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Fiona McKay

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What are you doing to prepare for the agency workers regulations?


This year will see the introduction of the new Agency Workers Regulations (AWR) on 1 October 2011. This new piece of legislation is set to have a significant impact on business and performance. But what are HR professionals doing to prepare themselves and their organisations for this change?

This new law means that temporary agency workers will have the same basic pay and employment conditions as permanent staff.

Yet many HR professionals are not even aware the change is coming. Adecco recently revealed the results of a survey, which showed that 61% of HR professionals did not know the implementation date of the AWR and staggeringly 80% said they had no idea what the consequences of noncompliance were!

Fiona McKay the Managing Director of Seminars & Solutions takes us through the impacts and consequences. She has spent the last twelve months advising, training and preparing some of the UK’s largest hirers of agency labour and leading recruiters for this significant change.

Temps receive the same basic pay and employment conditions as permanent staff
The AWR will ensure that temps employed for more than 12 weeks will receive the same basic pay and employment conditions as permanent staff. It will entitle agency workers to the same rate of hourly pay as permanent employees and this will include overtime, shift allowances, unsocial hours premiums, dangerous duty bonuses and commission payments. It will, however, exclude sick pay, pensions and bonus payments based on organisational performance.

Day one rights
In addition, agency workers will be entitled to access childcare services and canteen facilities, provision of transport services and the right to be notified about any vacancies which may arise. In fact, these entitlements kick in from day one of the assignment.

How will the twelve weeks be calculated?
The real contentious issue is the qualifying period. How will the twelve weeks be calculated? The bad news for employers is that any time worked within the first twelve weeks of assignment will go towards the qualification period. For example, an agency worker could work for you a full day every Monday. After he or she has done twelve Mondays they will be in scope and entitled to the same rate of pay and holiday entitlements as his or her directly recruited counterpart. This will be an administrative nightmare for employers; in fact BERR/BIS estimates it will take an additional 1.5hrs of HR Manager’s time PER agency worker to administer the qualifying period. Costly indeed!

44% of temps will be in scope
According to CBI figures the AWR will affect about 44% of temporary workers or about 590,000 people who are employed for more than 12 weeks at any one time. This is an issue which needs to be considered at board level now and then filtered down through the ranks to ensure line managers in charge of teams are aware of the implications in good time and well ahead of the changes coming into force.

Equality Act adds weight to potential claims
This becomes even more important when you consider the fact that on the 1 October last year, the Equality Act came into force – another element widening the scope of discrimination. This could be a very powerful vehicle for adding onto less favourable AWR potential claims, all of which will add to the pressure that line managers are already facing. Due to the fast-moving nature of the legislative changes taking place it is vitally important managers are kept abreast of developments.

High use of agency workers post recession
Trends and historical patterns have shown there to be a high use of agency workers in post recessionary periods.

The use of agency workers is particularly high in manufacturing, industrial, retail, hospitality as well as call and contact centres. It is also likely to impact heavily on the public sector given that the NHS is one of the UK’s largest employers of agency staff – and this could well increase in the short term due to the public sector recruitment freeze and the fact that agency workers offer excellent value for money. Based on the latest figures, there are around 1.3 million agency workers active in the UK at present, which represents about 5% of the workforce. In fact research conducted by REC in 2010 discovered:

  • More than 50,000 temporary agency workers were recruited in the first quarter of 2010
  • 1:3 employers expect to increase their use of temp agency workers within the next twelve months.

A potential time bomb
So there is little likelihood of any drop in demand for agency workers, the new regulations are coming into effect and many employers are unaware of the changes which are coming. This all adds up to a potential time bomb which could well cause significant issues for HR professionals unless addressed now.

Employers use agency workers for a wide range of reasons, to cover short-term sickness, respond to peaks in demand, fill vacancies or cover maternity leave, for example, and people become agency workers for a wide range of reasons – it’s flexible, varied and can pay very well. In fact research revealed that more than 80% of agency workers were either very satisfied or fairly satisfied. Further to this, 45% of employers state they already give agency workers the same basic pay as permanent employees, while 26% state they give temps better pay than full-time employees (REC & BERR Study 2008).

Trade Union intervention
The TUC’s involvement should also be treated as a warning shot to employers. A dedicated website has been created and a significant amount of campaigning has taken place in support of the proposals.

Examples the TUC claim in support of the new measures include call centres where agency staff were paid significantly less than their permanent colleagues, denied access to benefits such as pensions and given five minutes less break time. Other temp call centre workers were laid off via text message and received no statutory redundancy pay despite having worked there for more than two years.

While it’s good news for temps, the regulations will have an impact on businesses. As a result of the additional time it will take to administer the regulations and ensure equality there is likely to be a cost implication to both hirers and agencies.

Engaging with compliant agencies

The recruitment sector is now under real pressure to perform by advising and engaging with hirers as to alternative labour models and provisions. Agencies should be preparing and guiding their clients; offering and providing, viable solutions that reduce hirers exposure to claims and liability. I hear a lot of discussion from recruiters concerned about his change.

Some recruiters are still awaiting clarification of the AWR in the supporting guidance document, which won’t be published until the middle part of this year and will be an overview and not the definitive answer to all that some are expecting. Hirers are looking to scope out solutions to the AWR now! It is vital that recruiters can give realistic estimates of costs to be factored into 2011 budgets and beyond.

Managed service contracts

The managed service contract model is looking very appealing to a large users of agency labour. The contract provider directly employs the agency workers on permanent contracts of employment and therefore removes the comparator issue.

No claims can be made to the end user for less favourable treatment as the agency workers are employed by the outsourcer and not the end user. Many recruiters are also exploring the viability of the model known as the Swedish derogation. This is where the agency directly employes the temps. The temps have to be paid 50% of their hourly rate between assignments by the agency, have permanent contracts of employment and also have to be provided with details of the hours and locations they can be expected to work. However, caution must be exercised as this is a very different contractual arrangement to a zero hours contract.

Can we get rid of people before the 12 weeks?
As might be expected, the proposals have also been put together in such a way that unscrupulous employers seeking to avoid the 12-week rule face a tough task.

Those who intend to “churn” their agency workers before the 12-week period will face anti-avoidance fines of up to £5,000 per temporary worker. However, employers can refuse their temp agency workers access to the day-one rights (access to canteen, childcare, transport provision and information about vacancies), but only if they have a legitimate reason for doing so. This does not include cost, which is rarely considered good grounds for a defence, rather a business would have to demonstrate that any changes would have a disproportionate impact on the directly employed staff.

This should not be considered a comprehensive overview of the AWR but it does flag up issues which need to be addressed. The bottom line for all management teams to bear in mind is that this is not just a paper exercise – it will have a significant impact on the way in which your business runs and there are penalties if you fail to meet these new regulations.

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Fiona McKay is the Managing Director of Seminars & Solutions