Agency workers in the UK earn approximately £400 a year less than direct employees with identical qualifications doing identical jobs. Agency workers have also collectively missed out on as much as £500 million of unpaid holiday pay, according to a report from thinktank The Resolution Foundation.

The report, based on a two-year study by the Resolution Foundation, also found that the UK employs 950,000 agency workers.

“Many workers enjoy the flexibility that agency work brings, and are positive about the agencies that employ them,” the Resolution Foundation stated. “However, our research also finds widespread experiences of poor and sometimes unlawful practice, undermining both the reputation of agencies and the living standards of agency workers.”

Agency workers face an average pay penalty of £400 a year compared to direct employees with identical qualifications doing identical jobs.

“Agency workers are often unclear on their entitlements and rights,” the Foundation stated.

An analysis of the UK’s Labour Force Survey shows that agency workers are four times more likely to think they have no paid holiday entitlement than non-agency workers (at 17% and 4%, respectively), and almost twice as likely not to know whether they have a right to holiday pay at all (26% to 15%). As a result, the Foundation estimated that in 2017, agency workers collectively missed out on as much as £500 million of unpaid holiday pay.

“The government could boost awareness of rights by requiring agencies to provide a written, standardised statement outlining workers’ entitlements on the first day of work,” the Foundation stated.

According to the report, an agency workers’ power, which influences their ability to demand rights and respect in the workplace, appeared to be largely contingent on the strength of the local labour market: those that work in more buoyant local economies can up and leave assignments or agencies that offer fewer benefits or treat them poorly.

The Resolution Foundation also called on the government to repeal the Swedish Derogation, also known as pay-between-assignment contracts, which is a lawful way that agency workers can be paid a lower rate than a directly comparable employee.

The Foundation also recommended the establishment of enforcement taskforces in areas where agency work was prevalent, such as Barking and Dagenham, Leicester, Sandwell and north-east Lincolnshire. It also called for action to boost awareness of employment rights by requiring agencies to provide a standardised statement outlining workers’ entitlements on their first day of work.

Furthermore, the Foundation called on the Employment Agencies Standards Inspectorate to take the lead role and pilot enforcement task forces comprising the local authority, the police, the Gangmasters and Labour Abuse Authority, HMRC and the Health and Safety Executive in key agency worker hotspots.

The Recruitment and Employment Confederation commented on the study.

"While very short-term temps can be paid differently to long-term employees of a company, the law rightly states that after 12 weeks on the job pay should be the same," a spokesperson for the REC told the BBC. "With many assignments lasting a few days or weeks, it is no surprise that some pay differences exist when comparing these temps with experienced staff who have an ongoing relationship with the business.”