What Is It?
Swedish Derogation is the common term we use when talking about Regulation 10 of the Agency Worker Regulations (AWR). Under normal AWR rules temporary workers are entitled to the same basic pay and conditions as an equivalent permanent employee once they have completed a 12-week qualifying period.
When Swedish Derogation is used the agency worker is offered a permanent contract of employment with the agency. At this point they are exempt from the entitlement to the same pay as the comparable employee. Instead, agency workers under Swedish Derogation will be paid for at least 4 weeks between assignments. Pay between assignments must be at least 50% of the highest earnings during the previous 12 weeks but it must not be below NMW. Swedish derogation does not impact equal holiday entitlement after 12 weeks or other working conditions or ‘day one’ rights.
Why The Controversy?
The legislation is seen by some as a loop hole to undermine workers’ rights to fair pay. The Taylor Review of Modern Working Practices found that agency workers were not given a choice in the type of contract (being offered Swedish Derogation contract or no work). Some agencies were found to be avoiding paying workers between assignments by keeping them on longer assignments with reduced pay or offering unacceptable assignments when they were out of work.
What Are The Impacts?
Around 8-10% of agency workers are on Swedish Derogation contracts (that’s 104,000-130,000 agency workers!). The changes are estimated to cost over £300 million each year in additional wage costs. Agencies also need to consider other costs associated with understanding the changes, making changes to contracts and reviewing pricing structures.
Due to the bad press some companies are already moving away from Swedish Derogation. For example, BT have announced they are phasing out all Swedish Derogation contracts by March 2019.
However, back in 2014 5% of business reported they would stop using agency workers if Swedish Derogation was removed entirely showing not all businesses are on board with the changes.
What’s The Future?
The changes will come into effect from April 2020, but we suggest agencies start planning now. Agencies need to assess their current arrangements and review the impact with their clients ensuring they have plenty of time to renegotiate new charging structures.