The Trades Union Congress is calling on ministers to take action and end the Swedish Derogation, which they say is a ‘legal loophole’ that lets agencies and employers avoid paying agency workers the going rate.

“The loophole allows bosses to pay agency staff less, even when they do identical roles to permanent colleagues,” the TUC said in a new report.

The report, ‘Ending the Undercutters’ Charter’, states that agency workers employed under the Swedish derogation suffer a significant pay penalty. The TUC also stated that it has evidence of workers earning up to £4 less per hour than directly employed staff even though they do the same work.

Section 10 of the Agency Workers Regulation (AWR), known in the UK as “Swedish derogation”, allows companies to hire temporary agency workers without having to pay them the same wages as permanent employees if the temporary workers are employed by the agency.

Under UK law, temporary workers who are not given employment contracts by their staffing agency and supplied as temporary agency workers are entitled to receive the same pay as a comparable permanent employee after 12 consecutive weeks of work.

The practice is legal, however the union has criticised it and have called on ministers to act on it.  TUC stated that agency workers often receive fewer rights and fewer paid holidays than co-workers on regular contracts. The report also showed that six in ten agency workers have been in their jobs for more than a year. And one in six, more than 100,000 people, are agency workers who say they have been in their jobs for more than five years.

TUC pointed to two cases. In Argos distribution centres, agency workers earned £4.36 less per hour than permanent staff, while in BT call centres, agency workers can earn up to £3.26 per hour less than directly employed staff.

“Agency work no longer seems to be a stepping stone into secure employment. Instead, agency workers are getting trapped in low paid, insecure work which provides them with few rights. And our report shows that young workers are especially at risk of getting trapped in insecure agency work. Two-fifths of agency staff employed for more than a year are aged under 35,” the TUC stated.

The Taylor Review, published last year, recommended that ‘Government should “repeal the legislation that allows agency workers to opt out of equal pay entitlements.’