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AWR Simplified Manage your costs, manage your admin, manage your risk Agency Workers Regulations AWR Simplified

1. Introduction At any one time, there are up to 1.5 million Agency Workers on assignment in the UK Flexible working is an integral part of the UK labour market, particularly during uncertain economic times. In many organisations, a flexible workforce is required to: Meet skills shortages Provide regular short term supply in vocational sectors Meet genuine short term needs for cover Deliver critical projects Enable flexibility to meet seasonal, or fluctuating demand Maintain continuity during planned absences In October 2011, the Agency Workers Regulations 2010 (the AWR) will come into force in the UK, which will provide equal treatment on certain matters to Agency Workers who have completed a 12 week qualification period. Whilst the law may be changing, those benefits of using Agency Workers remain the same. At Reed, we have produced a guide to the changing legislation and what it means for you. We have been working with our clients as well as the Department for Business, Innovation and Skills (BIS) and other bodies representing the recruitment industry during the development of the AWR. Our aim has been to understand the impact of the AWR on the flexible workforce, and on the systems and processes that support the supply of Agency Workers. Guidance notes published by BIS in May 2011 have now been released and hirers will need to understand the impact of this legislation. At Reed we see it as our job to inform and consult with hirers to ensure that they understand and are prepared for arrival of the AWR. Reed Specialist Recruitment is a specialist provider of permanent, contract, temporary and outsourced recruitment solutions, IT and HR consulting. Assisting jobseekers and employers since 1960. Reed s global expertise spans Europe, the Middle East and Asia Pacific. 2. What are Agency Workers entitled to under the AWR? (a) Rights after the 12 week qualifying period After the completion of a 12 week qualifying period, Agency Workers will become entitled to a number of the same basic terms and conditions to which they would have been entitled had they been recruited directly by the hirer. This includes those basic terms and conditions relating to pay, working time, rest breaks and annual leave. AWR Simplified

The following table summarises what terms and conditions are included: Nature of pay/benefit Basic Salary Company holiday entitlement in excess of statutory entitlement Overtime payments Unsociable hours payments (e.g. shift allowances, danger money) Restrictions on night work Rest breaks Vouchers or stamps with monetary value (eg. luncheon vouchers) Personal performance bonus (e.g. commission and/or linked to personal output) Bonus based upon organisational performance (eg. company share or profit related schemes) Company sick pay in excess of statutory entitlement Notice periods/redundancy pay Company maternity/paternity/adoption pay in excess of statutory entitlement Occupational pension contributions or schemes Applicable under the AWR? No No No No No Example After completion of the 12 week qualifying period, an Agency Worker on assignment as a call handler within a contact centre would become entitled to be paid at the same basic rate of pay he or she would have received had he or she been directly recruited by the hirer. In addition, they would be entitled to the same working time, and payment for any shift premiums, or bonus payment based on individual performance as if they had been recruited directly. They would not receive any additional payments for enhancements to sick pay or other benefits such as pension or healthcare.

