CWS 3.0: May 18, 2011 - Vol. 3.12


Because You Asked: One-Hour Loophole Closed

I hear that one of the ways of getting around the new Agency Workers Regulations in the U.K. is to use an agency that employs its temporary workers on one-hour permanent contracts. Is this true?

-- Debating in Durham, England

The draft guidance issued by the U.K. department for Business Innovation & Skills in April did appear to give umbrella companies and staffing agencies the option of employing workers on one-hour a week permanent contracts in lieu of complying with the Agency Workers Regulations.

However, new guidance issued May 6 effectively closed that loophole. Here’s how it happened.

In countries like Sweden and Germany, temporary workers typically are hired in indefinite contracts with staffing firms, which means they are paid between assignments. For those regions, the permitted exemption referred to as the Swedish Derogation was put in place.

In its interpretation of this principle within the Agency Workers Regulations, the U.K. government’s initial guidance stated that “There is an exemption from equal treatment provisions on pay where an agency can offer an agency worker a permanent contract of employment and pay the agency worker between assignments.”

The initial guidance went on to state that the regulations refer to contracts of greater than one hour per week and that a zero hours contract “will not meet the requirements of the derogation from the right of equal treatment.” It is this wording that gave rise to the perceived one-hour exemption.

The final set of guidance, published on May 6, effectively closed this loophole. The final guidance stipulates that “the pay between assignments must be at least 50 percent of assignment pay based on previous 12 weeks and not below the national minimum wage”.

Furthermore, in a section titled ‘Anti-avoidance measures’, the guidance makes clear that “pay between assignments derogation is designed to be used where an agency worker has a contract of employment with a temporary work agency (TWA) and is paid during the weeks when the worker is not assigned to a client. It is because of this pay, when the worker is not assigned, that the Regulations provide for the derogation from equal treatment on pay (as if recruited by the client or based on a comparable employee). TWAs and clients should not structure arrangements in a way that deprives agency workers of the protection provided by pay between assignments. This could put them at risk of a legal challenge.”

While the one-hour loophole has been closed, it is still possible to avoid AWR obligations if the supplier does employ the temporary worker on a bona fide permanent contract of employment. However, the temporary worker has to be consulted and agree to the arrangement, and the contract must specifically stipulate that the worker foregoes the right to equal pay as stipulated in the AWR. Clearly, the supplier will also have to factor ‘bench-time’ into the cost of providing such a worker so, as a cost-saving alternative, this solution is unlikely to be practical. There’s no such thing as a free lunch.

The full and final guidelines can be downloaded here.



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