Agency workers: A delicate balance

On Christmas Eve the first tranche of agency workers completing 12 weeks in an assignment became entitled to the same pay and conditions as permanent employees doing similar work. But achieving equality is not easy, as both agencies and their employer clients have found to their cost

The new agency worker regulations have given Jaguar Land Rover HR director Des Thurlby an expensive headache.

It’s not that the car manufacturer will have to pay its 4,500 agency workers more – they are already paid the same as, or more than, their permanent colleagues, and the company will only need to make “minor” tweaks with respect to annual leave allowances – but that it took six months to do the analysis needed to ensure it had all the comparators in place.

“It has caused us a huge amount of work,” says Thurlby. “We have retained a full-time person in HR to do the analysis, consider all the issues and talk to the hundreds of agencies we work with. We’ve had to look at all our people, compare pay rates, bonus plans and all the other things that are involved.”

It is not yet clear exactly what effect the regulations will have on organisations that use agency workers. There has been talk of companies dramatically reducing the number of agency workers they use, or pushing their agencies to use the “Swedish derogation model” (SDM), essentially making the agency the worker’s employer. This means the agency has to pay the worker even when not on assignment.

But this model is not a magic bullet, says Tim Thomas, head of employment policy at manufacturers’ organisation the EEF. Those agencies that agree to take on the extra financial liability are saying “we expect an extra margin in return for taking the extra risk”, he says. Thomas is highly critical of the administrative and cost burden associated with the regulations, which he argues will affect the competitiveness of British business. “Some companies will reduce their use of agency workers and replace them with directly employed staff,” he says. “The financial cost is so high that they will take a hit on flexibility.”

Tom Hadley, head of policy at the Recruitment and Employment Confederation (REC), is much more positive. REC’s latest figures show that 86 per cent of employers are planning to maintain or increase their use of temporary staff over the coming years, while only 7 per cent say they will definitely cut back. “The bottom line is that these are not easy regulations to implement, but they will not have a fundamental impact on the benefits of agency work as a source of flexibility for UK businesses and opportunity for UK workers,” he says.

Once the average length of assignment and current pay rates are taken into account (many temps are already paid more than permanent staff), only about 13 per cent of agency workers will be affected, he adds.

Existing HR systems, pay rates above permanent levels, and a policy of minimising the use of agency workers to improve the continuity of care means that Bupa Care Homes is well placed to handle the changes, says its UK HR director, Beverley Ashby. As with Jaguar Land Rover, it’s only holiday allowances that need to change on the rare occasions that a temporary worker is on assignment for longer than 12 weeks.

“We have a massive admin process to monitor all our agencies anyway, so we already have all the information in place,” Ashby says. “The regulations are not likely to affect us significantly.” However, she thinks smaller operators without the HR structures in place – around 45 per cent of care homes are in groups of three or fewer – might find it more challenging.

The monitoring needed to ensure compliance is proving challenging for agencies, “The 12-week timeline is not consecutive weeks, so you could have a situation where a worker goes in with one agency, then works for the same client through a different agency. You need a unique system of identification so you are not caught out even if you have not previously provided that worker.”

Catering company CH & Co, which spends “a staggering amount” on agency workers, is expecting monitoring to be a challenge, according to its HR director, Alison Gilbert. But she says putting in a computer system to track each agency worker individually would be so complicated and expensive that it would negate many of the benefits of using an agency. “We have put measures in place,” she says. “One is that agencies will always ask people if they are doing work in the company with any other agency, or have done so in the past.” Another is restricting the agencies used, which should avoid the problem of a worker coming in who hasn’t been checked. “We are relying on trusting workers,” Gilbert says. “There is always the possibility for human error, however, that could leave us exposed.”

There are also logistical issues surrounding “day one” rights. Philip Atkins, managing director of hospitality sector agency Off To Work, says that clients are considering reducing facilities for permanent staff because offering them equally to agency workers is not feasible. For example, where previously permanent staff had their own private lockers while agency staff were expected to share, now all workers may have to share because it’s not realistic to install scores more lockers for occasional use.

Agencies also have the job of explaining to clients why the regulations require them to pay a higher rate for workers. “The message we send is that after 12 weeks you might be paying slightly more, but in return you are getting someone who is bringing more to the table because they know your business better,” Atkins says.

Some end users wrongly think the legislation is only relevant to agencies, says Samantha Hurley, head of compliance at the Association of Professional Staffing Companies. “There has been a lot of legislation in the past 10 years and clients see this as another piece of recruitment regulation, so they can leave it to agencies. But it’s not: it’s employment regulation – and they can’t.”

Agencies are dependent on their employer clients giving them the appropriate pay comparator and benefit information, and need to be sure they pay workers in line with that.

One group of employers – those in the public sector – are relatively well placed to cope with the new rules. Keith Nash, HR director of NHS Professionals, a government-owned company supplying around three-quarters of NHS agency staff, says the Agenda For Change (AfC) pay and grading system means the majority of roles are already part of a harmonised system across the NHS. So comparators for agency workers – who are already paid using AfC rates – are extremely clear.

Holidays, however, will change; agency workers get the statutory 28 days, but permanent staff can be entitled to as many as 35. NHS Professionals is adapting its holiday request system – part of the computer system agency workers use to find and log on to shifts – so workers who have reached the 12-week mark can press a button to get their holiday allowance recalculated to a higher number of days every year.

The extra holiday allowance accumulated by people who pass the 12-week mark will increase costs by 1 to 1.5 per cent, Nash says. If all agency workers were given the higher holiday allowance from day one, costs would rise by around 3.5 per cent.

It’s a similar picture in other parts of the public sector. Pressure on councils to improve efficiency and cut costs means most now have an excellent view of how many agency workers they use and where they hire them from, says Anne Gibson, president of the Public Sector People Managers Association and HR director at Norfolk County Council. Many have already done a lot of work around grading jobs for equal pay. “Over the past few years a lot of employers have rationalised their use of agency workers and now only use one or two preferred suppliers,” she says. “But if the regulations had come in a few years ago, it would have been a different picture.”

The basic rules

The Agency Worker Regulations 2010, in force since 1 October, entitle agency workers who spend 12 weeks in one job to the same basic pay and conditions they would get if they had been recruited directly. This covers, for example, annual leave, rest breaks and paid time off for antenatal appointments for pregnant workers.

The 12-week period need not be an unbroken period of service. So a break of up to six weeks taken by the worker for any reason simply pauses the clock.

The regulations also give agency workers a number of “day one” rights. From the start of an assignment they must have the same access to benefits such as car parking, lockers and canteen facilities as their permanent peers, and the same access to information about job vacancies.

Employers who use agency workers are responsible for ensuring they get these day-one access rights, and that any agency they use has up-to-date information about their terms and conditions so that workers receive the correct equal treatment.

Source People Management