Pay and Benefits

Following on from Christian Berenger’s article in October’s issue regarding the introduction of the Agency Workers Regulations (AWR), this month we take a closer look at the implications of the legislation.

The AWR were laid before Parliament on 21 January 2010 and came into force on 1 October 2011. They define an agency worker (Part 1, Regulation 3) “as an individual who is supplied by a temporary work agency to work temporarily for and under the supervision and direction of a hirer; and has a contract with the temporary work agency which is a contract with the agency or any other contract to perform work and services personally for the agency”.

Individuals who are employed on managed service contracts where they do not work under the direction and supervision of the hirer fall outside of the new Regulations.

The same applies to individuals working for temporary staffing banks where they are employed directly by a business or service. However, if the organisation supplies bank staff to other firms, which includes associated companies, this falls under the scope of the Regulations and the staffing bank is viewed as a temporary workers’ agency.

Other exclusions are individuals who are on secondment or loan from one organisation to another, where the organisation seconding is not supplying temporary workers working under the direction and supervision of another party.

The new Regulations provide agency workers with the same entitlement to basic employment and working conditions as other employees of the hirer. It is as if they have been recruited directly rather than through an agency. However, they only become entitled to the basic employment conditions after they have completed 12 weeks in the same job. The new rights bestowed on temporary workers are not retrospective. Consequently, where an agency worker began their assignment before 1 October 2011, when the new Regulations came into force, the 12-week qualifying period starts from 1 October. Some hirers may be tempted to terminate an agency worker prior to the completion of their 12-week qualifying period to avoid providing them with their basic employment and working conditions, particularly where the temporary worker is rehired a short-time later to do the same job. However, employers should be aware that this can lead to disputes which can be considered by an employment tribunal with a potential penalty of £5,000 per worker.

In order to establish what basic employment rights and conditions a temporary worker is entitled to, the agency should request this information from the hirer at the outset if it is clear that the assignment is likely to continue for more than 12 weeks. No timescale for providing this information has been set out in the Regulations; this is to allow for some flexibility. In many cases, the initial assignment may be for far less than the 12-week qualifying period, but for one reason or another the assignment may be extended past the 12-week point and this will need careful monitoring.

There are a number of situations where the 12-week qualifying period is not broken but simply paused. This would include a break of no more than six weeks, providing the temporary worker returns to the same role with the same hirer. Where the break between assignments is more than six weeks, the 12-week qualifying period has to restart at week one of the second or subsequent assignment.

Taking time out for annual leave or a break due to the workplace being shutdown for the holidays, for example Christmas or summer holidays, or a strike at the workplace, are acceptable breaks for the purposes of the Regulations.

Where an agency worker is unable to work for the hirer due to sickness or injury then a pause of up to 28 weeks is acceptable without breaking the continuity rule. Again the qualifying period would simply be paused.

However, if the temporary worker goes to work for a new hirer then the qualifying period for the new hirer begins again.

In addition, if a temporary worker is under contract to the agency and is paid by them during the periods when it is unable to offer the worker any employment, the employee would not be entitled to the same pay as a worker recruited directly. However, they are entitled to equal treatment of other rights, such as annual leave, after the 12-week qualifying period. It is only the basic pay that is covered by this exemption.

Furthermore, from day one of their assignment, all agency workers must be allowed access to the hirer’s facilities, such as the staff restaurant, staff coffee shop or crèche, and have access to information concerning internal vacancies.  

Once the 12-week qualifying period in the same job with the same hirer has been completed, the temporary worker is entitled to be treated equally in terms of pay and other working conditions. These include annual leave, which may be above the Working Time Regulations (WTR), and rest breaks. The qualifying period can begin on any day of the week from 1 October 2011 and applies equally to temporary employees working a few hours a week as to those working full time. Once the qualifying period has been completed, if the temporary worker is pregnant, they are entitled to time off with pay to attend antenatal appointments during their assignment.

Interestingly, the temporary worker can qualify for the new rights even if the qualifying period was split between two agencies, providing it is the same worker and the same hirer over the
12-week period. This poses a problem for agencies as many temporary workers work for more than one agency, so as to ensure continuous work, and they are not legally obliged to let an agency know details of previous assignments.

There are further complications for the agency if the worker is splitting their working week between two hirers. This could result in two or more qualifying periods running at the same time. Trying to keep track of this will need to be carefully managed by the agency to ensure that the temporary worker is receiving equal treatment at the appropriate time.

Once the temporary worker has completed the qualifying period they are entitled to the same rights as an employee of the hirer in the same role. This includes basic pay, annual pay rises, paid overtime for additional hours worked at the appropriate rate, luncheon vouchers (where applicable) and performance-related bonuses – where it is based on the temporary worker’s performance. However, it would exclude bonuses based on the company’s performance or long-service awards. Furthermore, they have the right to the same terms and conditions as employees with regard to working time, night work, rest periods and rest breaks where they exceed the WTR requirements.

All workers under the WTR are entitled to 5.6 weeks’ annual paid leave up to a maximum of 28 days. However, where the hirer provides paid annual leave above the statutory amount to workers they hire directly, then this must also be provided to the temporary worker.

To simplify the administration of this, the excess above the 5.6 weeks can be paid in lieu at the end of the assignment. However, the temporary worker, under the WTR, is obliged to ask for the leave and should be paid for it when it is taken. Buying out the 5.6 weeks is in direct contravention of the WTR.

In many cases, it should be fairly simple to determine what a temporary worker is entitled to regarding their basic employment conditions to ensure they are treated equally with a worker recruited directly. Items such as rest periods, working time, paid annual leave should be straightforward.

However, when it comes to basic pay, for example, this might be more difficult if employees are all on various rates of pay or terms which are individually negotiated. Where a comparator can be identified at the hirer’s workplace or another hirer’s workplace then this can normally be used.
However, if the terms are negotiated when the employee is recruited and the existing rates vary considerably so there is no established basic rate, then it would be up to the hirer and the agency to determine this at the outset. Consequently, the temporary worker would remain on the same rate throughout, even after the 12-week qualifying period, although caution is advised in this situation.

The AWR exclude the following entitlements with regard to temporary workers: occupational pension contributions, company redundancy pay, occupational sick pay, maternity, paternity or adoption pay, paid compassionate leave or paid time off for jury service. However, if they are under contract to the agency then these may be paid by the temporary worker’s agency.

The new Regulations will ensure that temporary workers are treated more fairly in the workplace, but it will no doubt add a significant cost to the employer on top of the agency’s fees. We will have to wait and see whether or not this will have an impact on the use of temporary workers.

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Linda Pullan is Head of Payroll Alliance