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Hiring Agency Workers

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Temporary and agency workers are a part of an organisation’s workforce who are not engaged permanently.

This guidance provides an overview of the legal considerations for employers when hiring agency workers and temporary workers.

 

Agency Worker Regulations

Legislation covering agency workers and temporary workers is provided by the Agency Workers Regulations 2010 which came into force on 1st October 2011 and the Agency Workers (Amendment) Regulations 2019 (both referred to in this guide as the “Regulations”) which came into force on 6th April 2020.

The term ‘agency worker’ is often used in the workplace to describe several types of similar workers, although it has a specific meaning under the Agency Workers Regulations 2010. Agency workers are also often referred to as ‘temps’ within the workplace.

The Regulations apply to:

  • Persons who work as temporary or agency workers
  • Persons or organisations, including private and public organisations, charities or social enterprises who are involved in the supply of agency workers. Whether that is directly or indirectly, to work temporarily for and under the direction of a ‘hirer’.
  • Sometimes referred to as the ‘Temporary Work Agency’ (TWA).
  • Hirers include public and private organisations, charities and social enterprises

 

The Temporary Work Agency

These types of agencies supply workers on a temporary basis to third parties (the hirer). The worker then works under the direction and supervision of the hirer but has a contract with the TWA. The Regulations describe a TWA as an individual or company in business, whether operating for a profit or not involved in the supply of agency workers. As stated above, the Regulations include private and public companies, charities or social enterprises, and may be a ‘high street’ agency or an intermediary, such as an umbrella company, if they are involved in the supply of agency workers.

 

The Agency Worker

The agency worker, often referred to as the temp, is an individual who has a contract with the TWA but works temporarily for and under the supervision and direction of the hirer. This trilateral relationship between agency, agency worker, and hirer is a primary feature of the Agency Worker Regulations.

The elements required for an individual to be an agency worker are:

  • There is a contract between the agency worker and the TWA
  • The agency worker is temporarily supplied by the TWA to a hirer
  • The agency worker is subject to the direction and supervision of the hirer when working on assignment
  • The agency worker is not in a business on their own account

 
Agency workers are entitled to a range of statutory protections under the Working Time Regulations, National Minimum Wage, and have agency worker employment rights. The Agency Worker Regulations also provide individuals with two types of rights, the first, which they receive from the first day of any assignment, and the second, which they receive after 12 weeks.

 

Day-1 Rights

  • To be informed of any relevant vacancies in the hirer’s company. This could amount to a general announcement in a suitable place, such as a notice board or intranet, for example.
  • To not be treated less favourably than an equal worker regarding “collective facilities and amenities.” This includes staff canteens, transport services and childcare facilities. It may also include prayer rooms, car parking, common rooms, shower facilities, on-site gyms, and mother and baby rooms.

 
Access does not have to be given if the equal worker would not have access, or if they do, but the less favourable treatment could be objectively justified. Here, the hirer would have to be seeking to achieve a “genuine business objective” and the treatment of the agency worker is a “necessary and appropriate” way to achieve that objective. Costs can be taken into consideration, but it is extremely unlikely hirers will be able to rely on this justification alone.

An example of less favourable treatment that may be objectively justified could be something like granting direct hires first refusal to use a work shuttle bus because places are limited. The reasons for providing the service, such as encouraging staff retention or talent recruitment, could be justified on the basis the company is better served, giving priority to direct hires over agency workers, as they are likely to be there only temporarily. It is important to say, this is merely an example, and the hypothesis put forward is untested. This is because there is very little guidance on the circumstances when a business could objectively justify less favourable treatment.
Since April 2020, an agency worker must receive an itemised payslip, and a written statement of particulars.

Hirers are also responsible for making sure all agency workers receive their day one rights. Hirers are solely accountable for any breaches in relation to these rights.

 

Twelve-week rights

Following completion of the twelve-week qualifying period, an agency worker will have the right to the same basic employment and working conditions they would have received if they were employed directly by the organisation to perform the same role. The rights cover terms and conditions surrounding:

  • Pay – this includes salary, wages, commission, holiday pay, overtime, shift allowances, car allowances, vouchers and/or stamps (if they can be exchanged for money, goods or services, and they are of a fixed value).
  • The duration of working time
  • Working at night
  • Rest breaks and rest periods
  • Annual leave entitlement
  • Pregnant workers are entitled to paid time off to attend ante-natal appointments. Agency workers who have completed the qualifying period and are classed as in a “qualifying relationship” with a pregnant woman or the expected child are also entitled to unpaid time off to attend two ante-natal appointments.

 
The TWA, not the hirer, provides these terms and conditions and will be liable for any breach of the agency workers’ twelve-week rights. However, this is only to the degree it was responsible for the violation. The hirer may also be accountable, to the extent it was at fault.

It is the hirers’ responsibility to hand over the correct information to the TWA about the workers’ basic working conditions of its equal or comparable employees or update the TWA about any change in pay. If the hirer does not do this or gives the TWA incorrect data, leading to the infringement of the agency workers’ rights, liability transfers from the TWA to the hirer.

