EU agency workers directive

Whilst many of you have no doubt heard of the proposed Agency Workers Directive (AWD), do you really understand the possible effect this proposal could have on your business and the recruitment sector?

The general aim of the AWD is to help the EU “become the competitive and most dynamic knowledge-based economy in the world, capable of sustained economic growth with more and better jobs and greater social cohesion” and specifically:

• To improve the quality of temporary agency work by applying the principle of non-discrimination
• to establish a suitable framework for the use of temps in the EU

Although recruitment agencies are well established in the UK, this is not the case throughout the EU (for example in Italy until recently the operation of an employment agency was deemed illegal). Indeed, some estimates suggest that as many of 1/3 of all agency workers in the EU are based in the UK.

The UK Government is conducting a consultation into the impact of the proposed directive on temporary agency work in the UK. The consultation period ends on 18th October 2002 and it is anticipated that the EU could adopt the proposed directive by September of next year with a time limit of two years for implementation into UK law.

The main requirements of the proposed AWD are:

• An agency worker assigned to work under the control of a client company should not be given less favourable basic employment conditions that a similar permanent worker in that client company, unless this is objectively justified.
• The significant employment conditions set out in the directive are: pay, working time, rest periods, holidays and holiday pay, work done by pregnant women and nursing mothers, children and young people, and action taken to combat discrimination.
• Member states can chose not to apply this equal treatment requirement where temporary agency workers meet one of four conditions:
  the temp is paid between assignments (this is invariably not the case in the UK);

1. the temp is covered by collective agreements (this is also very rare in most industries in the UK) ;
2. the assignment is for less than 6 weeks (this limit is one of the key points being debated with the Government pushing for a limit of 12 months whilst some MEPs believe that the limit should be removed altogether);
3. or
   there is no comparable worker

• Client companies should give agency workers access to ‘social services’ provided to permanent workers.
• Agency workers should be informed of permanent vacancies in the client company
• Clauses ban temp-to-perm fees which will be null and void

The DTI has suggested that the total cost to agencies will be between £80 and £194 million and the cost for clients between £239 and £387 million, although no quantitative estimate has been made as to the costs of the proposed directive to payroll companies. Many of the figures quoted in the DTI’s Regulatory Impact Assessment have been questioned and there is a distinct lack of objective data regarding the temporary work sector both in the UK and the EU.

In its current form the draft directive could have a significant impact upon agency recruitment as it will require temps to be given the same pay and benefits as comparable workers on the Client site. The result could be a reduction in temp work in the UK. It should be noted that the UK government does not think that pay could be included in the proposed directive due to the fact that the directive is legally based on Article 137 of the EC Treaty, which provides that, ‘the provisions of this article shall not apply to pay’. Nevertheless, if pay is to be included this will mean that the payroll company or the recruitment agency will have to obtain detailed information from the client relating to the pay and benefits of the clients permanent workers to ensure that temps are not paid less than a comparable employee of the client. This could lead to increased administration costs to particularly relating to dealing with temp workers pay disputes.

However, there may also be opportunities as agencies will need to provide various benefits for their temps. Agencies may wish to outsource to payroll companies the requirement to calculate and provide benefits in order to comply with the Directive.

Conclusion

In conclusion it is clear that the impact of the proposed AWD in the UK will be significant if it is adopted by the EU and those companies that will be affected by it should be prepared for it possible consequences. We recommend that you write to your MP and MEP providing them with examples of just how much the implementation of this proposed directive could cost your company.

Adam Bell LLB (Hons) LLM – July 2002