A guide to the Good Work Plan and pay parity

The Taylor Review

In October 2016, the UK government commissioned an independent review of the UK’s
current work practices in order to keep pace with modern business models.

Matthew Taylor was appointed to lead this review and in July 2017 he presented his
“Good Work; the Taylor review of modern working practices”.

Contained in his review were numerous recommendations proposed, one of which was
that the Swedish Derogation should be repealed completely.

In response to this, in December 2017 the Government published its response to the
Taylor Review named “The Good Work Plan”, which sets out what has been described
as “the biggest package of workplace reforms for over 20 years” and outlines their
commitment to improving UK employment laws and to provide workers with access to
fair and decent work.

What is The Swedish Derogation (R10)?

The Agency Workers Regulations 2010 (AWR) came in to force in October 2011 and
provide agency workers with the right to be engaged on terms, relating to certain
employment rights, which are at least favourable as the terms applicable to the staff of
the client they are supplied to. These rights, often referred to as equal treatment, apply
to agency workers once they have completed their qualifying period (12 weeks)

Equal treatment applies to the terms relating to:

However equal pay doesn’t apply if an agency worker is engaged on a contract of
employment that complies with all provisions of Regulation 10 of the AWR. Such
contracts are commonly referred to as “Swedish Derogation” or “R10” contracts.

The Swedish Derogation is shorthand for a special type of employment contract provided for in Regulation 10 of the AWR. Its official name is a “pay between assignments” contract because workers engaged on these contracts with a temporary recruitment agency give up the right to pay parity with comparable permanent staff in return for a guarantee to receive a certain amount of pay when they have gaps between assignments.

The Swedish Derogation contract has been mostly used where large numbers of lower
paid minimum wage temps are needed e.g. retail, manufacturing, etc. According to the
Government’s figures, 8-10% of UK agency workers are on Swedish derogation contracts.

What does the removal of the Swedish Derogation mean?

Abolition of the derogation means that all agency workers will be entitled to pay
parity after the 12 week qualifying period and will have to be issued Regulation 5
employment contracts.

By no later than 30 April 2020 recruitment agencies must provide workers whose
existing contracts contain a Swedish derogation provision with a written statement
telling them that with effect from 6 April 2020, those provisions no longer apply.
Agency workers can bring a claim in the Employment Tribunal where their employer
fails to provide that statement on time.

Workers asserting rights under the new Regulations will be protected from
detriment and unfair dismissal.

What is the Qualifying Period?

All agency workers will be entitled to pay parity with effect from 6th April 2020, if they
have completed the 12-week qualifying period, or at the end of the qualifying period if
they have not completed 12 weeks’ work.

What is pay parity?

An agency worker is entitled to the same basic working and employment conditions as
direct recruits of the same business once they have undertaken the same role with the
same end client for 12 continuous calendar weeks.

It Includes;

It Does Not Include;

Why are clients and agencies worried?

If the end client has agency workers who are currently employed under Swedish
derogation contracts, then these changes could have significant financial implications
after the 12-week qualifying period because we the recruitment agency will then have to
pay the agency worker the same rate as a permanent member of staff doing the same
job at that company.

This will mean either charge rates have to go up for the end client, to accommodate the
AWR 12 week rule, as well as the additional administrative cost of ensuring Regulation 5 Pay Parity contracts are compliant.

How much this impacts on each end client and recruitment agency will depend on how
many agency workers they have on Swedish derogation contracts, how long for and in
what kind of roles. In particular, of course, the cost will depend on how great is the gap
between what the agency currently pay those temps and what it will need to pay when
they are entitled to the same rates as the end clients comparable permanent staff.

What steps are SureStaffing taking?

At SureStaffing, we are currently talking to all our clients to discuss the ramifications
of the abolishment of Swedish Derogation and sending out Due Diligence
Questionnaires to obtain all matters surrounding equal treatment and pay parity and
advise those clients with whom this will impact and to discuss the way forward.