The law changes on 1 October 2011 when the Agency Workers Regulations 2010 (the "Regulations") come into force. Agency workers will then qualify for equal treatment after 12 weeks in the same role with the same hirer regardless of whether they have been supplied by more than one agency for part of that period of time. The Regulations do not make agency workers into employees; the usual common law tests will regulate employment status. They aim to protect low-paid workers from 'exploitation'

Agency workers are also to be entitled to access to facilities and information on job vacancies from day one of their assignment. Other facilities effective from day one would include canteen, crèche, staff common room, mother and baby room, prayer room, food and drinks machines and car parking.

The Government have recently published their Guidance which covers:

• what arrangements fall outside the scope of the Regulations
• qualifying for equal treatment when the 12-week qualifying period for equal treatment is met
• what constitutes pay for the purposes of the Regulations,
• working time and holiday entitlement
• pregnant workers and new mothers
• pay between assignments
• how to identify basic working and employment conditions
• information, liability and remedies

The guidance is presented in an easy to read style although some of the more challenging questions have not been addressed and will be left for tribunals and courts to tackle. With the draft guidance now available, hirers and temporary work agencies will be well advised to consider how the Agency Workers Regulations affect them, and take steps now to assess risk, make modifications to existing practices and otherwise ensure compliance in time for the 1 October 2011 implementation date.

Key Points

The examples in the guidance indicate that most agency workers will be employees of the temporary work agency (TWA) although some may simply have a contract with the agency and work under the direction and supervision of a manager within the hirer. Individuals on secondment or loan from one organisation to another, who are provided as part of a managed service contract, or those who are genuinely in business on their own account will be outside the scope.

Agency workers will be entitled to the same basic working and employment conditions as if they had been recruited directly by the end-user client ("equal treatment"). However, to qualify for equal treatment rights, the agency worker must have been working in the same role with the client for a period of 12 continuous calendar weeks. Continuity will be broken if an agency worker starts a new assignment with a different client, has at least a six-week break with the same client (either during or between assignments) or starts a new role with the same client that is substantially different from the previous role.

Many questions have been asked as to what events will break, or pause continuity. The guidance provides some clarification:

• The qualifying period will restart when an agency worker moves to a new hirer. New hirers are different legal entities. Where a hirer has multiple sites merely moving an agency worker from one site to another will not break continuity.
• The time that counts towards the qualifying period will be broken if there is a substantive change to a job role within the same hirer. The guidance confirms that the whole or main role must be substantively different and there has to be a genuine and real difference to the role. The key factors that will determine whether a job is substantively different relate to changes in the skill set required to carry out a job and in the nature of the work and duties carried out. In the event of a dispute a combination of factors can be expected to be taken into account by a tribunal when establishing whether or not a role is substantively different, such as different skills and attributes, a new level of responsibility, a different line manager, a change of organisational unit or location, or a change in working hours and pay rate.
• Most absences (e.g. sickness) will pause the clock for service accrual purposes, but pregnancy and maternity, paternity or adoption related absences keep the clock ticking.

The guidance makes clear that the Regulations are not retrospective. Therefore for those agency workers already on assignment the qualifying period starts on 1 October 2011. After 12 weeks in a given job an agency worker will be entitled to the same terms and conditions relating to the duration of working time, night work, rest periods ands rest breaks, annual leave and to be paid at the appropriate overtime rate as he or she would have received as a direct employee.

The right to equal treatment applies only to those terms and conditions of employment that are specifically set out in the Regulations, for example, pay which includes any sums that the hirer would normally pay if the agency worker had been hired directly to do the particular role in question. Pay is defined as basic pay plus other contractual entitlements that are directly linked to the work done by the agency worker whilst on the assignment, i.e. "pay for work done". This includes:- commission; holiday pay; overtime rates; shift allowances; unsocial hours premiums; and individual performance related bonuses. The Regulations also set out those terms and conditions to which the right to equal treatment does not apply. These include bonuses that relate to the client's corporate performance, pension and occupational sick pay, redundancy payments; maternity, adoption and paternity leave pay; non-performance related bonuses, such as those designed to reward loyalty or long-service; share option/profit sharing schemes; and staff loans.

Bonuses are a potentially difficult area and the key question when deciding whether an agency worker qualifies for a bonus is whether it is directly attributable to the work which that worker has done e.g. sales commission or piece-work. If a bonus is subject to an eligibility period of service then the agency worker is required to have the same period of service dating from the start of the assignment (not the end of the 12 week period). As assessing the amount of a bonus can depend on the performance of the worker the guidance covers performance appraisal systems. The Guidance states that although an agency worker may be entitled to the bonus that he or she would have been entitled to if hired direct to do the same job this does not mean that the same process for assessing performance need be followed. It may be appropriate for the hirer to adopt a simpler system for tracking agency workers’ performance, including a system operated in conjunction with the agency, or one based on the agency’s existing performance feedback arrangements. It also reassures employers that should a hirer choose to address this requirement of the Regulations by integrating an agency worker into an existing performance appraisal system this need not affect the worker's employment status.

