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Agency Workers Regulations – AWR risks for contractors, clients and agencies

Contractors, clients and agencies face new risks since the Agency Workers Regulations came into force on 1 October 2011. The challenge is to manage those risks, and ensure they do not have an adverse impact on the contracting supply chain.

Clients, especially those with large contracting workforces, can discover that facilities such as canteens and crèches are demanded from contractors under AWR. There is also the risk of damaging the morale of permanent employees when higher-paid contractors have access to the same facilities as staff.

Understanding the risks AWR poses helps contractors, clients and agencies mitigate any risk and ensures AWR is only used to protect those vulnerable workers who require, and want, such protection.

AWR: the risks for contractors

Contractors face the risk that many clients do not make the effort to understand the AWR regulations. As a result, they can choose to use fewer contractors, or to move operations, and contracts, outside the UK.

The main AWR risks facing contractors include:

  • Managing the perception that the AWR results in contractors becoming more expensive
  • Limited company contractors must overcome the uncertainty of their status and ensure that they have the right contracts in place
  • Umbrella company contractors are automatically in the scope of AWR, and may wish to minimise risks to their clients by choosing umbrella solutions offering employment models resulting in the equal pay requirements of AWR being removed.

AWR: the risks for clients

Clients face a combination of financial and organisational risks, such as the impact on morale of agency workers gaining access to many of the same benefits as permanent employees.

The main AWR risks facing clients include:

  • Increased cost of hiring contractors who are in the scope of AWR and therefore must receive equal pay after 12 weeks on assignment
  • Increased cost of making available shared facilities such as canteens and crèches from the first day that a contractor in AWR’s scope starts work on an assignment
  • Increased cost of compliance and administering agency workers and contractors, determining ‘equal pay’ and potentially funding the defence of any tribunals
  • Reputational risk of not implementing AWR according to its requirements, and of being perceived as a poor employer abusing vulnerable agency workers
  • Organisational risk of the morale of permanent employees dropping when agency workers receive equal access to shared services and equal pay.

AWR: the risks for agencies

Agencies already perform a wide range of services in addition to their core brokerage role between workers and clients. Agencies have taken on the compliance burden of AWR and absorb some of the potential cost increases by reducing margins.

The main AWR risks facing agencies include:

  • Increased cost of administering agency workers as the burden of compliance is passed from client to agency
  • Reduced margins as clients insist agencies part-fund the hike in costs for agency workers and contractors in AWR’s scope who meet the equal pay requirements
  • The cost of defending legal action by a client if the agency fails in its compliance duties and a worker has taken the client to a tribunal
  • The cost of tribunal defence if a worker on the agency payroll claims not to have received the rights granted under AWR.

It is in the best interests of contractors, clients and agencies that the risks associated with AWR are understood and mitigated.

Updated: 18 July 2017

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