REC – AWR Implementation Pack

1. REC – AWR Implementation Pack Overview presentation Recruitment & Employment Confederation

2. General background • EU regulations already enshrine equal treatment for part-time and fixed-term workers. The aim of the EU Agency Workers Directive was to extend this principle to agency workers. • Initial drafts of the EU Directive were blocked in Brussels for many years following lobbying campaigns by REC and other business bodies. • Equal treatment for temporary workers have been in operation in many other European countries since the 1980s and 1990s. • A main debating point was at what stage equal treatment should kick-in – trade unions and most national Governments calling for it to be from day one of an assignment, business organisations calling for a derogation period. • In 2008, there were no longer enough countries blocking the Directive in Brussels. The UK Government agreed a compromise deal with business and unions whereby equal treatment would apply after 12 weeks of an assignment.

3. General background (Cont) • Following the agreement in Brussels, discussions moved on to how the Regulations should be implemented in the UK. • Following two consultation phases, the Government published the final version of the UK Regulations in January 2010. • The official guidance document that will underpin the Regulations will be developed during the course of the year. The REC will be feeding into this document. • There is a chance that the new Government might review a few specific areas within the Regulations. However, the bulk of the Regulations are unlikely to change. • In summary, temporary workers will have the right to equal treatment with regards to pay, holidays and working conditions once they have completed a 12 week qualifying period. The regulations come into force from 1 October 2011.

4. Into the detail The overview will cover the following areas: • Who is an agency worker? • Are self-employed workers within scope of the Regulations? • What does equal treatment cover? • The 12 week qualifying period • Establishing equal treatment • Liability • Implementation date • These slides should not be read in isolation. Members should read Factsheets 1-7 which set out the detail of the Regulations.

5. Who is an agency worker? What do the Regulations say? • An agency worker is an individual supplied by a temporary work agency to work under the supervision and direction of the hiring client. • A worker can be an agency worker even if he works though an intermediary, e.g. an umbrella. (Regulation 3) • Agency workers cannot contract out or ‘opt-out’ of the Regulations (this isn’t stated in Regulation 3 but will be covered by Section 15 of the Employment Rights Act 1996).

6. Which workers are covered? What do the Regulations say? • Genuinely self employed persons are excluded whether they operate via limited companies or not. • Regulation 3(2) means that limited company contractors are agency workers if they are not genuinely self-employed. • There are no obvious ‘loopholes’ such as individuals opting-out or being out of scope by using umbrella companies. • It will be up to the agency to work out whether an individual is an agency worker for the purposes of the Regulations or not. (See REC toolkit online atwww.rec.uk.com/awr).

7. Which workers are covered? What does it mean? • Discussions with BIS officials confirmed that the intention is for genuinely self-employed workers to be excluded from the scope of the Regulations. • This will be important for those operating in sectors such as IT, Interim Management and Construction, where there is a high proportion of self-employed workers. • It is important to be aware simply calling the worker a ‘Limited Company Contractor’ will not automatically exclude him/her from scope. A tribunal will look at the facts of a case (for example the level of autonomy of the worker) to assess whether there is genuine self-employment.

8. Which providers are covered? What do the Regulations say? • A temporary work agency supplies individuals to work under the supervision and direction of hirers, or pays for or receives or forwards payments for those individuals. • Intermediaries including umbrella companies and master and neutral vendors are included. • Managed services companies are excluded. (Regulation 4)

9. The 12 week “qualifying period” What do the Regulations say? • The agency worker is not entitled to equal treatment until she/he has completed the 12 week qualifying period. • The agency worker must work in the same role with the same hirer for 12 calendar weeks (any week during which the agency worker works is counted). • If there is a break of 6 weeks or more, the clock starts again (except in certain circumstances where a break of more than 6 weeks will only suspend the clock). • Sick leave does not “break” the clock unless it is for 28 weeks or more. Pregnancy and maternity do not break the clock – for the protected period from the start of the pregnancy to the end of the 26 weeks following childbirth. (Regulation 7)

10. The 12 week “qualifying period” What does it mean? • A major concern is the issue of short but regularly repeated assignments. Agency workers could accrue equal treatment rights with a number of different hirers at the same time. • There are specific administrative implications for agencies. Specifically in terms of keeping a tab on the 12 week qualifying period. • This is especially true where workers do not complete an assignment in 12 consecutive weeks but are taking on a series of short intermittent placements and where the breaks in between are no longer than six weeks. • There is no obligation on the worker to tell the agency that it has worked in the same role at the same hirer but through a different agency. Agencies should keep a record of asking for this information from the worker.

11. Establishing equal treatment What do the Regulations say? • An agency worker is entitled to the same “relevant terms and conditions” as a comparable employee at the client. • An employee is a comparable employee in relation to the agency worker if both are: - engaged in the same or broadly similar work having regard, where relevant, to whether they have a similar level of qualifications and skills, and - the comparable employee works or is based at the same establishment as the agency worker, or works or is based at another establishment, if there is no comparable employee at the site the agency worker works at. (Regulations 5 and 6)

12. Establishing equal treatment What does it mean? • Once the comparator is established, the priority is to establish the correct rate of pay (and other working conditions to which the agency worker is entitled) and to be able to explain how this was worked out in the event of a claim. • Where there are formal pay bands this will involve comparing the current pay rates with entry level pay rates at the client. • Where no formal pay bands are in place, this may involve looking at the pay rates of existing staff doing the same or similar work. • However, the additional experience and qualifications of the directly recruited ‘comparator’ can be taken into account and justify why the pay rate of the temporary workers is not a the same level. • The REC will seek clarification in the official guidance with regards to the definition of the same establishment for comparison purposes.

