With implementation delayed to 1 October 2011, it may feel like the pressure is off for now. However, whilst there may be time for reflection, it is not a time for inertia. As the cost of the Regulations is estimated to be 0.3 per cent of the UK pay bill, hirers should act now to identify just how they will respond. Accommodating the Regulations will require planning and new working practices, which will take time.
The Regulations – key issues
Broadly, the final Regulations contain few major policy changes. However, there are some changes in the detail (eg the comparator and pay definitions) and the anti avoidance provisions which should not be overlooked.
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Workers supplied by a temporary work agency to work “temporarily for and under the supervision and direction of a hirer” will be covered by the Regulations i.e. those workers commonly referred to as “temps”. The definitions adopted are complex but are intended to exclude the genuinely self-employed, those working through their own limited liability company (provided they are genuinely self employed) and those working on “managed service contracts”. “Sham” arrangements are unlikely to succeed.
Upon completion of a 12 week qualifying period, an agency worker will be entitled to the same basic working and employment conditions as if he/she had been recruited directly by the hirer on day one of the assignment, whether as an employee or a worker. In identifying those terms, agency workers may compare their terms with direct recruits of the hirer working in “the same” or “broadly similar” role, not necessarily in the same office or establishment.
“Basic working and employment conditions” may sound a fairly simple concept and, in certain respects, it is. It will, for example, include comparable salary, overtime or commission payments, rest breaks and holidays entitlement. In practice, however, calculating increased holiday entitlement or identifying commission owed to agency workers is likely to prove less than straightforward. The issue becomes more complicated when one considers the list of payments for which agency workers are not eligible. Again, some are straight forward such as company sick pay, redundancy pay and pension. However, bonuses, incentive payments or rewards “not directly attributable to the amount or quality of the work done by a worker” are similarly excluded.
Also, benefits in kind are excluded but vouchers or stamps of a fixed monetary value (such as luncheon vouchers) are included. Will hirers know which employee payments or benefits apply? For example, staff discounts? Although not intended to be caught (according to the Impact Assessment) the issue is not clear cut -might they reward staff loyalty or constitute payments or vouchers to which agency workers are entitled? Or, where they are provided via an onsite shop, are they a collective facility to which agency workers should have equal access? While some of these issues will be clarified in future Guidance, the cautious option for hirers will frequently be to include agency workers or introduce service qualifications for their employees or, more drastically, remove certain facilities etc. Also, there will be Day One rights to access collective facilities (eg canteen, creche, transport) on the same basis as employees/workers.
Time for reflection, but not inertia..
Many hirers have already started to review how compliance will impact upon costs and practices and to consider whether there are more cost-effective ways of meeting their flexible labour needs. This might include ensuring agency workers never pass the 12 week qualification (easier in theory than in practice), a move to direct recruitment, engaging casual workers through an ‘in house’ bank, or an arrangement whereby a third party (possibly an agency) employs workers directly. Another option is to increase the use of self-employed workers and managed service contracts, both falling outside the scope of the Regulations. Other hirers, particularly those with short-term staffing gaps, will need to find ways of absorbing the increased costs. Negotiating exclusivity with fewer agency suppliers, whilst also renegotiating terms to reduce risks and costs, may ease administration if the hirer has sufficient purchasing power.
Some hirers may decide only to use agency workers for less than 12 weeks where this is feasible. However, repeating such practices or moving workers between different jobs where they stay longer, will not pose a viable means of avoiding the Regulations. Any ‘structure of assignments’, such as placing agency workers on a series of 11 week contracts or varying their roles every few weeks, is prohibited and may also attract additional financial penalty in the form of a fine of up to £5,000.
Another alternative is for hirers to scrutinise the way in which their pay and benefits are packaged and whether they fall within the equal treatment requirements of the Regulations or, with adjustment, can be excluded. Suddenly, October 2011 does not seem so far away! The government estimates that, in addition to the £1.8 Billion per year of increased costs,1.5 hours of a HR manger’s time per agency worker will be required in terms of monitoring & administration. How will you respond to these challenges?
By Mark Hammerton, Partner at Eversheds LLP
