Recruitment & Employment Confederation AWR Implementation Recruitment Direct Training Workshop 6 September 2011 Emily Neal Legal Advisor, REC.

Recruitment & Employment Confederation

AWR Implementation Recruitment Direct Training Workshop

6 September 2011

Emily Neal Legal Advisor, REC

Background to the Agency Workers Regulations

Following many years of debate in Brussels, the Agency Workers Directive became European law in December 2008.

The Agency Workers Regulations 2010 will implement the Directive in England, Scotland and Wales and will come into effect on 1 October 2011. REC worked with the Dept. of Business, Innovation and Skills on the guidance to the Regulations which was published on 27 May 2011.

In summary, temporary workers will have the right to equal treatment with regards to pay, holidays and working conditions once they have completed a 12 week qualifying period. Some rights apply from day one and there are new rights for pregnant agency workers.

The legislation is not retrospective and will only apply from 1st October.

Summary of AWRThe presentation will cover the following areas:

Who is an agency worker?Are self-employed workers within scope of the Regulations?Which providers are covered?What is equal treatment?Establishing equal treatmentVarious rights under equal treatmentThe 12 week qualifying periodDay 1 rightsPregnant agency workersEmploying temps – aka “the Swedish Derogation”Anti-avoidanceLiability and sanctionsAction points for Recruitment Direct

Who is an agency worker?

What do the Regulations say?

An agency worker is an individual who:

is supplied by a temporary work agency to work temporarily for and under the supervision and direction of the hiring client; and

has a contract of employment with the temporary work agency or any other contract to perform work and services personally

An individual can be an agency worker even if he or she works though an intermediary, e.g. an umbrella company.

(Regulation 3)

Self-employed?

What do the Regulations say?

Genuinely self-employed persons are excluded whether they operate via companies or not.

This will be important for those operating in sectors such as IT, Interim Management and Construction where there is a high proportion of self-employed workers.

But Regulation 3(2) means that limited company contractors are agency workers if they are not genuinely self-employed. It is important to be aware that simply calling the worker a ‘company contractor’ or drivers having a UTR number will not automatically exclude him or her from scope.

Genuinely Self-employed?

What does the BIS guidance say?

Individuals who are in business on their own account where the status of the hirer is that of a client or customer of a “profession or business undertaking” are not agency workers.

Being in a “profession”- narrowly construed (such as law, accountancy, the medical profession) is not sufficient - the actual relationship must be business to business.

If temporary work agencies do proceed with these arrangements, this point is likely to be tested at some stage in an Employment Tribunal and the clarity will eventually be established through case law.

What is a temporary work agency (TWA)?

For the purpose of the Regulations a temporary work agency is an undertaking which is in the business of “supplying individuals to work temporarily for and under the supervision and direction of the hirer.” A “temporary work agency’’ in the Regulations also includes an undertaking which is responsible for “paying for, or receiving or forwarding payment for, the services of individuals who are supplied to work temporarily for and under the supervision and direction of hirers.”The wide definition will capture employment businesses, umbrella companies, some payroll businesses and other intermediaries which are involved in the supply of agency workers. Master vendor and neutral vendors will also be coveredA managed services offering will not be a temporary work agency if the staff are not working under the supervision and direction of a hirer.

Who is the hirer?

“Hirer” means a person engaged in economic activity, public or private, whether or not operating for profit, to whom individuals are supplied, to work temporarily for and under the supervision and direction of that person.

In a traditional supply model the hirer will be the client of an employment business.

What is equal treatment?

An agency worker is entitled to the same “relevant terms and conditions” as if they had been recruited directly by the client. A client can show that they have provided the same relevant terms and conditions if there is a comparable employee receiving those terms and conditions.An employee is a comparable employee in relation to the agency worker if both are:

working for and under the supervision and direction of the client and engaged in the same or broadly similar work having regard, where relevant, to whether they have a similar level of qualification and skills; and the comparable employee can be someone working at a different establishment if there is no one who meets the conditions at the same establishment.

Establishing equal treatment

What does it mean if there is a comparator?

