AWR – a big deal?
This article was first published in UK Recruiter, 29 June 2011.
Agency workers, or temps as they are more commonly known, have long been used by the majority of UK businesses. They offer a flexible and cost effective means of covering short term demand for additional resource in the workplace, whether to cover holiday or sickness absence, family leave or a temporary increase in work. The business of supplying those temps is now a well established and valuable sector in the UK economy worth nearly £18 billion in 2009/20101.
Temps do not have all of the same employment rights as permanent employees, often giving rise to the perception of a two tier workforce within the UK economy. After a campaign for better protection of temps the long awaited Agency Workers Regulations 2010 (“AWR”) will come into force on 1 October 2011 in compliance with the European Agency Workers Directive of 2008. It is intended that this will give agency workers the entitlement to “equal treatment” in the workplace.
Until recently, the AWR have had a relatively low profile in the press. Nonetheless, the AWR are a significant change to the status quo and both agencies and hirers need to give careful consideration as to how the AWR will impact on their business in advance of their coming into force on 1 October 2011. Over the next few months this series of articles will explain the impact of the AWR both legally and practically on businesses operating in the recruitment sector.
Who is caught by the AWR?
Readers will be familiar with the classic tripartite arrangement between temps, agencies and hirers and the first key question to ask is whether your business falls within the scope of the AWR.
Who is a hirer?
The answer is straightforward. Hirers are any company, partnership, sole trader, public body engaged in an economic activity which hires a temp through an agency to work under their direction and supervision.
What is an agency?
A temporary work agency (“agency”) is a business, whether or not operating for profit, that supplies individuals to work temporarily for and under the supervision and direction of hirers. It also includes businesses that pay for or receive forwarding payment for the services of individuals who are supplied to work temporarily for and under the supervision and direction of hirers. However, agencies who introduce individuals for direct or permanent employment are not a temporary work agency for the purposes of the AWR.
Consequently, any business whether sole trader, private or public company, partnership, charity or otherwise involved in the supply of temps whether directly or indirectly, for example through umbrella companies, master vendors or neutral vendors, are caught by the definition of a temporary work agency.
Who is an agency worker?
The definition of temps or agency workers set out in the AWR is wide. A temp who:
- has an employment contract or an agreement to perform work or provide services personally with the agency, that pays the temp’s salary, sick pay, holiday pay etc.;
- is supplied temporarily to the hirer by the agency, whether that be for a few days or months; and
- works for and under the direction and supervision of the hirer
is an agency worker for the purposes of the AWR. However, where the individual is genuinely in business on their own account and has a business to business relationship with the hirer such that the hirer is their customer or client the individual is not an agency worker for the purposes of the AWR.
Consequently, those individuals who are paid through PAYE, those employed through intermediary / umbrella companies and who are then supplied to hirers via staffing companies are likely to be agency workers under the AWR.
However, where an individual is in business on their own account, or works under a managed service contract where they are not under the direction and supervision of the host organisation or is on secondment they will not be caught by the definition of an agency worker.
A number of agencies currently use the personal service company model and others are proposing to use it as means to avoid the AWR. However, it is important to note that simply requiring all temps to provide their services via a personal service company does not automatically mean that the provisions of the AWR can be circumvented. If, on a close examination of the facts, the classic tripartite relationship remains it is likely that the AWR will apply. The individual must be in business on their own account and the Tribunals will closely examine whether this is in fact the case.
Other agencies are seeking to use what is being referred to as “the Swedish derogation model” to limit the impact of the AWR on their business. This gives effect to the option for agencies to pay temps who are not in active assignments. However, measures to limit the impact of the AWR carry an element of commercial and legal risk and require careful consideration which will be explored further in this series of articles.
In next month’s article we will examine what the “equal treatment” of temps means and how it is intended to work in practice.