The Agency Worker Regulations become law this year - what does this mean for interims?

By Christine Jenner | Published: 17 October 2011 | Comments (1)

The Agency Worker Regulations 2010 (AWR), which come into force on 1 October, give agency workers many of the same rights as directly engaged employees/workers. 
 

What rights will Agency workers have under the new law? 

Under the AWR from the first day of an assignment agency workers will be entitled to access collective facilities and amenities that are available to a hirer's comparable full time staff such as a staff canteen or crèche facilities. They will also be entitled to receive information about job vacancies. 

An agency worker who has completed 12 weeks on an assignment with a hirer in the same role will also be entitled to the same 'basic working and employment conditions' as the hirer's comparable full time staff. This includes conditions relating to pay (including some bonuses and overtime payments) and annual leave.
 

Who will be liable for breaches? 

If an agency worker pursues a claim in relation to their day one rights it could result in compensation being awarded, for which the hirer will be solely liable. The level of compensation will be determined as what the Employment Tribunal considers "just and equitable" in the circumstances, which is likely to relate to any financial loss suffered by the worker. The liability relating to 12 week rights will rest either with the temporary work agency (TWA) or the hirer depending on the extent to which each are responsible for the breach. However, the TWA will have a defence if it can demonstrate it took reasonable steps to obtain information from the hirer about its basic working and employment conditions.   
 

How does the legislation affect interims? 

It is widely assumed both by interims and hirers that the AWR will not apply to them.  As a result, some hirers and TWAs are asking individuals to set up their own personal service company to place them outside the scope of the AWR. This is risky and if it is unsuccessful may mean not only that the individual falls within the scope of the AWR but may also raise certain tax issues which are outside the scope of this article. 

The assumption that limited company contractors and interims working through their own service companies or freelancers will fall outside of the scope of the AWR is not correct in all cases. Whilst, some individuals will fall outside the AWR they will only do so if they are genuinely in business on their own account, not working under the supervision and direction of the hirer and are not providing their services personally. 

This means that if hirers and interims are going to work on the basis that they are not caught by the AWR then they need to ensure minimum supervision and direction. They will also need to ensure that the roles in question are suitable for personal service company (PSC) arrangements. Generally lower paid or lower skilled workers will not be suitable for PSC arrangements as they will not be independent and will not be in a business relationship with the hirer as a client. 

The second assumption about interims is that even if they do fall under the scope of the AWR they will not have claims because their rate of basic pay is likely to be higher than comparable full time workers and employees may also cause problems.  

There has been some debate as to whether each employment term and/or element of pay will be considered individually for purposes of equal treatment under the AWR or whether a whole package approach can be taken. The regulations themselves do not say.  However, in our view a term by term approach is required. This means that an interim who falls within the scope of the AWR and receives more basic pay than their comparator will also be entitled to a equality of terms elsewhere, for example in relation to some bonuses and in respect of holiday entitlement. 

In practice such workers who bring an AWR claim may risk having their IR35 status challenged and face significant tax liabilities that exceed the amount of their AWR equal pay claim.  For this reason many believe such claims will not arise although there can be no guarantee.
 

What next? 

The new legislation raises some tricky issues for interims and hirers alike.  It is important  for both to give careful consideration to whether or not the AWR will apply rather than working on the assumption that it is irrelevant. The position is likely to become clearer over time and as case law develops. In practice hirers may look for appropriate indemnities from interims to manage their own risk or consider inserting a clause within the contract with the personal service company stating that the workers supplied via the personal service company do not have AWR rights.  

Tags: Agency Worker Regulations