13. What does equal treatment cover? What do the Regulations say? • “Relevant terms and conditions” are: • Pay (please see subsequent slides for further definition). • Duration of working time. • Night work. • Rest periods. • Rest breaks. • Annual leave (please see subsequent slides for further definition).

14. How is “pay” defined ? What do the Regulations say? The definition of pay INCLUDES: • Basic pay, overtime and shift premia. • Certain bonuses (bonuses linked with an appraisal could be seen as being linked to the comparable employee’s performance and potentially are likely to be included in the definition of pay) • Commission payments. • Holiday pay.

15. How is “pay” defined? What does it mean? The following are EXCLUDED from the definition of pay: • Pension. • Occupational sick pay. • Maternity, paternity and adoption pay. • Redundancy payment. • Financial participation schemes. • Bonuses linked to long service/paid to encourage loyalty. The REC has flagged the need for a tighter definition of pay.

16. How is “pay” defined? What does it mean? (Continued) • Although equal treatment measures cover more than basic salary, this is the starting point for evaluating potential impact on costs. • In some sectors, the feedback from employers has confirmed that when looking at ‘point-of-recruitment’ entry-level comparisons, many temporary and contract workers are paid the same and often more than direct recruits. • In other sectors, the analysis has shown that some temporary workers are currently paid less than staff recruited directly to do the same or similar work. It is in these situations that adjustments will need to be made after 12 weeks of an assignment.

17. How is “annual leave” defined? What does it mean? • Temporary staff are currently entitled to statutory holiday entitlements. REC argued that the entitlement under the new Regulations should not exceed the statutory entitlement but this was rejected. • Temporary staff will be entitled to the same holiday entitlement as if they have been directly recruited. Permanent staff will usually benefit from anything from three to eight days holidays on top of statutory minimum. • This extra holiday entitlement can be ‘rolled up’ in the weekly or monthly pay of the temporary worker. • Administrative nightmare where the agency worker does multiple ad hoc assignments.

18. Other rights • The right to access collective facilities i.e. canteen, childcare facilities or transport services – from day one of the assignment (Regulation 12). • The right to be informed by the hirer of relevant vacant posts with the hirer - although no obligation on the hirer to employ the agency worker (Regulation 13). • Only the hirer is liable for breach of these Regulations 12 and 13. • Pregnant agency workers have the right to be paid when attending ante-natal appointments (currently employees only). • Pregnant workers must be offered suitable alternative work, if the current role can no longer be fulfilled. If suitable alternative work is not available, the agency worker is entitled to be paid for the remainder of the expected duration of her assignment.

19. Different supply models • Agency workers who are employed by the agency are not entitled to equal pay provided that contract of employment meets certain conditions set out in the Regulations (though they are entitled to other rights under the Regulations). • However, there are real risks for agencies as workers would have to be paid even when not out on assignment and would also benefit from additional notice periods. • Managed services arrangements are also out of scope. In these situations the agency would be providing a whole outsourced service rather than simply providing staff.

20. Which providers are covered? What does it mean? • Working via an umbrella company will not take workers outside the scope of the Regulations. • Master or neutral vendors are ‘temporary work agencies’ for the purposes of the Regulations. They will also be liable for breach of the Regulations (the employment tribunal will apportion liability) so clear processes will need to be in place to ensure they obtain the necessary information from clients and pass this on to the lower tier suppliers.

21. How will the AWR be enforced? • The Regulations will be enforced through employment tribunals. • As a result, it will be crucial that agencies have internal complaints mechanisms in place as a first outlet for workers who are concerned about pay and equal treatment. • Effective internal procedures will play a key role in limiting the number of tribunal claims. • The REC will be working with ACAS to promote alternative dispute mechanisms where there is a claim from temporary worker.

22. Claims and sanctions • The agency worker can bring an employment tribunal claim for breach of the Regulations but must do so within 3 months of the alleged breach. • The employment tribunal can award compensation of not less than two weeks’ pay. Also any expenses or other losses incurred (but no award for injury to feelings). • Breach of Regulation 9 (i.e. where assignments have been deliberately arranged to avoid equal treatment) – compensation up to £5,000. • Refusal to allow time off for ante-natal care – the amount she would have been paid had she not been refused the time off.

23. Where does liability sit? • Regulation 14 - the agency bears primary liability for the application of equal treatment. • However, the agency will have a defence if they have taken reasonable steps and it is the client who is responsible for the breach. • The employment tribunal will apportion liability between the agency, any intermediaries and the client, and will apportion any financial sanctions accordingly.

24. Summary of next steps 1. Still some limited scope to influence Government: • Regulation 3 – inclusion of genuinely self-employed limited company contractors – need more explicit text. • Regulation 5 – tighten the definitions of pay and limit the inclusion of bonuses. • Regulation 7 – need to address the issue of short repeat assignments and the qualifying period. 2. Clients and agencies will need ongoing guidance and support procedures. 3. Clients will need to work closely with agencies and intermediaries to review potential implications. 4. Impact assessments – first stage of the planning process.

25. AWR implementation: next steps • Work on Guidance with BIS. • See AWR Implementation page at www.rec.uk.com/awr. • Legal team preparing “toolkit” documents – briefs for clients and mythbusters for temps. Available mid-June 2010. Meanwhile see Legal Bulletin of March/ April 2010. • Launch of AWR guidance – June 2010. • AWR Webinar in July 2010. • Training workshops – end 2010 throughout 2011.