Agency Workers Regulations (AWR) – a sleeping giant?

10 years after it was introduced, the Agency Workers Regulations 2010 have seemingly lain unmentioned. The few reported claims bely the drama that unfolded in 2010 when the regulations, in some people’s minds, threatened the very end of agency supply work. But could this now be a giant about to arise from slumber?

Firstly the proof of the pudding is in the eating. There have been minimal reported AWR cases over the last 10 years and for that we can all be thankful. Whether this is because workers have not been aware of their rights, unlikely given union interest in the subject, or agencies have been following the rules, a more likely story, we cannot say. However we now live in more challenging times.

More individuals are now working as agency workers as the latest round of IR35 rules has shifted engagements from limited company, to which the AWR may not apply, to PAYE direct and umbrella contracts to which they are likely to apply. The upsurge in both direct PAYE contracting and umbrella company use is a direct consequence of the change to the IR35 rules and, if press reports are to be believed, many contractors, in particular, object to lower net pay and the umbrella pay arrangements. This has driven a more litigious mindset fuelled by suggestions in some quarters that ex contractors are being done down both unfairly and illegally. There have been calls for employment rights for contractors, and suggestions that umbrella workers should not have employer NICs deducted from their pay packet. So could this more aggressive litigious mindset soon focus on to the AWR?

Let’s get it straight. Provided agencies are using the right contracts with their workers on contracts for services there should be no entitlement of the workers to employment rights as against the agency or the hirer. Furthermore, if the arrangements with the umbrella company, meaning contract with the umbrella company and umbrella company contract with the worker, are correctly captured there should be no basis for the worker to a claim for unlawful deduction of wages arising from payment of employer NICs or any other statutory payments by the umbrella company. However, the contracts cannot determine entitlement to AWR rights, which are set by regulation and arise from the working arrangements.

The AWR rules are complex but any individual classed as an agency worker is entitled to the same pay and basic working and employment conditions after 12 weeks in a role for a hirer as the worker would have received if engaged directly. Liability can fall to any or all of an agency, hirer and umbrella. This means that agencies should always make enquiries of the hirer to ascertain whether there has been any previous qualifying work that may count towards the 12 weeks and also what the hirer’s pay and conditions are for the same position. Agencies should act on that information appropriately to ensure the rights are complied with. This may require, for example, an adjustment to pay rates or to holiday entitlement after 12 weeks, and where an umbrella company is in the chain it should be informed and act accordingly.

The recent IR35 changes have engendered an atmosphere of impending litigation. The moral of the story is that both contracts and processes should factor in the new world realities. Provided they do so the giant should remain quietly asleep in the background and calm should once again be restored.

About the author

Theresa Mimnagh is Associate Director at the recruitment and employment law specialists LawspeedLawspeed group corporate clients benefit from immediate up to date advice on staff engagement and related regulation; employment status; client, IR35, PAYE and umbrella contract templates; contract review/negotiation; self-employment and CIS contract templates; trade membership and government representation; accreditation services and a state of the art digital contract management platform.

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