Employment Law When Hiring Agency Workers UK

Hiring agency workers is a common feature of the modern UK workforce. Employers rely on agency labour to manage fluctuating demand, cover short-term absences, access specialist skills, and maintain operational flexibility without committing to permanent headcount. While this model offers clear commercial advantages, it also raises distinct employment law and compliance considerations that employers must understand and manage carefully.

Agency workers sit outside the traditional employer–employee relationship, but this does not place them beyond the reach of employment law. A combination of statutory protections, most notably under the Agency Workers Regulations 2010, alongside wider employment legislation, governs how agency workers must be treated. Failure to comply can expose both hirers and agencies to legal risk, including tribunal claims, financial liability, and reputational damage.

What this article is about

This article provides a detailed employer-focused overview of the key employment law considerations when hiring agency workers in the UK. It explains the legal framework that applies to agency workers, how their employment status differs from employees and workers, and where liability can arise. It also examines the commercial context, including the practical advantages and disadvantages of using agency labour, and explores how the tripartite agency relationship operates in practice. The article concludes with practical guidance for employers, supported by FAQs, a glossary of key terms, and links to authoritative sources.

Section A: Agency workers and an overview of the law

Agency workers form part of a triangular working arrangement involving the individual worker, a temporary work agency, and the end user or hirer. This structure is recognised and regulated under UK employment law, with specific statutory protections designed to prevent less favourable treatment compared to directly engaged staff while preserving labour market flexibility for employers.

The primary legal framework governing agency workers is the Agency Workers Regulations 2010 (AWR), which came into force in October 2011. The Regulations implement an EU-derived framework that continues to apply in the UK following Brexit. The AWR sit alongside wider employment legislation, including the Employment Rights Act 1996, the Equality Act 2010, and health and safety law, all of which may apply depending on the circumstances of the engagement.

Under the AWR, an agency worker is defined as an individual who is supplied by a temporary work agency to work temporarily for and under the supervision and direction of a hirer. The Regulations do not apply to genuinely self-employed individuals operating a business on their own account, nor to those engaged through managed service contracts where the worker is not under the hirer’s day-to-day control.

A key feature of the AWR is the distinction between Day 1 rights and 12-week qualifying rights.

From the first day of an assignment, agency workers are entitled to access collective facilities and amenities provided by the hirer, such as canteens, childcare facilities, transport services, and staff common rooms, where these are available to comparable employees. They must also be informed of relevant job vacancies within the organisation to ensure equal access to permanent employment opportunities.

After completing a 12-week qualifying period in the same role with the same hirer, agency workers become entitled to equal treatment in respect of basic working and employment conditions. These include pay, working time, rest breaks, annual leave, and certain other contractual terms that would apply if they had been recruited directly into the role. The qualifying period can be broken or reset in specific circumstances, such as substantial changes to the role or extended breaks between assignments, and employers must understand how these rules operate in practice.

For employers, it is important to understand what equal treatment does and does not cover. The AWR equal treatment entitlement is limited to the basic working and employment conditions applicable to the role. It does not generally extend to wider benefits and protections associated with direct employment such as occupational sick pay schemes, occupational pension arrangements, redundancy pay, or benefits that are not directly linked to the work done by the agency worker.

Responsibility for compliance under the AWR is shared between the agency and the hirer. While the agency is typically responsible for pay and contractual terms, the hirer controls access to facilities, working hours, and the day-to-day management of the role. Where a breach occurs, liability may fall on one or both parties depending on who is at fault and whether relevant information has been provided accurately.

Employers should also be aware that the AWR include anti-avoidance protections. Where assignments or working arrangements are structured deliberately to prevent an agency worker from acquiring equal treatment rights, tribunals have powers to award additional compensation.

Section summary

The legal framework governing agency workers is deliberately structured to balance flexibility with fairness. Employers must understand how the Agency Workers Regulations interact with broader employment law, where rights arise from day one, and when equal treatment obligations are triggered. Misunderstanding these obligations can lead to avoidable disputes and compliance failures, particularly where agency arrangements are used on a long-term or recurring basis.

Section B: Employment status: where do agency workers fit in?

Understanding the employment status of agency workers is critical for employers, as status determines which statutory rights apply and where legal risk may arise. Agency workers do not sit neatly within the traditional employment model, and their status must be assessed by reference to statutory definitions, contractual arrangements, and the reality of the working relationship.

