Briefing
28 February 2011
Agency Workers
Regulations 2010:
Are Agency Costs
on the Rise?
KEY POINTS:
• The AWR will come into force
on 1st October 2011. It places
obligations on agencies and
hirers to ensure agency
workers are subject to the
same employment conditions
as comparable employees of
the hirer.
• Within the NHS, in most
cases agency workers are
paid a premium which will
likely compensate for
additional entitlements such
as annual leave.
• Hopefully any uncertainties in
applying the regulations will
be addressed in the BIS
implementation guidelines to
be released in April 2011.
• In the meantime, hirers and
agencies should work together
to ensure implementation is
properly planned and the
appropriate infrastructure is in
place to monitor compliance.
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The Agency Workers Regulations (“AWR”) will come into force on
1st October 2011. In advance of the Department of Business Innovation
and Skills (“BIS”) releasing the implementation guidelines in April 2011, we
thought it would be useful to review the regulations, consider the impact
they could have on agency spend in the NHS, and provide some guidance
on what preparations Trusts should commence now to smooth the
implementation process.
Overview
The regulations provide agency workers rights to „the same basic working
and employment conditions‟ as „comparable employees‟ in the hiring
organisation, after a qualifying period of 12 weeks service. The relevant
terms and conditions for equal treatment include pay (including bonus and
commissions), working hours, breaks, and annual leave entitlements
(hereafter, “Equal Treatment Rights”). It excludes sick pay, pension,
maternity/paternity leave and redundancy.
In addition, all agency workers will be given rights that are not subject to
the 12-week qualifying period (hereafter, “Other Rights”), meaning they are
entitled from “day one” of an assignment to:
• access “collective facilities and amenities” of the hirer, such as canteen,
child care facilities, and transport services; and
• be informed by the hirer of any relevant vacant posts (excluding where
the post is advertised for internal restructuring to avoid redundancies) and
internal training resources.
Whilst temporary work agencies (“agencies”) and hirers share the liability
for providing the Equal Treatment Rights to qualifying agency workers, the
hirer is solely liable for providing agency workers with the Other Rights.
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After 12 weeks, Agency Workers will have
the right to the same basic working
conditions (pay, bonus,
annual leave, working time)
as if they were employed
by the Hirer
Agency
Worker
Comparable
Employee
Temporary
work agency
Hirer
Figure 1: The “three-way relationship” between an Agency Worker, Temporary Work Agency, and Hirer
What will compliance involve?
Broadly, compliance with the AWR will require the
mapping of all agency worker posts to „comparable
employee‟ posts in the hiring organisation and
making a determination as to whether the existing
terms and conditions of the agency worker fall short
of the conditions of the comparable employee.
In addition, hirers will need to ensure that the Other
Rights are extended to all agency workers as a
matter of course.
These considerations will hopefully be clarified in the
BIS implementation guidelines in April 2011.
Hirers must also bear in mind that the Equal
Treatment Rights only extend to agency workers that
qualify by completing 12 weeks continuous service,
so the duration of assignments will affect what
compliance will involve for different organisations.
The 12-week qualifying period is quite broad in
application and is discussed in more detail later.
In the case of considering the „comparable employee‟
in the NHS, there may be complicating factors such
as:
Will it increase costs of agency
staff in the NHS?
• It is unclear what the impact would be of salary
banding and pay scales – what is the appropriate
„comparable employee‟ pay rate? This is
particularly ambiguous for non-clinical staff;
The answer to this question depends on:
• Since duration of service (and thus annual leave
entitlement) in the NHS is tied to the individual from
Trust to Trust, it is unclear whether the „comparable
employee‟ is assumed to be in the first year of NHS
service (with 27 days of annual leave entitlement)
or whether the entitlements are calculated as if the
agency worker had been recruited by the hirer
(taking into account their continuous NHS service
and up to 33 days of leave entitlement).
Copyright © 2011 Bolt Partners LLP
1. whether there is currently a gap between the pay
and working conditions of agency workers and
„comparable employees‟ of the hirer;
2. whether agency workers engaged in the hiring
organisation are likely to qualify for the rights
based upon the duration of assignments; and
3. whether agencies choose to absorb or pass on
increased administration and compliance costs
For the most part, agency workers in the NHS are
already paid at rates premium to that of comparable
employees.
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QUICK FACTS:
1.3 million temporary workers
in the UK
10 % engaged in health sector
NHS spent c.£1.3 billion on
agency staff in 2008/09
The regulations appear to allow a “rolling up” of
entitlements into pay rates. For example, where the
standard 4-week annual leave entitlement adds 8.3%
to the cost of an employee, if the agency rate is
already 8.3% higher than the basic pay rate for a
„comparable employee‟ then no additional cost would
be expected (assuming annual leave was the only
relevant term and condition to be applied).
