News

The end of Swedish Derogation and what it means for you

As well as keeping on top of the changes to IR35, there will also be changes to the Agency Worker Regulations (“AWR”) to worry about come 6th April 2020.

Currently, under the AWR, agency workers can work under “Swedish Derogation” which means that instead of receiving the normal pay rights awarded to agency workers after being employed in the same assignment for more than 12 weeks, they are paid between assignments. The worker is an employee of the agency and when the worker is not on an assignment for a client, the agency will pay the worker for a minimum of four weeks while they are not on assignment. The agency only needs to pay the worker National Minimum Wage so workers may not be paid the same as a worker in a similar role earns. Therefore, the financial implications of working under Swedish derogation could be detrimental to the worker.

However, this is all going to change. The government released its Good Work Plan which includes the revocation of Regulations 10 and 11 from the AWR which mean the abolishment of Swedish derogation. This means that all agency workers will be entitled to equal pay after the 12 week qualifying period. This will have a major impact for clients as after the 12 week qualifying period, the client will need to pay the agency worker the same rate as direct employees. The government estimates that around 120,000 workers will be affected.

There will also be an impact on recruitment businesses as client terms and pay rates will need to reviewed.

Recruitment businesses who have existing contracts with agency workers which contain a Swedish derogation provision must provide the worker with a written statement by 30th April 2020 which informs them that with effect from 6th April 2020, those provisions will no longer apply.

If you have any queries on the revocation of Swedish derogation and would like advice on the possible implications to your recruitment business, please get in touch with us on 0333 400 4499 or by email to francesca.damario@cognitivelaw.co.uk.

Francesca Damario