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Agency Workers Regulations - Swedish Derogation could mitigate pay fears

Contracting clients’ concerns that the cost of hiring contractors will spiral as a result of the Agency Workers Regulations (AWR) could prove unfounded, if service providers apply a measure known as the ‘Swedish Derogation’.

According to Rob Crossland, CEO of umbrella employment solutions service provider Parasol, the Swedish Derogation removes the requirement for contractor clients to match a contractor’s pay with their permanent counterparts, as required by the equal pay requirements of the AWR.

“When the AWR comes into force in October 2011, contractors affected by the rules will qualify for equal pay and conditions,” explains Crossland. “However, the Swedish Derogation allows hirers, such as contractor clients, not to pay the same rates to both permanent and temporary workers.”

What is the ‘Swedish Derogation’?

The Swedish Derogation was a ‘get-out’ clause negotiated into the original Agency Workers Directive (AWD) by the Swedish delegation. It means the rights to equal pay that will normally exist under the AWR won’t apply to workers employed on a permanent basis by an umbrella company or agency and who receive pay in-between assignments.

Crossland warns that the derogation is not a ‘get out of jail free’ card: “The AWR imposes a range of conditions on the hirer relating to conditions and access to facilities; none of these requirements and obligations on the part of the hirer will change. The Swedish Derogation only applies to pay, not conditions."

Conditions under which the Swedish Derogation can apply

In order for a hirer to benefit from the Swedish Derogation, an umbrella or agency payroll contractor must satisfy a number of strict conditions:

  • The contractor must be genuinely employed by the umbrella company or agency, with a permanent contract of employment in place
  • The umbrella company or agency must pay the contractor in-between contracts, and that pay can’t be less than 50% of the contractor’s regular fees or the national minimum wage
  • There is an obligation for the umbrella company or agency to find work for the contractor, and make sure any available work is offered to the contractor
  • All other statutory rights under employment law and the AWR will also apply to the contractor, just as they would to any regular employee.

The contractor must also have the employment contract with the umbrella company or agency signed before they start work with the client.

A fully compliant umbrella employment solutions provider is already eight tenths of the way towards fulfilling the obligations required by the Swedish Derogation

Rob Crossland, Parasol

“A fully compliant umbrella employment solutions provider is already eight tenths of the way towards fulfilling the obligations required by the Swedish Derogation,” explains Crossland, “and can therefore remove the biggest concern currently in the minds of most contractor clients, the prospect of the cost of contractors rising.”

How the Swedish Derogation could impact on contracting

Crossland’s view is that the Swedish Derogation offers the contracting sector an option to work within the AWR when the rules come into force, rather than trying to get around the legislation.

“The original directive was adopted because it provided a mechanism to protect vulnerable workers from exploitation and it is essential that protection is put into place,” continues Crossland, even though the rules will apply to many contractors who are far from being vulnerable.”

Crossland concludes: “The Swedish Derogation presents the contracting sector with an opportunity to maintain those protections, allay clients’ fears of rising costs and offer contractors a much improved deal.”

Published: 30 March 2011

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