Is the Swedish Derogation the right route for you?

It has become apparent that a number of agencies are being asked by their clients to use the Swedish Derogation model as a means of limiting client’s liability under the Agency Worker Regulations (“AWR”). But is this really the best solution for all involved?

The AWR come in to force on 1st October 2011 and will provide agency workers with the same basic working and employment conditions after 12 weeks as they would have received if they had been directly engaged by a hirer. The Swedish Derogation solution requires that an agency (or umbrella company) engages its candidates under permanent contracts of employment with minimum requirements and pays the candidates in between assignments for a minimum period of 4 weeks. This model, if operated correctly, can have the effect that the candidate is not entitled to equal pay.

However, the Swedish Derogation solution is not without its problems:

• Issues with drafting mean claims are possible where payment has not been made in between assignments, even if there has been no break and therefore no opportunity to pay when the agency worker is not working.

• It is not a complete solution; individuals are still agency workers, they have day one rights and not all of the 12 week rights are excluded.

• Employing the agency worker brings its own responsibilities e.g. unfair dismissal, redundancy, notice and TUPE.

• Legislation and guidance leave many issues such as dismissals for gross misconduct and when someone is ‘available for work’ in the hands of the employment tribunals.

So why are your clients asking you to operate in this way? There could be a number of reasons:

• Engaging your candidates under contracts of employment substantially reduces the risk of employment status claims against your clients.

• On the face of it, it is the agency (or umbrella) that is responsible for applying the solution.

• No change to the pay rate to the individual so costs should not increase for your client.

• Your clients may think this is the only option.

The Swedish Derogation could be a good solution provided that you have the right contracts in place but agencies and umbrellas should bear in mind that this is neither a complete solution nor does it prevent the risk of claims – there may be other solutions better suited to your specific business model which you can propose to your clients as an alternative. For further advice on the options available to you contact Lawspeed on 01273 236 236.