The priority is to establish the correct rate of pay (and other working conditions to which the agency worker is entitled) and to be able to explain how this was worked out in the event of a claim. Where there are formal pay bands, this will involve comparing the current pay rates for agency workers with the relevant band at the client.Where there are direct comparators the agency workers must receive exactly the same for the client/agency to rely on this defence. Comparators cannot be ‘created’ as they must have the terms and conditions ordinarily included in the contracts of employees.

Establishing equal treatment

What does it mean if there is not a comparator?

You need to ask the client what they would have paid, had they recruited that worker directly.Could this job fall into the pay band of other similar workers?Has the client previously had any direct recruits in this position?Does the client have any standard terms and conditions that apply to all members of staff?What is the current market rate for a direct recruit in that role?

Basic working and employment conditions

Relevant terms and conditions” are:

Pay (see later slides).

Duration of working time.

Night work.

Rest periods.

Rest breaks.

Annual leave (see later slides).

(Regulations 5 and 6)

“Pay”

What do the AWR say? “Pay” is defined as “sums payable to a worker of the hirer in connection with the worker’s employment, including any fee, bonus, commission, holiday pay or other emoluments referable to the employment, whether payable under the contract or not” (Regulation 6). Pay INCLUDES:

Basic pay, overtime, unsocial hours rates.Bonuses related to personal performance.Commission payments.Holiday pay.Vouchers which have a transferable cash value e.g. luncheon vouchers.

.

Excluded from payWhat does it mean?

Payments which are not “directly attributable to the amount or quality of the work done” or which “reward the worker’s long term services” are EXCLUDED from the definition of pay.

Those elements expressly excluded are: Pension.Occupational sick pay.Maternity, paternity and adoption pay.Redundancy payment.Financial participation schemes.Bonuses related solely to company performance.

The following are not expressly stated in the Regulations but are excluded:

Life assurance, private medical insurance.Offsite health club membership.Childcare vouchers paid via salary sacrifice.

Basic working and employment conditions: Working time

Qualifying agency workers will be entitled to equal treatment with regards to working time, including the duration of their working time, night work, rest periods and breaks and annual leave.

Annual leaveTemporary staff are currently entitled to statutory paid holiday entitlements. Under the AWR, agency workers will be entitled to the same contractual holiday entitlement as if they have been directly recruited by the client (Regulation 5) even if this is over and above the statutory minimumBIS have confirmed that this extra paid holiday entitlement can be ‘rolled up ’in the weekly or monthly pay of the temporary worker (but do not roll up the statutory entitlement).REC view – is that the entitlement is the ’time off’ for holiday, the extra pay can be accrued and put into their ‘holiday pot’ to be used at a later date

Qualifying for equal treatment

To be entitled to receive equal pay and working conditions an agency worker must meet the qualifying criteria:

Must work for 12 weeks in the same role for the same hirer.A role will be the same role unless the work or duties that make up the role are ‘substantively different’ from those in the previous role.Substantively different role will be one where a number of factors interact:

Duties.skills required by the new role (are different skills required, is extra training required?).working hours.different equipment.different location.

12 week qualifying period

The 12 week count towards qualifying for equal treatment can be interrupted in certain ways without the agency worker having to start the count again. i.e. the clock will simply be paused until the agency workers returns to the same role. For example:

6 week break for any reasonsickness or injury up to 28 weeksJury service up to 28 weeksStrike/lockout at hirer’s establishmentPeriods when the hirer does not require the worker because of a regular shut down.

12 week qualifying period contd..

For certain breaks, the agency worker will be treated as if he or she continued to work, i.e. the clock will continue to count. Breaks related to pregnancy, childbirth or maternity (during the protected period).Statutory/contractual maternity, adoption or paternity leave. An agency worker will accrue a qualifying week even if s/he does just one shift in 7 calendar days.An agency worker does not have to work through the same agency in order to continue their qualifying clock. An agency worker can have a number of different qualifying clocks going at any one time if s/he does ad hoc assignments

What issues will this raise for agencies and their clients?

