An End to the Swedish Derogation

On 6^th April 2020, the Agency Worker (Amendment) Regulations 2019 came into force which had the effect of abolishing the Swedish Derogation. 

What is the Swedish Derogation?

Before 6^th April this year, Regulations 10 and 11 of the Agency Worker Regulations (AWR) 2010 provided a derogation, or exemption, from the right to equal pay where the worker was given a permanent contract and was paid between assignments.  It meant that employment businesses were able to avoid paying agency workers the same as those employed directly, provided they were paid between assignments when there was no work. The workers were paid by the agency and must have been paid at least 50% of the pay received whilst on assignment which could not fall below the National Minimum Wage. 

Why has the Swedish Derogation been abolished?

Although often attractive to the employment business and allowing for savings, the Swedish Derogation created detrimental financial implications for the worker.  Following the report of Matthew Taylor known as the 'Taylor Review' and his detailed review into agency workers' rights, the government compiled the Good Work Plan in 2018 setting out various commitments to what it called "the biggest package of workplace reforms for over 20 years."  This Plan is now in the process of being implemented.  The Swedish Derogation has received criticism over the years for effectively allowing contracts which promote unequal pay.  The Good Work Plan included plans to revoke Regulations 10 and 11 of the AWR 2010, stating that "we think prolonged use of these contracts is unfair and we accept Matthew Taylor’s recommendation to ban the use of this type of contract to avoid agency workers’ equal pay rights."

What is the impact?

As of 6^th April 2020, agency workers are entitled to equal pay following completion of the 12 week qualifying period.

For existing workers with a provision in their contract relating to the Swedish Derogation, in accordance with Regulation 4 of the 2019 Regulations on or by 30^th April 2020 agencies must provide a written statement to their temporary workers.  The new statement must inform the worker that the original statement no longer has effect and that as of 6^th April 2020 they are entitled to rights relating to pay following completion of the 12 week qualifying period.

For new workers, from 6^th April 2020 the Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2019 introduced a new Regulation 13A to the 2003 Regulations.  Under the new Regulation, workers are entitled to receive a Key Information Document when signing up to a new employment business.  Temporary work agencies must provide a document titled 'Key Information Document' to those seeking work in advance of agreeing terms with them.  This document must be clear and concise and not exceed two A4 pages.  It is not intended to replace a contract, but provide an overview of key information relating to pay, deductions, annual leave entitlement and details of engagement, with the purpose being to increase transparency before terms are agreed.  Further specific information may be required in a Key Information Document depending on the circumstances, for example, if an intermediary company is involved.

Workers can bring a claim in the Employment Tribunal if they are not provided with an updated statement, and those asserting their rights under the new sets of Regulations will be protected against both detriment and unfair dismissal.

If you think the amended Regulations may have an impact on you or your business, our expert Employment Team are here to help.  If you require any assistance or advice, please do not hesitate to contact a member of our team on 01205 351 114 or 01522 814 638.