The question of bonus schemes Under the AWR, Agency Workers will be eligible only for bonus that is related to their personal performance. Therefore, Agency Workers will not be entitled to bonus which relates wholly to organisational performance (eg. company share or profit related schemes). However, this means that where hirers operate hybrid schemes that contain elements based upon individual and company performance, the element relating to the Agency Worker s performance will have to be identified and paid to the Agency Worker. Included Excluded The following table summarises the types of bonuses that are typically included and excluded under the AWR: Commission linked to sales Bonus reflecting organisational performance with no recognition Individual KPIs, e.g. call handling for individual contribution Individual performance Loyalty or retention bonus Do I have to assess agency workers in the same way? Whilst Agency Workers have the right to be paid bonus based upon performance, there is no requirement for them to be integrated into the same performance appraisal systems of the hirer. The question of whether or not to replicate the exact system for measuring and monitoring performance will largely be one dependent on the ease of assessment and time required by managers to do so. Choosing to use a simpler process for assessing the performance of temporary staff may be an option, although hirers will still need an approach that accurately links performance and rewards. (b) Rights from the first day of an assignment In addition to rights gained after 12 weeks, Agency Workers will also be entitled to the following from the first day of their assignment: Access to facilities e.g. childcare, transport, car parks, canteen and other onsite facilities Access to internal vacancies in line with the company s internal recruitment policy Responsibility for providing access to amenities and facilities will rest with the hirer and so hirers should review existing policies to ensure compliance. The guidance notes released by BIS provide some additional information about these points and it is important to note that these rights of access are not designed to give enhanced rights of access to Agency Workers over those recruited directly by the hirer. The purpose of the AWR is to provide parity of treatment between Agency Workers and those recruited directly by the hirer. In that regard, if a hirer has a policy which sets out the criteria that its permanent employees must meet before becoming entitled to such facilities, then those criteria could also be applied to the Agency Workers. Furthermore, in certain circumstances, a hirer may be able to objectively justify not providing Agency Workers with access to such facilities. AWR Simplified

Example - an organisation publishes all internal vacancies onto a company intranet, through which Agency Workers will have access to apply for internal vacancies, in the same way that a comparator doing the same, or broadly similar work would. Qualification or experience criteria for the role, or any preferences given to staff within a redundancy redeployment pool would remain valid and the hirer would continue to treat applications based upon these types of criteria. 3. Who is in scope under the AWR? An Agency Worker is defined under the AWR as an individual supplied by a temporary work agency (who has a contract of employment or a contract to perform work personally for the temporary work agency) to work temporarily for and under the supervision and direction of a hirer. The fact that an individual is supplied via an intermediary (such as master and neutral vendors and umbrella companies) does not prevent the individual from being an agency worker for the purposes of the AWR. Only those genuinely in business of their own account (the self employed) will be out of scope. Typically, indicators of self employment could include a combination of the following: People who submit their own invoices and tax returns People with their own business and public liability insurance People who receive no payments for sickness and holiday pay People who are not required to perform the work personally, and are not under direct supervision and control of the hirer when working People who provide their own equipment and materials when working (a) Can Agency Workers opt out of the AWR? No. Any provision in an agreement which attempts to exclude the AWR will be void. (b) Can hirers structure assignments to avoid the AWR? The AWR contain a number of anti avoidance provisions, which if breached can result in additional awards of up to 5,000 on top of any outstanding pay/benefits owed to the Agency Worker as decided in the Employment Tribunal. Seeking to manage your workforce in such a way as to avoid Agency Workers from completing the qualifying period will risk serious financial and reputational damage.

4. How are complaints handled? After completion of the 12-week qualifying period, and provided the assignment is continuing, an Agency Worker is entitled to submit a written request to their agency for the following information: relevant basic working and employment conditions in force; the factors considered by the agency when determining the basic working and employment conditions applicable to the Agency Worker; and if appropriate, the basis upon which a comparator was identified, and the relevant terms and conditions applicable to that comparator. Upon receipt of such a request, the agency has 28 days to provide the information to the Agency Worker. If this information is not provided by the agency within 30 days of the request, the Agency Worker may refer the request directly to the hirer. The hirer will then have to respond to this request within 28 days. Reed would of course endeavour to respond to any such requests from Agency Workers. If the complaint cannot be resolved through the above procedure, the Agency Worker may bring an Employment Tribunal complaint. Agencies and hirers will be responsible for breaches to the AWR to the extent that they are liable. Employment Tribunals will have the power to award compensatory awards of loss, subject to a minimum of two weeks pay to any Agency Worker who successfully makes a claim under the AWR. In addition, Employment Tribunals could make an additional award to the Agency Worker of up to 5,000 where the agency or hirer has deliberately structured assignments in order to prevent the Agency Worker from completing the 12 week qualifying period. 5. Who do I establish equal treatment? The AWR states that the obligation to provide the same basic terms and conditions is satisfied if the Agency Worker is engaged on the same terms as a comparable employee, provided that the comparator s terms reflect terms and conditions typically included in employees contracts in the hirer s organisation. Identifying an appropriate comparator and providing the Agency Worker with the same basic terms and conditions as that comparator will therefore provide a defence to a claim for equal treatment under the AWR. Organisations who currently operate clearly defined pay banding systems, or who are part of national terms and conditions of pay will be able to use these systems to identify suitable comparators. The sharing of this information and the processes for doing so will require greater contact with agencies and closer working relationships with trusted recruitment partners. AWR Simplified

