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Do Recruiters really understand the Agency Workers Regulations?! (Or, Yet another application of Supervision, Direction or Control)

The Agency Workers Regulations 2010 (AWR) came into effect on 1st October 2011. But even after all this time I am often asked whether they apply to particular situations when recruiters are placing Contractors with Clients.

As most of us know, the AWR give agency workers the same or no less favourable treatment as comparable employees with respect to basic employment and working conditions, if and when they complete the relevant qualifying periods in a particular role. So far, so simple. But who is an agency worker? Does that include Contractors? Not everyone is always sure…

The AWR defines Agency Workers as workers rather than employees. Does that help?!

In more common parlance, an Agency Worker is often referred to as a Temp. A Temp is someone who has a contract with what the AWR call a Temporary Work Agency (the Agency). I’ll move on to what exactly an Agency is in this context, shortly. The Temp will either have an employment contract or a contract to perform work personally, but will work temporarily for, and under the direction and supervision of, a Hirer (aka the Client). More importantly, the Temp is not in a business on their own account, and will not have a business to business relationship with the Client/Hirer.

Under the AWR, an Agency is defined as a person (individual or a company) in business, whether operating for profit or not and including both public and private sector bodies, involved in the supply of Temps. The Agency finds and retains Temps for clients in need of short term workers, and then supplies the Temps to the Client/Hirer. The Temp works under the direction and supervision of the Client/Hirer but only has a contract with the Agency.

This could be a regular “high street” Agency, but can also include an intermediary, such as an umbrella company, if they are involved in the supply of the Temp.  An individual may be a Temp under the AWR if they are working through an umbrella company who finds work for the Temp via an Agency. The Temp will usually have an overarching employment contract with the umbrella company, with full employment rights, and an employee’s income generally being treated as employment income.

The Client/Hirer will be any company, partnership, sole trader, or public body which is engaged in economic activity (whether or not for profit), which books Temps via an Agency. The Client/Hirer is responsible for supervising and directing the Temp while they undertake the assignment.

So what does it matter?

Under the AWR, from Day 1 of the Temp’s assignment they have the right to access facilities provided by the Client/Hirer, as well as information on job vacancies. In fact, Temps are entitled to be treated as employees in relation to access to collective facilities and amenities provided by the Client/Hirer. However, that doesn’t mean that Temps are extended all the benefits which a Client/Hirer might provide to directly recruited employees. It typically applies to benefits that the whole workforce of that Client/Hirer receive such as: a canteen or other similar facilities like food and drink machines; transport services; toilets and shower facilities; staff common room; prayer room; a workplace crèche; and, car parking.

This doesn’t mean that Temps are given “enhanced” rights. For example, where access to a crèche involves joining a waiting list, the Temp would simply be able to join the list rather than being given an automatic right to a crèche place.

After 12 weeks with the same Client/Hirer, in the same role, Temps are entitled to have the same basic terms and conditions of employment as if they had been employed directly by the Client/Hirer, such as: key elements of pay; duration of working time (working is limited to a maximum of 48 hours a week; rest periods or rest breaks; annual leave; and, paid leave for ante natal appointments.

It doesn’t even matter if the Temp has been supplied by more than one Agency over the course of those 12 weeks. Even if the Temp has just joined a particular Agency, it is perfectly possible that they may have already completed the qualifying period in relation to a particular role with a Client/Hirer, or at least has accrued a number of weeks towards completing in.

Personally, I can’t believe that it was only 5 years ago that Temps were given these rights. But that isn’t necessarily what your client wants when a Contractor is being placed with them. In fact, your client would be pretty miffed if after 12 weeks a Contractor started asking for paid annual leave. For that reason, my clients are often asked to confirm, or even give an indemnity to their client, that the AWR don’t apply. And that’s often when they look blankly at me, because on the face of it, why wouldn’t the AWR apply.

Those people who are not covered by the AWR, are referred to as being “Out Of Scope”.

Which means….?!

Contractors who are genuinely in business on their own account, working for clients in a business to business relationship are Out Of Scope. Which is one of the reasons a majority of Contractors operate through a Personal Service Company (PSC), a limited company of which they are the sole director and shareholder, or through an Umbrella Company which fulfils that role for them.

When placing Contractors, in the terms of business it’s important to make it absolutely clear that the Agency is the client of the Contractor’s PSC, and the Client/Hirer is the client of the Agency. In most of the client-agent terms I draft I cover that off, making sure that both the relationship and the Contractor truly are Out Of Scope. However, a PSC isn’t automatically Out Of Scope simply by being a PSC.

As you will have noticed above, this is another area where “Supervision, Direction or Control” applies. Contractors are Managed Service Contract staff who work under the supervision and direction of the company who employs or engages them (i.e.: their PSC or Umbrella Company) and not under the supervision and direction of the Client/Hirer where they work. If the Contractor works under the Supervision, Direction or Control of the Client/Hirer, they can still be a Temp for the purposes of the AWR. I’ve dealt with Supervision, Direction or Control in another blog, so I won’t rehearse it here. Suffice to say it’s becoming one the most pervasive concerns of contract recruitment.

And it’s not as easy as structuring assignments to prevent a Contractor completing the 12 week period. This is seen as avoidance. Additionally, the AWR provide for a number of circumstances in which breaks do not prevent Contractors from completing the qualifying period. The 12 weeks qualifying period does not have to be 12 consecutive weeks, there can be a pause. Reasons for pauses in the qualifying period include where the break is no more than six calendar weeks and the Contractor returns to the same role with the same Client/Hirer; where the Contractor is incapable of work because of sickness or injury; and, where there is a regular and planned shutdown of the workplace by the hirer, for example at Christmas.

Other ways of shoring up your Contractor terms are to ensure that the Agency specifies that there is no contract for services between assignments, and specifying that the Contractor is intended to be an independent Contractor whose PSC is responsible for their tax and National Insurance. But above all, it comes back down to those 3 little words “Supervision, Direction, Control”.

Oh, and a Contractor can’t opt out of the AWR like they can the Employment Agency Regulations.

So…?!

There is no independent body tasked with policing and enforcing the AWR. So why does it matter? Well, if a Contractor wants to enforce their rights under the AWR they would do so by pursing a claim in an Employment Tribunal.

Claims can either be brought against the Client/Hirer, or the Agency, or both. An Employment Tribunal would consider the facts to determine to what extent each party is responsible for the breach of the AWR. That means that when determining what compensation will be awarded to a Contractor whose claim is successful, the Employment Tribunal can apportion the award against the party or parties which it concludes responsible to provide equal treatment. Your client wouldn’t be very happy with that, to say the least.

In practice, it is likely to result in the Agency that has direct contractual relationship with the Contractor, bearing primary liability for the breach. That is because the Agency is responsible for agreeing the terms and conditions and paying them.

So next time you are asked what the AWR are, whether they matter or whether they apply, take note of the above and make sure you know the correct position applicable to the role.

If you need any further information on this or if Cognitive Law can be of any assistance, please do not hesitate to get in touch with Lucy Tarrant on 0333 400 4499 or lucy.tarrant@cognitivelaw.co.uk . Otherwise, thank you for reading this blog.