basic terms and conditions, the agency worker should be treated as if hired directly as a worker or employee. This involves the hypothetical question of "What terms would the agency worker be entitled to if he/she was hired directly to do the same job as he/she is doing as an agency worker at the time the assignment commenced."

Where there is a clear pay scale, then it may be obvious what terms an agency worker would be entitled to if recruited directly. If there are genuinely no basic terms and conditions that are ordinarily included in employees contracts, i.e. all staff have different terms, then the obligation will not kick in.

The guidance of the Department for Business Innovation & Skills published in May 2011[2] suggests that it is not necessary to look for a comparator. However, Hirers will be deemed to have complied with the Regulations on equal treatment if they can point to an appropriate comparator and treat the agency worker in the same manner.

Cost of getting it wrong

Agency workers will be entitled to bring a claim in the Employment Tribunal for any breach of the Regulations and also if they have suffered a detriment on certain "prescribed grounds" (for example having their assignment terminated for asserting their rights). Agency workers have a formal right to request information from the Agency and the Hirer and there are strict deadlines that should be complied with.

Liability will be apportioned between the Agency and the Hirer to the extent that each is responsible. Agencies have a defence if they:-

  • obtained, or took reasonable steps to obtain, relevant information about equal treatment terms from the Hirer; and
  • once the information was obtained, acted reasonably in setting the agency worker's terms and ensuring that the agency worker received those terms.

Records, communication and audits are key

Considering the potential liability for both the Hirer and the Agency combined with the complexities of the Regulations a risk audit is recommended. Proper communication between the Agency and the Hirer, regular record keeping and risk audits are essential.

The Regulations have led many employers to question the benefits of agency workers for anything other than very short term cover. Alternatives such as casual workers, fixed term employees etc must be considered.

What now?

By way of a non-exhaustive 'to do list', we recommend that if your business is using agency staff you consider taking the following steps:-

  • Conduct a risk audit by reviewing any documentation between your business and agencies, and any other arrangements which could be construed as that of hirer and agent (for example secondments), and consider including appropriate warranties and indemnities;
  • Ensure that information on all terms and conditions is passed on to the agencies. Suggest putting together checklists so that nothing "slips through the net";
  • Monitoring and record keeping become key;
  • Consider putting together a welcome pack for agency workers;
  • Review appraisal process; and
  • Train managers.