Taylor review outcomes; the use of Pay Between Assignment Contracts

The Taylor review, published in July 2017, recommended that Government amend the Agency Workers Regulations 2010 to remove the opt-out for equal pay, commonly known as the Swedish Derogation provision. Government has responded by saying they will consult on the best way to address ‘problems’ found in the use of Swedish derogation contracts and consider whether the Employment Agency Standards Inspectorate’s remit should be extended to cover the enforcement of the Agency Workers Regulations 2010.

Government have published a research document written by HOST Research and Evaluation Services LLP (HOST) to BIS entitled “Qualitative Analysis of the use of Pay Between Assignment contracts for Agency Workers including the role of Umbrella Organisations”. Interestingly, the date on the cover of the report is July 2015, therefore BIS, which has since become BEIS, have been sitting on this document for some time!

Swedish Derogation contracts, also called ‘pay between assignments’ (PBA contracts) are offered by agency and umbrella companies to temporary workers. They contain a clause which details an opt out of the element of Regulation 5 of the Agency Workers Regulations 2010 in regard to equal pay, in favour of receiving pay between assignments (at least 50% of the pay they received during the last 12 weeks on their last job, or the national minimum wage rate for the hours they worked on the last job, whichever is greater).

HOST experienced difficulty in meeting the aims of their methodology when it came to conducting interviews with hirers, agencies, workers and umbrella companies. Only 18 agencies participated, 17 umbrella companies, 3 hirers and 9 workers.

HOST believe PBA contracts are more widespread than originally envisaged, however findings from their interviews with umbrellas showed only one umbrella used PBA contracts as their only model and all the others left the choice of whether to use a PBA contract to the agency or hirer. One umbrella disclosed that a lot of the umbrella’s contractors get paid more than their employed counterparts, therefore the motivation is the hirer not wanting to release details of what are actually being paid which could be due to complicated bonus structures or overtime payments.

However, some umbrellas who do not use PBA contracts explained to HOST that organisations calculate a deduction for PBA from the hourly rate in the same way that holiday pay is calculated.  Also, many workers do not actually receive any PBA in event of a break between assignments.

Interviews with agencies demonstrated hirers are pushing for these types of contracts and one agency admitted they did not want to use them but three clients have insisted. Contradictory to this, although only a very small number of employers were interviewed, the employers said they had no idea what type of contract their temporary workers are on and it is a matter for the agency.

HOST’s findings from their interviews demonstrate that often agencies and umbrella companies are being dictated to by hirers to use PBA contracts, with one agency saying the hirer will say how much they are willing to pay and the agency has to come up with a ‘workaround’ and another stating that when the agency refused, they lost work. Findings show it’s often a requirement on a Preferred Supplier List to be able to offer PBA contracts.

HOST concluded that it would be wrong to tarnish all umbrella companies because of the ones operating incorrectly by not explaining the consequences of PBA contracts to workers or by offering travel and subsistence schemes to workers and rebates to agencies.

HOST recommend further areas for consideration in section 9 of their report, including;

1. Explore whether the use of the Swedish derogation could be tightened up to ensure that it is not used to circumvent the equal pay element of AWR in order to decrease labour costs.
2. Raise awareness amongst workers about the implications of signing PBA contracts.
3. Establish whether or not PBA is deducted from a worker’s pay.
4. Provide firmer guidance on what is reasonable in terms of what workers are required to do in order to remain eligible for PBA.
5. Carry out further research into the relationship between agencies and umbrellas, paying attention to referral fees and agencies setting up their own umbrellas.
6. Develop more guidance on expenses. Worker interviews implied that expenses are being claimed that haven’t originated from, or to, the worker to reduce National Insurance liabilities.

To see our news on the other consultations published by the government in response to the Taylor review, click here.

Aspire comment

So long as hirers want to cut costs and agencies and umbrella companies want to stay in business and remain competitive, it seems as though PBA contracts will be here to stay, subject to Government introducing legislative changes.

Notably, the Swedish Derogation provision in the Agency Workers Regulations 2010, was an easement which was introduced following extensive negotiation between Government, trade unions and the Confederation of British Industry (CBI).  We would anticipate that Government moves to remove the opt out facility would face strong opposition from British industry representatives.  

Those engaging workers on PBA contracts must be careful in ensuring the contracts are issued prior to the temporary worker starting an assignment and, in accordance with Bray & others v Monarch Personnel Refuelling (UK) Ltd, it is crucial to ensure that the workers understand that, by signing a PBA contract, they are waiving their right to equal pay. Unfortunately, during interviews with workers, HOST found that many individuals sign contracts because they need work and they are not given the details at the time of signing or don’t fully understand the implications of a PBA contract.

Government agreed in their “Good Work” report that they will consult on the best way to address problems found in the use of Swedish Derogation contracts and the remit of the Employment Agency Standard Inspectorate.

As this report was published in 2015 it would seem likely that, if the interviews were re-done now, the findings could be substantially different because of the passage of time since the introduction of the Agency Workers Regulations 2010 and legislative change, such as the amendment of the expenses legislation for temporary workers, which would also impact HOST’s further areas for consideration.

If you have any concerns about your use of PBA contracts, then please don’t hesitate to contact Aspire.  You can email us on enquire@aspirepartnership.co.uk or call us on 0121 445 6178.