The Agency Workers Regulations (AWR)

26 - 09 - 2011

The Agency Workers Regulations come into force on 1 October 2011

The regulations come into force on 1st October 2011. There is no retrospective effect.

Three parties are affected by the AWR; the Hirer (end client), the Temporary Work Agency (TWA) and the Agency Worker.
There may be a chain of TWAs. An Umbrella Company is a TWA but has less liability initially than the TWA with a contractual relationship with the Hirer (the primary TWA).

The objective of the AWR is to provide, so far as practical, equality of treatment for Agency Workers – or to ensure that potential or existing employees of the Hirer are competing for their jobs on a level playing field.

PSCs and Sole Traders

A Limited Company (PSC) or Sole Trader providing inter alia the services of its owner manager is not within the scope of the AWR provided that the PSC or Sole Trader is genuinely in business and that is the nature of the contract with the Agency or the Hirer. All the usual tests relating to status developed for income tax and IR 35 probably apply but proof will be greatly assisted by the existence of a written contract between “the business” and the end client.

The exclusion for a profession or business undertaking refers to “a contract”. This could be express or implied but a lot of the doubt relating to status would be removed if the contract is in writing. The contract needs to make it clear that the Agency (if the contract is with the Agency) or the Hirer (if the contract is with the end client) is the “customer of a business undertaking carried on by the individual”. Where the individual is conducting their business through the medium of a Limited Company, with all that that implies, and the Limited Company invoices the Agency for the work undertaken by the owner manager, it is difficult to see how the requirement to be a “business undertaking” could fail.
It is more difficult, but by no means impossible, for the Sole Trader to demonstrate both the business to business nature of the contract and/or the existence of the “business undertaking.” However, where the “business undertaking” test fails the owner manager will be an Agency Worker, notwithstanding the tax status of the individual as “self employed”.

The Worker's Benefits

Essentially the AWR provides two benefits to the Agency Worker; the initial benefits - equality issues relating to the staff canteen etc and the 12 week benefits.
  • Initial benefits: the Hirer must provide the work place benefit description to the primary TWA who must pass on that information to all other TWAs in the chain and thus to the Agency Worker. The initial benefits primarily relate to rights of access to common employee facilities e.g canteen facilities, car parking, collective transport but where facilities e.g. a crèche are in short supply the Agency Worker has no better right than an employee and must join the appropriate waiting list.
  • 12 week benefits: the primary TWA must approach the Hirer and obtain comparative information on pay and pay conditions and pass that information on to the chain. The responsibility for obtaining this information equally falls on the other TWAs in the chain.
    If it is known at the outset that the contract period will be longer than 12 weeks then the obligation to obtain comparative information on pay and pay conditions arises immediately. Otherwise the obligation arises at or shortly before 12 weeks.
The 12 week clock may pause e.g. for extended holidays, illness up to 28 weeks, etc  or for any other break in the Assignment not exceeding 6 weeks. The clock will continue to tick for absences related to pregnancy, maternity, paternity or adoption leave.
Comparative Pay
This includes all remuneration factors including holidays, bonus, vouchers.

Umbrella workers must use their total reward (i.e. including travel expenses) in measuring comparative pay. Comparative pay includes for example basic pay, overtime, shift or unsocial hours allowances, holiday pay and in certain circumstances commission payments. It includes bonus payments that relate to the quantity or quality of work done. However, comparative pay does not include for example, sick pay, pension payments, maternity pay or redundancy pay. Nor does it include bonus payments that relate to loyalty or rewards for long term service or discretionary bonuses where there is no bonus scale or structure.

The obligation to obtain information on comparative pay does not stop once the 12 week information has been obtained e.g. the TWA should ascertain/be informed if the Hirer concludes a general pay increase for staff members. A reminder system is therefore needed for longer term contracts.


The 12 week benefits do not have to be provided where the Worker is in a fulltime contract with a TWA but the rate of pay “between assignments” must be not less than 50% of assignment pay and at least the NMW. The Worker must receive not less than 4 weeks pay between assignments before they can be dismissed.

This is sometimes referred to as the “Swedish Derogation”. Most Umbrella employees will be employed on a continuous basis by their Umbrella company, an over-arching employment contract, but not with the benefit of substantial pay for downtime. Schemes that are based around the “one hour @” concept will fail as a sham –i.e. true rates will be applied by Employment Tribunals.

It is rare that an Agency Worker is materially worse off than his employee counterpart especially where the Employer has Starter Rates for new employees. Accordingly the AWR will be, in practice, largely an administrative affair – another piece of red tape!

The genuine PSC or Sole Trader is not affected but should be advised/encouraged to obtain written confirmation of their status from their Agency and/or the end client. This could be in the form of a simple letter of confirmation.
For more information or further advice on the AWR call Foremans LLP on 01244 625 500.






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