Example an organisation has introduced a robust pay and grading structure, that requires all new starters to begin at the lowest point on the pay scale, and progress through the bandings based upon performance. An Agency Worker after completing the 12 week qualfiying period will become to be paid at the bottom of the equivalent pay banding for that role. In addition to this, they will be entitled to additional terms, such as holiday, as if they had been recruited directly.the Agency Worker will also be entitled to pay progression through the band, based upon the same conditions enjoyed by directly recruited staff. Hirers may also seek to review their approach to pay and/or require additional resources to undertake an analysis of the impact of AWR on their business. This should include proactively establishing the comparators for roles which are regularly filled by agency workers to reduce the time and risk of identifying comparable salaries on an ad hoc basis. Reed are experts in the areas of job evaluation and remuneration benchmarking and have been undertaking AWR impact analysis with a number of clients across a variety of sectors. It may be that we can do some of the hard work for you. 6. How is the qualifying period calculated? To make a claim for equal treatment under the AWR, the Agency Worker must have worked in the same role with a hirer for 12 continuous calendar weeks. It is important to note that: Certain situations pause the qualifying period Continuity will only be broken after a 6 week gap or commencement of a new and substantively different role Part of a week worked will count towards qualification The qualifying period can be completed by being supplied by several different agencies The following table summarises the different events that can pause or reset the qualifying period. Event Where the break is less than 6 weeks Where there is a break of 6 weeks or more Where the Agency Worker starts a new and substantively different assignment Sickness absence Annual leave Workplace shut downs (e.g. factory closure, school holidays) Jury service Industrial action Pregnancy and maternity related absence *Maternity, paternity or adoption leave Effect on qualifying period Pauses Resets Resets Pauses for up to 28 weeks Pauses Pauses Pauses for up to 28 weeks Pauses Continues Continues *Where the Agency Worker is an employee of the agency and is entitled to this leave

Example - An Agency Worker starts an assignment with a hirer. After two weeks in the role, she is off sick for a week. That sickness absence will pause the qualifying period and the Agency Worker will have to work for a further period of ten weeks upon their return from sickness absence before they become eligible for equal treatment under the AWR. In practice, this means that hirers of Agency Workers may want to consider working with fewer, trusted agencies who can track qualification, maintain accurate records, offer assurances about data security and provide management information without additional administrative burden. Also, in certain sectors, simply tracking the qualification will provide some of the most difficult challenges. Hirers who regularly re-use the same workers in short term shifts patterns, for example in hospitals and schools will need to have sophisticated systems, or work with agencies that do, in order to track qualification. 7. What is a substantively different role? The qualifying period is reset where an Agency Worker starts a new or substantively different role. Whether a role is new or substantively different will depend entirely on the circumstances, although a combination of the following factors may indicate that the role is new or substantively different: include different skills and competences have a different pay rate work in a different location or cost centre work for a different line manager work different hours require extra training or a qualification that wasn t needed before 8. Impact of the AWR At Reed, by using our experience of working across 30 recruitment specialisms and conducting in-depth impact analyses with our clients we believe that AWR will affect different sectors, industries and organisations in different ways. We have been working with clients to effectively ensure that they; Manage the costs of temporary recruitment Reduce the administrative burden of compliance Reduce the risk of non compliance In the first instance, hirers need to undertake an impact analysis to determine exactly how the AWR will affect them. Following this, hirers can determine action plans and work with their agencies to ensure compliance. Successful collaboration between procurement, finance, and HR departments in conjunction with agencies is essential in making this work. AWR Simplified

