Agency Workers Regulations (AWR) arose from the European Agency Workers Directive which was introduced in October 2011. This gave temporary agency workers the same rights to working conditions and pay as those people employed directly by an organisation. However, from April 2020, under new AWR, these rights changed. We look at the implications of these new rights for clients, recruitment agencies and contractors, as well as how Conduct Regulations and Key Information Documents impact them.
Previously under AWR contractors could work within what was known as ‘Swedish Derogation’. That meant that even after being employed in the same assignment for more than 12 weeks contractors were not entitled to full pay between assignments, rather they were eligible only for the National Minimum Wage. This was considered to be financially detrimental to the contractor. However, since April 2020 when the government issued its Good Work Plan, Regulations 10 and 11 have been revoked from AWR and Swedish Derogation has been abolished. Contractors are, therefore, now eligible to equal pay after their 12 week qualifying period and a contract whereby they can ‘opt out’ of equal pay between assignments is no longer legal.
While this is good news for the estimated 120,000 contractors affected by these new rules, the impact on recruitment agencies and employers is significant. The employer is now liable to pay the contractor the same rate as their direct employees, as well as the same holiday entitlement, and under anti-avoidance provisions the agency or the employer (or both) can be fined up to £5,000 if they are found in breach of the regulations. Agencies will also need to ensure that the contracts and pay rates and holiday entitlement offered to contractors are reviewed in line with the new regulations.
The Conduct of Employment Agencies and Employment Business Regulations 2003, or Conduct Regulations, is legislation introduced by the Department of Business, Innovation and Skills (BIS) in order to offer contractors and employers a framework of minimum standards they could expect from recruitment agencies. The legislation is designed to ensure ‘fairness’ for both the contractor and the employer. All contractors who find work through a recruitment firm, whether that’s temporary or permanent, are covered, regardless of the nature of the contract, including umbrella companies. Conduct regulations cover such things as what information must be supplied to and from the contractor and client, the contractual documentation required, the amount a contractor will be paid and if any transfer fees are applicable.
Contractors, including those working through umbrella companies, are able to opt-out of the conduct regulations providing this opt-out is done before the contract starts. But is it wise to do so and lose the protections that the regulations offer? Contractors certainly lose the protection of guaranteed payment from the agency if the employer does not pay, but this can be partially covered by the employment through an Umbrella company. As an employee of the umbrella you must be paid your salary for the hours worked, at the defined rate, regardless of whether the umbrella receives payment from the agency or not.
Key Information Documents
From April 2020 a new requirement was included within the Conduct Regulations. Key Information Documents (KIDs) were designed to give detailed information for contractors which would enable them to make an informed decision about the terms of their employment. They also provide information for employment agents to ensure that their business complies with the regulations.
KIDs should include information about the exact nature of the work – who is employing the contractor and who is paying them, the number of hours they are expected to work and how much pay they can expect to receive, any fees that the contractor may be expected to pay, as well as their entitlement to benefits and holidays. The responsibility to supply this information to the contractor lies with the agency, however, they are reliant on the details supplied to them by the employer, typically an umbrella company. Agencies are also responsible for updating contractors on any changes that the employer intends to make to their contract or, in the case of a contractor using an umbrella company, if that umbrella company changes.
The introduction of these pieces of legislation is designed to enhance transparency and increase protection for contractors, as well as simplify the process for agencies.