Agency worker regulations & recruitment agencies



The fundamental principle of the agency worker regulations is to protect lower paid agency workers from being exploited by unscrupulous hirers. As soon as they start an assignment, day 1 rights are available, which include the agency worker having access to facilities and also having access to information on job vacancies. It is the hirer, or end client who is responsible for ensuring that the agency worker has access to these facilities. If a dispute was to arise, there would be no liability on the recruitment agency. However, after 12 weeks, there are other rights which the recruitment agency must comply with.

Tip: We recommend that you should still enquire into the facilities your end client has to offer and include it as part of the job spec to prospective candidates. This not only increases the appeal of the role to potential candidates, but also can differenciate your jobs against others in the market.
Equal treatment after 12 weeks

After a qualifying period of 12 weeks the agency worker has the right to receive the same basic working and employment conditions of a comparable permanent employee, such as;

- Pay & bonuses
- Duration of working time
- Annual leave

"the requirement is simply to treat the worker as if he or she had been recruited directly to do the same job."

Should a dispute arise over these additional rights, it is the temporary worker agency that is responsible (a temporary worker agency can be seen as the recruitment agency, umbrella company or master vendor). All parties will be responsible for any breach, to the extent that they are responsible for the infringement.
What impact will the AWR have?

To identify what impact the AWR will have, we initially need to establish who is considered 'in scope' and 'out of scope' of the regulations.

'In Scope' – Agency workers operating through a temporary worker agency (TWA) will be in scope (a temporary worker agency includes recruitment companies, umbrella companies and master vendors' ). The agency worker would be able to use the AWR if they feel that their right to equal treatment has been breached.

'Out of Scope' – Contractors who are in business in their own right (usually operating through their own limited companies).

There is a possibilitly that hirers will include indemnity clauses within their contracts allowing them to pass all liabilities back to the recruitment company (if an agency worker makes a claim). We suggest that recruitment agencies carefully analyse each contract that they sign for such indemnities as the liabilities could be significant.

What happens if a worker brings a claim?
Any claims of non-compliance under the AWR will be heard by the Employment Tribunals. A worker has to bring a case within 3 months of becoming aware of the issue or 3 months from the end of the contract or assignment.

NB: The guidance makes it clear that all parties should attempt to resolve any disputes before bringing a case to the tribunal.

Cases brought for non-compliance to equal treatment rights after the 12 week qualifying period will be able to include all parties as potentially liable. The minimum award will be equal to two weeks pay with no maximum.

Additionally, the tribunal also has the ability to award penalties where they feel anti avoidance tactics or intentional abuse.
How can recruitment agencies minimise risk?

There are a number of steps a recruitment agency can take to minimise the risk of AWR. We suggest the following steps should be taken:

1. Advise your temporary workers of the comparator data and confirm that their rate is comparable and compliant.

2. Where you are unable to confirm comparable pay , you can use a Swedish Derogation umbrella, which will
ensure that they receive pay between assignments. (this ensures the worker can not claim for equal pay).

3. If you have a worker operating through their own limited company, ask them if they are in business in their own account.

4. Ensure workers that your workers have a contractual obligation to let you know of any shortcomings directly to you as soon as they know of any.
How can Danbro minimise the impact of AWR?
Danbro are providing four solutions in response to AWR. Danbro will be offering;

* A traditional umbrella solution – Matching Permanent Pay Model
* An umbrella solution based on the Swedish Derogation Model
* Limited company (personal service company) accountancy support
* Back office payroll service.

One size does not fit all and we believe by providing a wide array of solutions we can ensure complete compliance with AWR.

More on Danbro operating the "Swedish Derogation Model"
If the agency worker is issued with a permanent contract of employment with the umbrella company and regulation 10 is met, comparable pay will not apply to the individual.

Under a permanent contract of employment, the TWA (umbrella company) must attempt to find suitable work for the individual and pay the worker a minimum amount between assignments. The minimum amount is 50% of the basic pay that they received (based on the highest level of pay) within the last 12 weeks of their assignment. The payment must not be less than minimum wage and should be for a period of up to 4 weeks in any 12 month period. (If you would like more information on this model, please email

What operational changes will there be?

Information flow

Gathering the relevant information from the hirer and the agency worker is going to be vital in ensuring full compliance is achieved with the AWR for contractors who are 'in scope'.

1. Information from the Hirer
a. Day 1 - The hirer is responsible for providing equal treatment for day 1 entitlements and is liable for any breach of this obligation. The TWA has no control over providing an agency worker with access to facilities when they are on an assignment. Information about access to facilities is likely to be set out in company handbooks. The hirer could either provide agency workers with information about their facilities, for example as part of an induction pack, or provide information to TWAs to pass to agency workers as part of the information about the assignment. b

b . After 12 weeks – The Hirer will need to provide information on basic working and employment conditions to ensure equal treatment. Deciding what "equal treatment" means will usually be a matter of common sense – the requirement is simply to treat the worker as if he or she had been recruited directly to the same job. Information may be found in;

(a) Standard contracts
(b) A pay scale or pay structure
(c) A relevant collective agreement
(d) A company handbook or similar

2. Information from the agency worker
It is important to gather information on the agency workers previous work assignments (If they have simply moved agency whilst still working for the same hirer, they may already be over the 12 week qualifying period and the new temporary worker agency could become liable in the event of a claim under AWR). NB: There is no legal obligation for the agency worker to give details on their previous work however, tribunals will take this into account so it is worth exercising this process.

3. Information flow between agencies and umbrella companies.
Information flow is paramount in complying with the AWR. Both recruitment agencies and umbrella companies fall under the term 'temporary worker agency' and the guidance indicates that both are responsible for ensuring that the basic working, and employment conditions of the agency worker are not breached. That being said, all parties will be responsible for any breach, to the extent that they are responsible for the infringement (i.e. recruitment agencies have direct contact with the hirer so they would normally be responsible for gathering the required information on the comparable employee. The umbrella company is responsible for the agency workers payments so would be responsible for ensuring that their payments are made in line with any contractual changes made, based on the comparable employees pay rates).

At Danbro we have devised a questionnaire that will ensure all the required information is gathered, helping to ensure complete compliance is achieved with AWR.
Final word...

As a firm of regulated Chartered Management Accountants that can provide both traditional umbrella, Swedish Derogation and limited company services, we can ensure your candidates receive the best advice tailored to their individual needs. It is inevitable that AWR will have an impact on the industry, however we believe that we can work closely with agencies to minimise this impact.

We have been providing tailored accounting and payroll advice to agencies and their candidates for over 10 years. By simply establishing which candidates are both eligible and better off working through their own limited company, the risk of AWR can be removed. On the contrary, if the umbrella company is more suitable for a candidate, we can operate either the traditional or Swedish Derogation Model when required and put in place the necessary processes to ensure both agencies and ourselves remain AWR compliant.
If you would like one of our representatives to schedule a meeting on how we can help you minimise AWR's impact, please call 01253 600140.

3 AWR tips for recruitment agencies...