What does it mean?A major concern is the issue of short but regularly repeated assignments. Agency workers could accrue equal treatment rights with a number of different agencies at the same time and when working for one or more hirers. This has administrative implications for agencies in terms of keeping tabs on when agency workers acquire the 12 week qualifying period.This will be particularly true where agency workers are taken on for a series of short intermittent placements and where the breaks in between are no longer than six weeks.There is no obligation on the worker to tell the agency that s/he has worked in the same role at the same hirer but through a different agency. Agencies should ask for this information from the worker and keep a record - this provision is in the REC contracts

Other rights – Day 1 rights

“Day One” rights will apply to workers in all assignments from 1st October.

1. The right to access collective facilities, i.e., canteen, childcare facilities or transport services (Regulation 12)

Onsite facilities also include car parking or an onsite gym, prayer rooms, toilet or shower facilities, but not subsidised offsite gym membership.Agency workers will not have an absolute right to access all facilities if the client can objectively justify the reason for not providing access (not cost alone).

2. The right to be informed by the hirer of relevant vacant posts with the hirer - although no obligation on the hirer to employ the agency worker (Regulation 13).

Only the hirer is liable for breach of Regulations 12 and 13.

Other rights – maternity

All pregnant agency workers will have the right to be paid when attending ante-natal appointments (currently employees only).Pregnant workers must be offered suitable alternative work, if the current role can no longer be fulfilled. If suitable alternative work is not available, the agency worker is entitled to be paid for the remainder of the expected duration of her assignment.She is not entitled to be paid if she unreasonably turns down suitable alternative work.These rights are subject to the 12 week qualifying period.

Employing Agency Workers Employing agency workers (the Swedish Derogation) Regulation 10

An agency workers who is engaged under a permanent contract of employment which provides for the agency worker to be paid between assignments is not entitled to equal pay, but the other equal treatment rights will apply.The contract must include certain terms specified in the Regulations and meet certain conditions.There are lots of hidden costs when employing agency workers including redundancy pay, notice pay, cost of disciplinary/grievance processes, additional insurance liabilities etc. A ‘zero hours’ contract will not meet this requirement.

Conditions applicable to Regulation 10 contract

The agency will need to comply with certain conditions for this to apply. The contract of employment must set out the following:

the minimum scale and rate of pay and how this will be calculated;

the location or locations where the worker will be expected to work;

the expected hours of work during an assignment;

the maximum hours per week the worker may be required to work during an assignment;

the minimum hours per week that the agency will offer the agency worker during an assignment - this must be at least 1 hour (therefore no zero hours contracts);

the type of work that the agency will offer the worker and details of any experience or qualifications required; and

NB - a statement that by entering into the contract of employment, the agency worker will not be entitled to equal pay.

Obligations applicable to the temporary work agency

During periods that the agency worker has no assignment the agency is required to seek alternative assignments. It must pay the agency worker a ‘minimum amount’ rate of pay when there is no work. These obligations must be met for at least 4 weeks before the contract of employment can be terminated by the temporary work agency.

The ‘minimum rate’ of pay must be at least 50% of the highest rate of pay received by the agency worker during the previous assignment.

This amount cannot be less than NMW

Looking at the examples in the following slide, this could be very expensive for agencies who have no guaranteed volume of work from their client.

Examples under Regulation 11(National Minimum Wage for over 21s will rise

from £5.93 to £6.08 from October 2011)

Example 1: an agency worker with an hourly rate of £13.00. 50% of this is £6.50. As this is greater than the NMW the agency worker must receive £6.50 per hour when not working.

Example 2: an agency worker with an hourly rate of £9.00. 50% of this is £4.50 but this is below the NMW. In this case the minimum rate of pay will actually be £6.08 because the agency will not be able to pay less than NMW. This works out at 67.5% of the hourly rate of pay.

Example 3: an agency worker with a rate of £6.08 per hour. 50% of this is £3.04. Again the minimum rate of pay will actually be £6.08 because the agency will not be able to pay less than NMW. In this case this equates to 100% of pay.