There is an exemption from equal treatment provisions on pay where an agency can offer an agency worker a permanent contract of employment and pay the agency worker between assignments (i.e. during the periods when they are not working when there are no available suitable assignments for the agency worker). The minimum amount of pay between assignments must be at least 50% of the worker's basic pay while on assignment and not less than the national minimum wage. The exemption (known as the Swedish Derogation) means that after 12 weeks in a given job the agency worker will not be entitled to the same pay as if they had been recruited directly. The guidance warns that this derogation as to pay is only in the context of a worker who has the comfort of employed status and enjoys the certainty of a fair level of pay where there is genuinely no assignment available. Attempts to deny workers their rights may lead to claims under the remedies available in the Regulations.

The guidance on how to identify basic working and employment conditions is intended to identify the correct terms and conditions which apply. The requirement is to treat the worker as if he or she has been recruited directly to the same job as a comparable employee. If there is no comparable employee then the basic working and employment conditions are those which "apply generally" in the workplace. The guidance refers to terms and conditions, for example those set out in a company handbook or similar without fully elaborating on what "basic" really means. For our clients we would expect it to be Handbook conditions and the many of the terms and conditions of people with similar 'contracts of employment'.

Antenatal appointments (paid by the agency) are a new right for pregnant agency workers. Of greater financial impact for the agency is the fact that, in cases where a hirer (who will be obliged to risk assess for the pregnant worker) cannot make reasonable adjustments to remove risks identified, the agency will be obliged to try and find suitable alternative work for the worker (at the same or better rate) failing which she will be entitled to be paid by the agency for the duration of the terminated assignment. This highlights the scope for commercial disputes between agencies and hirers, given that in many cases agencies are likely to try and build in protection against such costs to their terms with a hirer.

A great deal of information must be supplied to the various parties. Hirers will need to provide to the agency the following details:

• the level of basic pay, overtime pay, shift pay or risk payments for hazardous jobs
• types of bonus schemes and how individual performance is assessed
• if they offer vouchers which have monetary value (but not salary sacrifice)
• annual leave entitlement

Agency workers can bring claims in employment tribunals and can be compensated for any loss of earnings related to their entitlements under the Regulations, or receive an appropriate level of compensation for example if they have been denied access to a facility. There is no maximum award but there is a minimum award of two weeks' pay regardless of any loss suffered unless the employment tribunal finds that the agency worker behaved unreasonably and the employment tribunal has the power to reduce the award if it is just and equitable.

The Regulations contain anti avoidance provisions designed to prevent the structure of assignments that are put in place to intentionally circumvent the Regulations. Here the remedy is an additional amount up to £5000 made against the hirer or agency or split between the parties in a way the tribunal considers just and equitable. The agency worker must have completed at least two assignments or two roles in substantively different roles which break the qualifying period with the same hirer or connected hirers within the same group in order for the anti avoidance provisions to become relevant. Even then the tribunal will have to decide whether the pattern of assignments indicated an intention to deprive the worker of his or her rights.

The Regulations do not extend new collective rights of representation but the Guidance does say that if you are consulting employees then you should give information about agency worker usage.

Our guidance - Conduct an Impact assessment

• If you use agencies as a cheap option to avoid expensive employment costs then think again.
• Assess how the changes, particularly to pay and benefits, will impact on your budgets and cost this into your projections.
• Is it preferable to use workers who are genuinely self-employed and fall outside the Regulations?
• Would it be better to employ people on a fixed term (temp) contract directly rather than via an agency?
• If you use agencies for reasons of flexibility, think hard about whether to keep them beyond twelve weeks.
• Consider using agencies that agree to take advantage of the exemption within the Regulations for agency workers with a permanent contract of employment with the agency.
• Consider whether you can create exclusive agency worker roles.
• Consider outsourcing discrete services.
• Do you need to reduce agency workers rates if paid more than your own employees?
• If you have a regular relationship with agencies then talk to them and put down in writing how this is going to work for both organisations in the future
• Do you want to limit the number of agencies used to just ones that you trust and have relevant details about your conditions?
• We expect significant scope for misunderstanding and litigation, by workers and also the hirer and agency. The guidance points out that many claims will be low value and encourages settlement without using the tribunal process.
• Mitigate the risk of non-compliance by keeping your chosen agencies up-to-date with accurate information on rates of pay and hours etc.
• Tighten up on agency purchasing procedures/decisions.
• Keep accurate records of agency worker assignments.

The content of this article is intended to provide a general guide to the subject matter.