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AWR – a big deal?

26/10/2011

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United Kingdom

AWR – a big deal?

Neil Johnston of Field Fisher Waterhouse LLP continues his series of articles on the new Agency Workers Regulations (“AWR”). Appeared in UK Recruiter Newsletter, 26 October.

Nearly one month on from the introduction of the AWR has anything really changed in the temps market?  Is everyone waiting until Christmas Eve when the 12 week qualifying period for equal treatment in respect of basic employment terms and conditions crystallises?  What are agencies doing in response to the AWR?  And are the AWR really a big deal?

What, if anything, will change?

When the first draft of the AWR was published some commentators were predicting that they would have an adverse impact on the temps market and would hit the UK’s productivity with businesses either hiring perms instead or not hiring temps at all to avoid the administrative burden of the AWR.  However, as has been seen in this series of articles, the equality given temps is not as extensive as many thought it might be.  The Government could have certainly gold plated the AWR to a considerably greater extent, giving even more protection and rights to temps.

Temp agencies have responded to the AWR in positive way, mindful of the current economic climate and keen to reduce the impact of the AWR for their clients as much as they can.  Many agencies have provided training seminars or briefing sessions for clients as well as providing them with literature on the impact of the AWR and detailing the steps that they are taking in response.  Most agencies have also produced new questionnaires for clients to complete seeking the information required to comply with the AWR, others have introduced online tools for clients to gather the information required.

Whilst there is an administrative cost to both agencies and hires of filling in more forms and complying with the AWR, it appears that many agencies have yet to pass on their administrative cost and risk to their clients.  Many agencies appear to be absorbing this extra cost being particularly mindful of the current economic climate. That said, the extra administrative cost and risk, if not passed on now, is likely to be passed on at some point in the future.

It is also apparent that despite their long gestation period, many hirers remain ignorant of the AWR, in particular, the Day 1 rights of access to collective facilities and vacancies.  Many hirers have taken the view that the AWR is an issue for agencies, not themselves, and are relying on their agencies to get it right.  This in itself represents an opportunity for agencies to market themselves to hirers and update them on their obligations, in particular the Day 1 rights.  However, it also leaves the hirer exposed to the quality of the agency’s advice and knowledge of the AWR.  No doubt the first test cases will have been filed in the Employment Tribunals by Easter of next year.

Models being adopted to circumvent the AWR

The anti avoidance provisions have not stopped some agencies from seeking to adopt models that avoid the AWR all together.  The most popular of which are currently the personal service company model and the so called “Swedish Derogation” model.  Whilst both these models are ways to avoid the AWR, or at least some aspects of the AWR, whether they will work in practice remains to be seen.

The personal service company model is a model which has been used by a number of agencies prior to the AWR.  However, its success very much depends on whether the temp is genuinely in business in his own account.  The AWR does not directly address the issue of a temp’s employment status and it is likely that next year the Employment Tribunals will see further claims testing the personal service company model.

The Swedish Derogation model, under which temps are given permanent contracts of employment by agencies thereby placing the risk on the agency and then placed with a hirer, is also being tested by a number of agencies.  Its success will depend on the commercial liability to the agencies.  Therefore, the Swedish Derogation model may not be appropriate for all agencies and temporary workers. 

A big deal?

The AWR certainly are a big deal for the one million or so temporary workers as they provide some basic rights that were never before available.  However, as we have seen, the old adage that “all men are equal, but some are more equal than others” remains true for temporary workers.

Businesses still need temporary workers, whether to cover a short term demand for extra resource in the workplace,  or to cover holiday or sickness absence or family leave and it is unlikely that the AWR will impact on this need.  There remain commercial off balance sheet advantages to having agency workers who do not have protection, for example, in relation to TUPE transfers or redundancy exercises.  Whilst the AWR does introduce an extra administrative burden and risk to both agencies and hirers the commercial advantages in engaging temps remain and, in my view, the AWR will not have as big an impact on UK plc as some commentators were predicting. 

The AWR have been introduced with something of a whimper and as we have seen they are not as big a deal as some have made out.  That said, they should be complied with and are ignored at your peril.

Neil Johnston is a Senior Associate in the Employment and Pensions Group at Fieldfisher. He can be contacted for further information at neil.johnston@Fieldfisher.com

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