Anti-avoidance provisions Regulation 9 sets out anti-avoidance provisions. Regulation 9(4) provides that an agency worker will be deemed to have qualified for equal treatment if the “most likely explanation for the structure of the assignment, or assignments “is intended to prevent the agency worker from being entitled to equal treatment.Agencies and hirers who seek to arrange assignments with a view to preventing agency workers from reaching the qualifying 12 week period are likely to be caught by the anti-avoidance provisionsFor example, do not assign workers for 11 weeks to Hirer A, then another 11 weeks to Hirer B and back to Hirer A (where A and B are “connected hirers” and the only explanation is to avoid the Regulations). Compensation of up to £5000 for breach of Regulation 9. However, clients can terminate assignments after 11 weeks –just do not repeatedly terminate and bring same workers back.

Liability

Under the Regulations an agency worker can enforce his/her rights by taking action against a temporary work agency and/or a hirer in an employment tribunal.

For failure to provide equal treatment, each party will be liable to the extent that it is responsible for the breach.

The Regulations provide an agency with a defence if:It obtains or takes reasonable steps to obtain, relevant information from the hirer about the applicable basic and employment conditions; and

Having received that information from the hirer, it acts reasonably in determining what conditions to apply to the agency worker and ensures that it does so.

Information requests to the T.W.A.

An agency worker who considers that he or she has not been given equal treatment can make a written request to a temporary work agency about the treatment received.

The temporary work agency has 28 days to reply in writing with:

Information about the basic employment conditions of the hirer.

The factors it considered when determining the terms that would apply to the agency worker.

If relying on the comparable employee – information explaining how the comparable employee was selected and information about that employee’s terms and conditions.

Information requests to the hirer

If the agency worker does not receive a reply from the temporary work agency within 28 days, after 30 days, the same request can be made directly to the hirer.

The hirer has 28 days to provide a written reply.

If the agency worker considers that he or she has not been afforded access to facilities he or she can make a request to the hirer directly for information about the treatment received.

The hirer has 28 days to reply.

Claims and sanctionsA failure by the agency or hirer to respond to the information requests within the required time limits may lead to an employment tribunal to infer that the agency worker’s rights have been infringed.

An agency worker can bring an employment tribunal claim for breach of the Agency Workers Regulations, but must do so within 3 months of the alleged breach.

The employment tribunal can award compensation of not less than 2 weeks’ pay, as well as any expenses or other losses incurred (but no award for injury to feelings).

It will be crucial that agencies have internal complaints mechanisms in place as a first outlet for workers who have concerns about pay and equal treatment. Effective internal procedures will play a key role in limiting the number of tribunal claims.

Issues for employment businesses and their clients

Agencies and their clients will need to ensure that relevant information regarding terms that the client applies to its own staff (basic working and employment conditions) is provided in sufficient time to ensure that the agency worker receives equal treatment once the qualifying period is reached e.g. pay rates, holiday etc.

Where it is known at the outset that the agency worker will complete the 12 week qualifying period during the assignment, agencies and clients may wish to agree that information regarding equal treatment is provided by the client at the outset.

The client bears liability for breach of Regulations 12 and 13 (Day One rights).

Action points for Recruitment Direct and their clients

How does your client use temporary workers? Pay – are there clear pay scales that can be referred to?Is it evident that there are significant differences in the pay rates paid to own staff?Do your agency workers typically work for more than the 12 week qualifying period? Is it evident that there are significant differences in other working conditions – e.g. holiday entitlement?Bonuses – does the client pay bonuses to its own staff? Are these bonuses tied to production/performance or other criteria? Is it clear that the bonus is paid in relation to ‘the amount or quality of work done’?What services/on site facilities does the client provide for its own workers?

REC members

The REC will continue to work with its members to provide guidance to assist with compliance with the Regulations (legal factsheets and the legal helpline).

Model contracts which are AWR compliant & info request form.

Client briefing documents.

Impact assessment guidance.

Questions?

Table exercises: Scenarios

Please refer to the handouts

© REC Copyright 2011

Recruitment & Employment Confederation

T: 0207 009 2144

W: www.rec.uk.com/awr

Thank you for coming

This document has been created for the purpose of the presentation only and does not constitute specific legal advice. It is not a substitute for specific advice on related matters and issues that arise and should not be taken as providing legal advice on any of the topics discussed.

© REC 2011. All rights reserved: no part of this publication may be reproduced, stored in an information storage and retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the written permission of the REC.