Contributors
What is it?
The Swedish derogation is the name for special 'pay between assignment' contracts created by Regulation 10 of the Agency Workers Regulations 2010. These contracts between temporary workers and temporary worker agencies give workers a guaranteed amount of pay when they have gaps between assignments, in return for giving up their right to equal pay with permanent staff members of the client company, which would normally apply when they have been engaged for 12 weeks.
What's happening?
These contracts are being abolished by the Agency Workers (Amendment) Regulations 2019, which will take effect from 6 April 2020. The abolition was recommended by the Taylor Review in an effort to encourage employers to take on more permanent staff, and to offer greater certainty to the nearly one million temporary agency workers currently in the UK.
What does this mean for agencies and employers?
By 30 April 2020, temporary worker agencies must inform affected workers in writing of the fact that the Swedish derogation no longer applies to them. If an agency fails to inform a worker on time, they will open themselves up to a claim in an employment tribunal.
For employers, the abolition of the Swedish derogation means that any agency worker working for 12 consecutive calendar weeks is entitled to be paid at the same rate as the company's comparable direct recruits. This change will impose a financial burden on organisations already using temporary agency workers who are subject to Swedish derogation contracts. The extent of this burden will depend on how many Swedish derogation workers the company has and the pay gap, if any, between those workers and the company's permanent staff.
Government guidance
The Government guidance on the Agency Workers Regulations for hirers of agency workers and the recruitment sector has been updated to reflect the repeal of the Swedish derogation and a new section 7 has been added.
Comment
The recommendation in the Taylor Review to abolish the Swedish derogation was designed to level the playing field and ensure that all workers are being paid a fair wage. Abolishing the Swedish derogation will affect the temporary employment market, as employers find a new cost efficient way of taking on temporary workers. As with any large change to the employment landscape, we recommend taking expert advice to discuss your options in good time before April next year.
With thanks to Omar Sammakia.