Under UK law, individuals generally fall into one of three categories: employee, worker, or self-employed contractor. Agency workers are most commonly classified as workers, although in some circumstances they may be able to establish employee status, either with the agency or, less commonly, with the hirer.

In most standard agency arrangements, the agency engages the individual under a contract for services or a contract of employment, and supplies them to the hirer to perform work under the hirer’s supervision and direction. The presence of control, personal service, and mutuality of obligation will influence status, but these elements are often fragmented across the agency–hirer relationship. As a result, agency workers frequently fall within the statutory definition of a “worker” rather than an employee.

Worker status provides access to core statutory rights, including the national minimum wage, paid annual leave, rest breaks, protection from unlawful deductions from wages, and protection from discrimination. These rights apply regardless of the length of the assignment and operate alongside the specific protections conferred by the Agency Workers Regulations.

Employee status carries a broader set of rights, such as protection from unfair dismissal, statutory redundancy pay, and family-related leave. Agency workers will only acquire employee status where there is a contract of employment and sufficient mutuality of obligation. This is more likely to arise where an agency provides continuous work and is obliged to offer assignments, or where the working arrangements create ongoing reciprocal commitments. However, employers should not assume that a long assignment on its own will create employee status, as tribunals will look closely at the overall facts, including whether there is any obligation to provide or accept work between assignments.

For hirers, the risk of being deemed the employer of an agency worker is generally low, but it is not impossible. Where the hirer exercises a high degree of control, determines key terms, and the arrangement lacks genuine agency independence, an implied contract of employment may be alleged. Tribunals are cautious about imposing such relationships, but employers should be aware that poorly structured arrangements can increase exposure, particularly where the reality of the relationship is inconsistent with the written documentation.

Self-employment is also sometimes asserted in agency contexts, particularly where individuals operate through personal service companies or umbrella companies. However, labels are not determinative. If the reality of the relationship involves personal service, control by the hirer, and no genuine right of substitution, self-employment may be challenged for employment law purposes, even if tax treatment differs.

Section summary

Agency workers typically fall within the category of workers rather than employees, but status is not fixed and depends on the facts of the engagement. Employers must understand how control, mutuality of obligation, and integration affect status assessments, as misclassification can give rise to unexpected statutory liabilities and employment tribunal claims.

Section C: Commercial context: pros and cons

From a commercial perspective, the use of agency workers offers employers a level of flexibility that is difficult to achieve through permanent recruitment alone. However, these advantages must be weighed against financial, operational, and legal considerations that can affect workforce planning and risk management.

One of the principal benefits of agency labour is responsiveness. Employers can scale their workforce quickly in response to seasonal demand, project-based work, or unexpected absences without the long-term commitment associated with permanent hires. This can be particularly valuable in sectors such as logistics, manufacturing, healthcare, and professional services where workload can fluctuate significantly.

Agency arrangements can also reduce certain administrative burdens. Recruitment, payroll processing, and, in some cases, disciplinary and performance management responsibilities are often handled by the agency. This can allow internal HR teams to focus on core employees while maintaining operational continuity. In addition, agencies may provide access to specialist skills or niche experience that would be difficult or time-consuming to source directly.

Cost certainty is another perceived advantage. Agency fees are typically agreed in advance and can offer predictable short-term expenditure. Employers may also avoid costs associated with redundancy, notice periods, and long-term benefits. However, this must be viewed carefully, as agency rates often exceed the direct employment cost of comparable employees, particularly once the 12-week equal treatment threshold under the Agency Workers Regulations is reached.

There are also clear drawbacks. Long-term reliance on agency workers can undermine workforce stability, affect morale among permanent staff, and limit investment in training and development. From a compliance perspective, employers must monitor qualifying periods, role changes, and access to facilities to ensure ongoing adherence to legal obligations. Failure to do so can erode the perceived flexibility benefits and introduce legal risk.

Commercial risk also arises where agency arrangements are used to avoid employment obligations. Employers should be aware that agency labour cannot lawfully be used as a substitute to sidestep statutory protections. The anti-avoidance provisions within the Agency Workers Regulations are designed to prevent hirers from structuring assignments to deny workers their rights. Where tribunals find that assignments have been deliberately manipulated, additional compensation may be awarded.

Reputational considerations should not be overlooked. How an organisation treats agency workers can affect its employer brand, particularly in competitive labour markets. Equal treatment, transparent processes, and consistent management practices can help mitigate this risk and support longer-term recruitment objectives.

Section summary

Agency workers can provide valuable commercial flexibility and operational support, but they are not a risk-free solution. Employers must balance short-term workforce agility against cost, compliance obligations, and the potential impact on organisational culture and reputation.