Hirers need to consider the following: Cost Impact assessment Benchmarking Policy review Review of T&Cs and bonus schemes Admin Collecting comparator data Sharing comparator data Reviewing ordering processes and controls Provision of management information Risk Recruitment policy review Review of collective facilities and amenities Relationship with agency(s) & supply models Managing your employer brand We consider that the impact of AWR is dependent upon a number of factors which include; The volumes of Agency Workers in your organisation The visibility you have of Agency Workers in your organisation The variance in existing pay when compared to your direct workforce By asking yourself the following questions, you will be able to start determining the impact of AWR of your organisation. What purpose do Agency Workers fulfill in my business? How many Agency Workers will be in scope of the AWR? How often do I order these roles? How easy is it to define comparators for the roles they occupy? What T&Cs do I offer that form part of equal treatment? Which of the T&Cs covered by AWR are currently given to Agency Workers? Does my current agency relationship work for me? How will I manage the additional administration? Who in my organisation will be responsible for ensuring we are prepared? How will I allow access to amenities, facilities and vacancies?

9. How Reed can help As an Employment Tribunal could apportion blame to the hirer and/or agency for a breach of the AWR, agencies and hirers will need to work together to ensure that Agency Workers receive their entitlements. At Reed, we are seeking to simplify the implementation of the AWR and streamline the process of gathering data and tracking compliance in order to make the introduction of the AWR as smooth as possible. Increased requirements for the hirer to share information will mean closer working relationships with fewer, trusted agencies for many hirers. Reed has a dedicated project team reviewing all aspects of the legislation, ensuring that our systems and processes support implementation of the AWR. We have also been conducting industry leading impact analysis projects across a variety of sectors. We are focusing on: Supporting our clients to understand how AWR will affect their business. Offering market leading solutions which reflect the range of challenges which each of our clients will face and reflects business need and budgetary restraints. Managing the flow of information which is critical in managing compliance and ensuring equal treatment. Reed will: collect data efficiently and store it securely manage the sharing of relevant data across the appointed supply chain (in supply chain arrangements) 10. The future of the UK labour market. Agency Workers will continue to form an integral part of the UK workforce as we adjust to overcome economic instability. Following the introduction of the AWR we may well see that the use of Agency Workers becomes of greater strategic importance, with hirers and agencies working more closely together to plan effectively for the deployment of a flexible workforce. The introduction of the AWR will mean that hirers will look for trusted recruitment partners who can demonstrate the capability to provide the tracking and reporting processes necessary to comply with the AWR. For many hirers, this will mean moving towards closer relationships with fewer, trusted agencies who can support them in managing compliance. AWR Simplified

At Reed, we are seeking to work with our clients as a trusted partner, offering comprehensive, flexible resourcing models, efficient processes and risk management strategies to assist them during the introduction of the AWR. For further information Reed has: A dedicated set of resources available via /awr, including a series of public seminars, interactive online assessment tools and guidance notes Impact analysis consultancy services An AWR advisory service Comprehensive recruitment solutions to support you to manage costs The ability to track and monitor compliance in complex environments Trusted HR Consultancy services. For more information about how Reed can help support you with our bespoke AWR impact analysis consultancy, or for more details on our diagnostic tools, and advisory support please contact: awr.query@ or visit www./awr. Disclaimer Please note that the information on the AWR contained in this document is provided free of charge for information purposes only. Every reasonable effort was made to make the information accurate and up to date, but no responsibility for its accuracy and correctness, or for any consequences of relying on it, is assumed by Reed Specialist Recruitment Limited. The information contained in this document does not and is not intended to be legal advice.

AWR Simplified