 

The Hirer

The hirer is a ‘person’ (this includes a company, partnership, sole trader or public body) which is engaged in ‘economic activity’ (whether for profit or not), who hires workers via the TWA. The hirer directs and supervises the agency worker while they fulfil the assignment.

The hirer must ensure that the agency worker is treated equally to that of a comparable permanent employee.

The test to establish equal treatment is: “on what terms would the agency worker have been employed had the hirer employed the individual directly?” If the TWA or hirer can show that the treatment of the agency worker is consistent with that of a comparator employee (doing broadly similar work), they will be deemed to have complied with the Regulations. It is not necessary to have an actual comparator employee.

Certain types of pay would need to be matched, for example, salary/wages, commission, overtime, holiday pay, shift allowances or car allowances, but benefits that are not classed as “sums payable” which are close in conceptual terms to “pay” are not required to be matched. This includes:

  • Benefits in kind
  • Company vehicle
  • Percentage discounts
  • Insured benefits
  • Pension contributions
  • Option or share schemes
  • Redundancy pay
  • Sick pay
  • Family leave pay
  • Notice pay
  • Any benefits given via salary sacrifice schemes also do not need to be matched. Instead, the agency worker is entitled to pre-sacrifice pay.

 

Complying with information requests

If an agency worker believes the TWA or the hirer has breached the Regulations, they have the right to make an information request. Any request must be addressed to the hirer in the case of day one rights, and to the TWA if they have not received a response. With twelve-week rights, the request should be directed to both the TWA and the hirer.

 

Key points for hirers

  • Ensuring they are aware of the rights afforded to an agency worker from day one of their assignment.
  • Be aware of those agency workers who are nearing or have completed the twelve-week qualifying period and their entitlement to the same basic employment and working conditions of someone employed direct by the hirer to perform the same role.

 

Employment status of agency workers

Rights of agency workers or temporary workers depend on the following:

  • Whether they have employee status
  • Fall within the legal definition of “worker”
  • Have completed the required period of continuous employment in order to qualify for certain rights.

 
An agency worker can be a worker or an employee of the TWA, but is not likely to be either of the hirer. It is extremely rare for an agency worker to be found to be a worker or employee of the hirer, and case law suggests the same. The case of James v Greenwich LBC found that a relationship of employment will only be found to exist between a hirer and an agency worker, where it is necessary to give proper effect to the reality of the relationship.

Provided the agency worker has a contract of employment with the TWA and not the hirer, and the hirer has not incorporated the agency worker into its benefit schemes and payroll, the possibility of the hirer being found to be the agency worker’s employer is extremely low.

 

Advantages of using agency workers

There are many reasons organisations use agency workers, including:

  • To temporarily cover gaps in the workforce, possibly caused by busy periods, illness or staff being on annual leave
  • To avoid headcount restraints
  • To provide flexibility to get through peaks and troughs of demand or workload, for example, seasonal work
  • For the ease with which agency workers can be hired or terminated
  • The cost of hiring an agency worker may be lower than employing a permanent employee

 

Disadvantages of using agency workers

  • Compliance with the Regulations: providing the necessary pay information to TWAs can add to administrative burdens, and there is a liability risk for issues of non-compliance.
  • Additional costs: the hirer will pay a fee that covers the agency worker’s pay, the TWAs mark-up and other TWA overheads. This could easily add up to more than the cost of directly employing someone.
  • Discipline and compliance with policies: an organisation’s disciplinary procedures are unlikely to apply to agency workers, and therefore it may find an agency worker is less likely to comply with its policies. This leads to complications for hirers when dealing with unacceptable behaviour other than ending the hire under the terms of the contract with the TWA.
  • Loyalty and staff commitment: organisations sometimes experience less engagement and commitment from agency workers than they would from a permanent member of staff who has the opportunity for promotion, for example.

 

Hiring Agency Workers FAQs

Are agency staff classed as workers?

Agency workers are likely to be classed by an Employment Tribunal as workers as opposed to an employee. However, if an agency worker can show they are an employee, they will benefit from the full range of rights available to employees.

Who is the employer if you work through an agency?

Agency workers’ contracts of employment are with the temporary work agency (TWA) or employment agency, and they place the worker within a suitable hiring organisation (the hirer). So the TWA (employment agency) will be classed as your employer.

Are agency workers on zero hours contracts?

Agency work tends to come in the form of assignments requiring a certain period of time in each setting. This means that each assignment is performed separately, and an agency worker is generally not contracted by an employment agency in the intervening periods.

Do agency staff get sick pay?

If the agency worker is working on an assignment when they get ill, then they may be entitled to receive Statutory Sick Pay (SSP). If they are not on assignment when they fall ill, they will not be entitled to SSP. Generally speaking, they will not be entitled to receive sick pay from the hirer, either.

Last updated: 20 October 2021

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