An example of how the qualifying period could
potentially be satisfied is if a nurse worked one
agency shift per month for 12 months for the same
Trust, even if through different agencies. In our
experience this is not an uncommon pattern of usage
of agency workers and therefore it is likely that many
agency workers in the NHS will qualify for the Equal
Treatment Rights.
However, we need to wait until implementation
guidelines are produced to see if this is how it will
work in practice, and ensure all relevant terms and
conditions are taken into account in the comparison
analysis.
Once the agency worker has met the qualification
requirements, he/she must continue to qualify
through the same definition of “continuous” service.
The 12-week Qualifying Period:
Fairly Broad in Scope
An agency worker qualifies for Equal Treatment
Rights if he/she works „in the same role with the
same hirer for 12 continuous calendar weeks‟. The
rule is wide in its application:
• „12 continuous calendar weeks‟ is satisfied even if
there is a break where the agency worker is not
working for up to six weeks for any reason, or a
break up to 28 weeks for sickness and injury. In
that case, the number of continuous weeks of
working shall be carried forward and added to
number of continuous weeks worked for the hirer
after the break
For agency workers in posts prior to the AWR
coming into force on 1st October 2011, their service
prior to this date will not count towards the qualifying
period.
Compliance Costs and
Co-operation with Agencies
The Equal Treatment Rights in the AWR place
obligations on hirers and agencies which are
expected to increase administration costs.
Initially, a higher cost is likely due to the need to
collate and disseminate information, update policies
and procedures, potentially upgrade systems and
engage with agencies to agree the approach. Once
the process is set up, the administration costs would
be significantly lower.
• „calendar week‟ includes working the whole or part
of any week, so would appear to include working
only one shift
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There is a risk to hirers that agencies will pass on the
increased administration costs through one-off fees
or increased rates. However hirers will have some
bargaining power to push back - since they must be
assured that agency workers are being paid at least
as much as a „comparable employee‟, agencies may
be forced to reveal their gross margins which the
hirers can use to push down prices.
Hirers can also minimise internal administration costs
by making the most of agencies. Figure 2 sets out
the obligations of hirers and agencies in the process:
• Hirers can largely ensure compliance with the AWR
by providing information and providing appropriate
working conditions. Creating standard information
packs up-front will ease the ongoing administration
burden.
• Agencies have the somewhat heavier duty to make
the assessment of what the agency worker‟s basic
working and employment conditions should be, and
ensuring that the worker is paid at the required rate
once the qualifying period is satisfied.
The process will require significant co-operation
between agencies and hirers and it is recommended
that the parties should commence discussions now
to plan the implementation process.
Exclusions
In some circumstances the Equal Treatment Rights
do not apply:
• If the agency worker is permanently employed by
the agency and is guaranteed a minimum of 50% of
normal pay when not placed on an assignment
• Workers under outsourced contracts (for example,
the hirer does not have AWR obligations for
cleaners and maintenance staff if that service is
outsourced)
• Whilst the regulations capture umbrella companies,
it is not clear whether it is intended to include
contactors trading under limited companies
The rationale for excluding agency workers that are
permanent employees of the agency is that these
workers already have a form of income protection
and do not need the protections afforded by the
AWR.
However it is unclear how this will apply to NHS
agency workers that use agency work as a
supplement to permanent NHS employment. In one
possible interpretation of the rules, such agency
workers would qualify for annual leave entitlements
from both the employer and the hirer (or multiple
hirers). It is hoped that the BIS guidelines clarify this.
Figure 2: AWR – Equal Treatment Rights – Obligations of Agencies and Hirers
Process
Obligated
Type
Start of new
agency role
Hirer
Information
Hirer provides information to Agency about basic working and employment
conditions in force in the Hirer
Within 12-week
qualifying period
Agency
Assessment
Agency determines what agency worker’s working and employment conditions
should be at the end of the qualifying period
Post 12-week
qualifying period
Agency & Hirer
Delivery
Agency ensures the agency worker has been treated as a ‘comparable employee’
(to the extent it can, which would mostly be pay-related), Hirer is otherwise liable
If role changes
Agency
Information
If an agency worker changes roles, the agency must provide updated information
to the agency worker, else the worker will receive Equal Treatment Rights when
they otherwise shouldn’t
If agency
worker claims a
breach
Agency & Hirer
Information
An agency worker can make a written request to the agency to provide
information about basic working and employment conditions. If no response
from the agency within 28 days, the information can be requested from the Hirer
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Description
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Limitations on Claims
Conclusion
The AWR balances the rights of agency workers and
obligations of hirers and agencies by placing
relatively tight limitations on claims:
• There is a three month time limit for agency
workers to lodge complaint to an employment
tribunal
Whilst we await the release of the BIS
implementation guidelines in April 2011 to obtain a
more comprehensive idea of how the regulations will
work in practice, it is clear that significant information
requirements and hirer/agency collaboration will be
necessary to ensure organisations are compliant
when the rules come into force on 1st October 2011.