Section D: The agency relationship

The agency relationship is a tripartite arrangement involving the agency worker, the temporary work agency, and the hirer. Understanding how responsibilities are allocated within this structure is essential for managing legal risk and ensuring compliance with employment law obligations.

The contractual relationship typically operates on two levels. First, there is a contract between the agency and the worker, which may be a contract of employment or a contract for services. This contract governs pay, notice, and other core terms. Secondly, there is a commercial contract between the agency and the hirer, setting out the terms under which labour is supplied, including fees, duration of assignments, and allocation of liability.

Although the agency is usually responsible for paying the worker and managing contractual terms, the hirer exercises day-to-day control over how the work is carried out. This includes supervision, working hours, performance standards, and health and safety arrangements. As a result, employment law obligations are often shared, with liability depending on which party is responsible for the breach.

Under the Agency Workers Regulations, agencies are primarily responsible for ensuring equal pay and other basic working conditions after the 12-week qualifying period, provided they have been given accurate information by the hirer. Hirers, in turn, are responsible for access to collective facilities, information about job vacancies, and for supplying agencies with correct details about comparable employee terms. Where a hirer fails to provide accurate information, liability for equal treatment breaches may transfer to the hirer.

Clear contractual documentation is critical. Agreements should set out information-sharing obligations, indemnities, and mechanisms for monitoring qualifying periods. Employers should also ensure that agencies are reputable and have robust compliance systems in place, as deficiencies in agency processes can still expose the hirer to claims.

Health and safety obligations are another key aspect of the agency relationship. Hirers owe duties to agency workers under health and safety legislation, as they control the workplace and working practices. Risk assessments, training, and appropriate supervision must be provided in the same way as for directly employed staff.

Data protection and confidentiality should also be addressed. Agency workers often have access to sensitive information, and employers must ensure appropriate safeguards are in place through both contractual controls and workplace policies.

Section summary

The agency relationship divides responsibility across multiple parties, but it does not dilute legal accountability. Employers must understand where their obligations begin and end, ensure clear contractual arrangements, and maintain active oversight of agency engagements to avoid compliance failures.

FAQs

Do agency workers have the same rights as employees?
Agency workers do not generally have the same rights as employees. They are usually classified as workers, which gives them access to core statutory rights such as paid annual leave, minimum wage, and rest breaks. Additional equal treatment rights apply under the Agency Workers Regulations after 12 weeks in the same role with the same hirer.

When does the 12-week qualifying period start?
The qualifying period starts on the first day an agency worker begins an assignment with a hirer in a particular role. It continues to accrue during breaks of six weeks or less and in certain other circumstances, such as sickness absence, annual leave, or workplace shutdowns. Substantial changes to the role may reset the qualifying period.

Who is responsible for compliance with the Agency Workers Regulations?
Responsibility is shared between the agency and the hirer. Agencies are typically responsible for pay and contractual terms, while hirers are responsible for access to facilities, job vacancy information, and providing accurate information to the agency about working conditions and comparable employees. Liability for equal treatment breaches can fall on the agency, the hirer, or both, depending on fault and information provided.

Can agency workers bring employment tribunal claims against hirers?
Yes. Agency workers can bring tribunal claims where their statutory rights are breached, including claims under the Agency Workers Regulations and discrimination claims under the Equality Act 2010. Depending on the issue, the claim may be brought against the agency, the hirer, or both.

Can using agency workers reduce employment law risk?
Using agency workers can reduce certain risks associated with permanent employment, such as redundancy obligations and long-term contractual commitments. However, it introduces its own compliance risks, particularly around equal treatment, employment status, and health and safety. Proper management and oversight are essential, and agency labour should not be used to avoid statutory protections.

Conclusion

Agency workers play an important role in the UK labour market, offering employers flexibility and access to skills while supporting workforce resilience. However, the legal framework governing agency work is complex and requires careful management. Employers cannot assume that using agency labour removes employment law obligations or transfers all responsibility to the agency.

Understanding how the Agency Workers Regulations operate, how employment status is assessed, and how responsibilities are shared within the agency relationship is essential for compliance. Long-term or poorly structured arrangements can increase exposure to claims, particularly where equal treatment rights are overlooked or status issues are ignored.

By maintaining clear contractual arrangements, monitoring qualifying periods, and treating agency workers consistently and fairly, employers can mitigate legal risk while continuing to benefit from the commercial advantages of agency labour.

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