Is the 'Swedish derogation' a flat-pack solution to EU's agency workers directive?
Rob Crossland, February 18, 2011
I'm hoping that you can clarify something for me. Even though your article is now 5 years old I still had problems understanding the phrase "In between assignments". I'm a driver for an employment ...
Read More Richard Castermans
March 21, 2016 17:13
The development of the EU's Agency Workers Regulations (AWR) has been controversial to say the least, but after prolonged debate and much horse-trading between the Government, trade unions and the CBI, the year of its UK introduction is finally here.
As the clock ticks down to October, when the legislation comes into effect, HR managers who rely on contingency and temporary workers to meet staffing needs are turning to the recruitment agencies and their umbrella company partners to provide the solution to work within the AWR – and the ‘Swedish derogation model’ might just be that solution.
In a nutshell, the aim of the AWR is to protect vulnerable workers from exploitation and ensure them, after 12 weeks of service, the same basic employment conditions as if they had been hired directly by the end client – mainly the right to the same pay, working hours and holidays. There has been a deluge of conferences, forums and seminars in the past few months examining everything AWR in some detail – which isn’t surprising when you consider that it’s only eight months now before the legislation comes into effect. But what few of these have really addressed until now is a robust solution that will ensure all those effected, be they HR managers, recruiters or the workers themselves, are working within the new rules.
Employment service companies, commonly known as umbrella companies, are quite often central to the process of supplying the freelance and temporary workers. Among a whole raft of services, these umbrella companies are responsible for invoicing recruiters and making sure that the temporary worker receives their pay on time and with all the relevant tax deducted, so that the worker is compliant with HMRC. As a result, umbrella companies can act as a buffer, mitigating all the risks associated with employing temporary or agency workers, all of which have been polarised by the AWR.
From this position, for many umbrella companies, it has become their responsibility to develop the solution to the AWR – which is where the Swedish derogation model comes in.
What is the Swedish derogation?
This fancy-sounding term relates to the opt-out clause negotiated by the Swedish delegation when the Agency Workers Directive was debated at EU level. To put it simply, it means that the AWR rights to equal pay of an agency worker no longer exist when agency workers are employed on a permanent basis by their umbrella company or temporary work agency and receive pay in-between assignments.
There are conditions to this, though – with 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 include:
- For agencies or umbrella companies, they will obviously have an obligation to pay agency workers during non-working periods, as well as:
- Ensuring that reasonable steps are taken to seek suitable employment for the worker
- Making sure that any available work is offered to the worker
- Paying the worker a minimum amount for an aggregated period of not less than four calendar weeks (subject to National Minimum Wage)
- The ‘minimum amount’ must be at least 50% of the worker’s basic pay while on assignment. However, it cannot be less than the national minimum wage (in the UK, £5.93 an hour for workers aged 22 and upwards)
For HR managers, this is good news. As long as the agency worker has a robust contract of employment in place with their agency or umbrella, then all of the responsibilities that come with the introduction of the AWR lie with the recruiter or umbrella. Should reference to a tribunal ever come about, it will be the umbrella or recruiter that the case is brought against.
Hirers will need to conduct due diligence to ensure that the agencies and umbrella companies they are working with are applying the ‘Swedish derogation model’ correctly and have the financial strength to honour the ‘non-assignment’ payment obligation. A good place to start is membership of the Freelancer & Contractor Services Association (FCSA).
We are still in a position where the absence of any guidance notes from Government makes it very difficult to finalise any potential solutions and all partners in the supply chain for temporary labour need to come together for a detailed impact assessment should the Swedish derogation model be implemented. But the outlook is positive and the AWR should not be regarded as the big scary piece of new legislation that many people see it as.
Rob Crossland (pictured) is chief executive of employment services company Parasol