Employers should not be searching for ways to get around the new legislation. The safest, most compliant and ethical solution that also helps control costs, is to use a comparable full-time worker as a benchmark for the temporary worker's terms - otherwise known as the comparator model. Using the comparator model allows employers to understand the potential costs of a contract from the outset and any possible risks are rendered controllable. Once the assignment is complete, there is no necessity to stay in contact with the contractor or run the risk that further payments will have to be made.
An employer's alternative route to meeting AWR requirements is to use the widely debated Swedish Derogation clause. This can be appropriate for a small number of contractor cases, but it is arduous, time consuming and puts the employer's margins at risk.
Despite the "business as usual" message that many companies are proclaiming with their choice of Swedish Derogation, the concept ultimately undermines the very people they serve - the agency workers. Swedish Derogation does not sit with the spirit of the law, which was brought in primarily to protect the less well paid and more vulnerable workers. Using a concept to effectively to get around the regulations, in a world where good governance and ethics are becoming increasingly important, is not good practise if you want to be an employer of choice.
Neither does it make economical sense to follow the Swedish route. The contractor must be paid up to 50% of their highest-earning weekly salary (or national minimum wage if that's higher) for up to four weeks after the assignment finishes (designed to assist them in looking for a new contract). These post-assignment financial liabilities make it much more difficult to predict the true value of a contract, meaning that forecasting cash flow is more difficult. Research has indicated that, unless the worker is employed on a nine month contract or longer, it costs more to pay out the 50% of their highest weeks pay for four weeks than it would have cost to pay an uplift on comparator rate.
How is the employer or agency going to track whether the worker has already found work, is actively looking for work rather than taking a holiday, or is sick and unable to look for work? Have additional costs of managing the back end of Swedish Derogation, such as staff time, computer time, paperwork management, operational management, tax management been included in your total cost of hire on top of the four weeks at half pay?
The media has focused much attention on the relative merits of AWR and, overall, the feedback has been good. The vulnerable get protection and the less well paid get looked after, which is particularly appropriate in this time of economic hardship. Swedish Derogation, however, contains certain areas of legislation that are much more open to interpretation. Many of the solutions being touted by misguided companies in the temporary workforce supply chain involve exploiting these loopholes. The Department of Business, Innovation and Skills has already stated its intent to review the legislation in six to seven months time. Employers can be sure that many, if not all, of the loopholes deigned to exploit Swedish Derogation will be closed off from this point.
Employers and agencies must be careful that a short-term economic gain, resultant of employing the Swedish Derogation model, does not turn around and become a millstone around the neck.
Simon Last-Sutton (pictured), MD, FPS Group
