Using a Swedish Derogation contract – some considerations

Since the AWR came into force, much has been written on R.10 ‘Pay between assignments’ contracts, commonly called the Swedish Derogation (SD), the one available derogation from the basic principle under the regulations, whereby the right to equal pay falls away in return for the employer paying the agency worker for periods when they are available for work but not working.

It is now recognised that this form of contract is no silver bullet to address the obligations on agencies and hirers under the AWR, and in many ways it throws up more questions than it gives certainty. But to those using such contracts, whether voluntarily or at the request of their hirer clients (who are anecdotally the main driver behind its use) there are some important considerations that should be borne in mind:

  • A Regulation 10 contract must be a ‘permanent contract of employment’. Therefore an individual engaged under such a contract will be entitled to the rights of an employee (as opposed to a worker). Some of these rights are automatic (i.e. from day 1) such as to a statement of employment, to notice, or the right to ask for time off for training; others require a period of service before they come into effect such as unfair dismissal, redundancy and statutory maternity pay.
  •  Continuous employment – If there is not a gap greater than one week between the termination of an employee’s contract and their re-employment, they will be considered to have a continuous period of service. This has a bearing on the entitlements referred to above.
  • Changes to a contract of employment that renders it less favourable to the employee can only be made after consultation with them and potentially the affording of some other benefit or consideration.
  • Many recruiters will have policies that they use in house such as a disciplinary and grievance procedure, and holiday absence, sickness, data protection and social media and internet policies. Agencies and umbrellas should consider whether it is appropriate to apply these same policies to agency workers under a Swedish Derogation contract or whether they should be revised to reflect the actual nature of the employment relationship in the context of supply.
  • Employers using the SD model contract should consider whether to include in the agency workers’ package other employee benefits which are offered to the full time staff of the agency or umbrella, such as a stakeholder pension scheme. What benefits are afforded to the employees should ideally be accurately reflected in the contracts given to the individual employees (agency workers or full time staff).
AWOL employee on the Swedish Derogation
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