Many European staffing agencies are actively considering how best to approach the Agency Workers Regulations (AWR) 2010 legislation, which provides agency workers with rights such as to equal pay. This piece of legislation goes into effect beginning October 2011 in the United Kingdom. Agencies are considering the so-called Swedish Derogation as an approach, but it has its pros and cons.

Swedish DerogationWhat does this term mean? This term refers to an opt-out clause negotiated by the Swedish delegation to the European Union when the Agency Workers Directive was debated. 

Basically, it means that temporary workers who are employed on a full-time contract by an agency or umbrella company do not fall under the requirements of the AWD. The Swedes bargained for this opt-out because all temps in Sweden are employed directly by agencies. (The German market also works the same way.)

There are conditions to this opt-out, though -- the first one being that the agency worker needs to be genuinely employed by the umbrella company or agency with a permanent contract of employment in place and that the contract was entered into before the beginning of the worker's first assignment.

Other considerations are that the agency (or umbrella company) would be obligated to:

• Pay the agency workers during non-working periods
• Ensure that reasonable steps are taken to seek suitable employment for the worker
• Make sure that any available work is offered to the worker
• Pay the worker a minimum amount for an aggregated period of not less than four calendar weeks (subject to National Minimum Wage)
• Ensure that the 'minimum amount' be at least 50 percent of the worker's basic pay while on assignment. However, it cannot be less than the national minimum wage (in the U.K., £5.93 an hour for workers aged 22 and older)

The aim of the AWR is to protect vulnerable workers from exploitation and ensure that after 12 weeks of service, these workers have the right to the same pay, working hours and holidays as if they had been hired directly by the end user.

Ultimately, some believe that companies will end up paying more whether they abide by the AWR or use the services of a supplier applying the Swedish Derogation. Suppliers using the Swedish Derogation will have to factor bench-time into their costs, so using one of these 'temps' is not likely to be a cost-saving alternative, observers believe. 

A benefit to companies whose staffing suppliers apply the opt-out is that they can avoid the additional administrative  requirements imposed by the legislation -- employers will be obliged to provide agencies with perm pay scales so that they can ensure the temp is paid the correct "equivalent" amount. So employers without the inclination, resources or ability to meet this burden might find an agency's use of the Swedish opt-out clause beneficial. The majority of employers, though, likely will adapt quickly to the new process and simply ensure their agency temps are paid the right amount.