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UK – Miliband’s vow to crack down on Swedish derogation criticised

06 January 2014

Labour leader Ed Miliband has vowed to end what he calls Britain’s chronic dependency on cheap foreign labour if he wins the 2015 general election. Writing in The Independent on Sunday, the opposition leader said that addressing anxiety about immigration means changing a British economy that is hard-wired into a cycle of low wages, low skills, insecure jobs, and high prices that is lowering  the living standards of ordinary families.

The primary target outlined by Mr Miliband is the use of temporary agency workers under the so-called ‘Swedish Derogation’. An opt-out clause successfully negotiated by the Swedish delegation when the Agency Workers Directive (AWD) was debated among social partners in the EU.

Under the current UK interpretation of the directive, temporary workers not employed on a full-time basis by their recruitment agency are entitled to the same working conditions and pay scale as a comparable permanent member of staff at the client company, following 12 consecutive weeks of employment. 

The Swedish derogation means that the AWD rights to equal pay of a temporary agency workers do not exist when the worker is directly employed on a permanent basis by the temporary work agency and received pay between assignments. While the derogation is credited to the Swedes, it is also a crucial factor for the German and, to a lesser extent, Dutch staffing markets, where it is normal for temporary agency workers to be employed full-time by their temporary work agency.

Mr Milliband, in his article, promised that a Labour government would end the practice by amending the way the directive and its clauses are interpreted in the UK.

He wrote: "There is a loophole in the laws around agency work, which allows firms to avoid paying agency workers at the same rates as directly-employed staff. This loophole is being used in sectors where levels of employment from abroad are high, such as food production, and now account for as many as one in six of those employed by agencies. The next Labour government will work with British business to close this loophole and ensure that agency workers cannot be used to undercut non-agency staff."

Commenting on the proposal, Katja Hall, CBI Policy Director, said: “The flexible labour market in this country has saved jobs and kept our economy going during tough times. Undermining this flexibility would put the very system, which has kept unemployment down, at risk. The agency directive was not welcomed by business, and further gold plating of EU rules can only cost jobs. Many businesses prefer to pay an agency to provide temporary workers using the Swedish derogation. This is perfectly legal, was supported by trade unions at the time and also gives employees security of income between jobs.”

Kevin Green, Chief Executive of the Recruitment and Employment Confederation, commented: “It is wholly misleading of Ed Miliband and the TUC to describe pay between assignment contracts (PBA), also known as Swedish Derogation, as a loophole or as anything to do with immigration. These arrangements are part of the 2010 Agency Workers Regulations that were agreed following consultation between the last Labour government, business and the unions and apply to British and non-British workers. Workers on PBA contracts are employed by their agency on a permanent basis, giving them greater security and all the benefits that come with permanent work such as protection from unfair dismissal, maternity leave and statutory redundancy pay. Is the Labour party really saying they want to deny British temps the option of permanent employment?”

“The pledge to ban recruiters from only advertising vacancies overseas is a ridiculous straw man. It is already illegal to do this. Ed Miliband has made this accusation against our industry before, we have asked to see any evidence that it is occurring and he has failed to produce any. It’s an unwarranted slur on the UK’s professional recruitment businesses who helped more than 600,000 people find new permanent jobs last year and on any given day place 1.1 million temps into work,” Mr Green added. 

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