• The claim must justify compensation amounting to
a minimum of two weeks‟ pay (to avoid frivolous
claims)
We will follow this issue and provide an update when
the guidelines are released.
However a tribunal can overrule the time and value
limitations if, in all the circumstances, it is „just and
equitable‟ to do so.
References
Penalties for Non-Compliance
Once a claim is validated, the tribunal will calculate
„just and equitable‟ compensation based upon
expenses incurred by the agency worker and loss of
any benefit (i.e. pay) as consequence of the breach.
In addition, up to £5,000 can be awarded to penalise
hirers and agencies that have attempted to
circumvent the rules in the way the assignment was
structured.
• The Agency Workers Regulations 2010
• Proposal for a Directive of the European Parliament and the
Council on working conditions for temporary workers, Brussels,
2002
• Smith A (2010) „Equal treatment for agency workers: A guide to
the Agency Workers Regulations 2010‟, www.cipd.co.uk
Emily Montgomery
emontgomery@boltpartners.com
Laura Chung
lchung@boltpartners.com
What can hirers do now to prepare?
1. Conduct high level reviews of agency workers‟ current pay and conditions versus comparable
employees, and consider the duration of agency workers‟ assignments to estimate the cost
implications for the organisation of implementing the AWR
2. For NHS hirers, increase bank resources by incentivising staff to work on the Trust bank rather than
do agency shifts elsewhere
3. Revise policies, procedures and systems to ensure that by 1st October 2011, all agency workers
have access to collective facilities (e.g. canteen, childcare, transport) and are informed about
permanent employment opportunities and internal training resources as a matter of course
4. Prepare information packs to provide to agencies that set out the working and employment
conditions of employed staff for roles that agency workers may fill
5. Review information systems and conduct spot checks to see whether existing systems can
accurately track an agency worker‟s service in the hirer‟s organisation
6. Set up discussions with agency suppliers to agree an implementation timetable
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About Us
Bolt Partners LLP is a leading turnaround and performance consulting boutique specialising in
healthcare, consumer goods and services, and professional and industrial services. We work with
organisations in distressed situations, either as interim executive management (Chief Executive
Officer, Chief Financial Officer, Chief Restructuring Officer) or on an advisory basis.
Temporary Staffing Controls is an area we specialise in and have proven success in the
delivery of significant savings within healthcare organisations and other staff intensive businesses in
the United Kingdom. A sample of our credentials is provided below.
Case Study 1, 2006
Case Study 2, 2010-11 (ongoing)
Background:
Background:
•
The Trust was facing annual temporary staffing spend
in nursing of £12m and 300 WTE per annum
immediately prior to our engagement
•
Prior to our involvement, temporary staffing spend
was out of control, escalating to c.£41m in FY2010
•
•
Controls and processes were weak with ownership
and accountability lacking
With 3 separate bank offices, controls were limited on
all aspects of temporary staffing, from authorisation
stage through to invoice payments
Actions: Appointed January 2006
Actions: Appointed April 2010
•
Consolidated the ordering of temporary staff and
introduced robust controls resulting in reduction in
usage by 100 WTE
•
Merger of bank offices across 3 sites to centralise
internal and external bookings
•
•
Weekly review of spend and usage with firm
challenges of expenditure at ward level
Introduced weekly reporting and subsequent
challenge
•
•
Developed in-house training and toolkit; encouraged
planning and sharing of resources across Divisions
Increased authorisation levels for all bookings. More
stringent controls over long term bookings and
additional sessions
•
Supplier rationalisation and renegotiation
•
Review of spend within corporate areas
•
Implemented robust checks and balances on invoices
to ensure compliance with new controls
•
Ban on agency usage within certain staff groups and
elimination of usage of non PASA agencies, use only
by exception
•
Renegotiation with preferred suppliers on rates and
worked closer with agencies to ensure compliance
with new procedures
•
Greater scrutiny of invoices prior to payment
Results:
•
£5.0m reduction in nursing agency, from £12m to
£7m and 100 WTE reduction (delivered recurrent
FYE)
•
Reduced vacancy rate
•
Decline in reported clinical incidents
Results:
•
£6.0m reduction in Divisional bank and agency, from
£35m to £29m (forecast outturn at Month 9)
•
£2.8m annualised savings from corporate agency
achieved within 4 months
•
Consolidated invoicing on preferred suppliers to one
weekly invoice, saving £7 per invoice
Contact
For more information please contact Laura Chung, lchung@boltpartners.com or Emily Montgomery,
emontgomery@boltpartners.com
Copyright © 2011 Bolt Partners LLP
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