Swedish derogation will end next year, government confirms

But details on legislation still lacking, as new payslip reforms take effect under Good Work Plan implementation

So-called ‘Swedish derogation’ rules governing the use of agency workers will come to an end next year, the government has confirmed, as it reasserted its intention to implement large portions of Matthew Taylor’s Good Work Plan employment reforms.

Last week, parliament approved the first package of the Good Work Plan, including bringing into force an entitlement to a day one statement of rights detailing a new employee’s pay and holiday allowance. 

This part of the plan, which came into effect on Saturday (6 April), means more than 300,000 workers who previously did not routinely receive a payslip will now do so, including those on casual or zero-hours contracts.

Payslips now also need to state the number of hours worked, making it easier for workers to ensure they are paid in full and at the correct rate.

The Good Work Plan, announced in December, formed the government’s response to the Taylor review of the impact of modern working practices and includes reforms to ensure workers rights keep up with changing world of work. 

Talking after the latest package of changes was confirmed, business secretary Greg Clark said the plan promised to build a labour market that rewarded people for hard work, celebrated good employers and boosted the productivity and earning power of workers.

“The UK has a labour market that it can be proud of, and we are committed to continue leading the way in workers’ rights. That is why we have introduced a new right for all workers to a payslip, ensuring workers are paid fairly,” he said.

“The legislation approved by parliament is a significant milestone in our concerted effort to deliver the largest upgrade in workers’ rights in over a generation.”

The Swedish derogation rules currently mean agency workers do not need to receive the same pay and conditions as employees in the company they are assigned to, as long as they are paid between assignments. 

It has been estimated that around 120,000 workers are currently affected by the rules, which the government has now confirmed will end in April 2020. But experts said they were concerned by the lack of detail on how agency workers will be treated, and which rules they will be governed by after this point.

Meanwhile, Ryan Barnett, economic policy adviser at the Association of Independent Professionals and the Self-Employed (IPSE), welcomed the government’s progress with the Good Work Plan as a “step in the right direction” toward clearing up confusion about employment status.

“This package of reforms will help to clarify and guarantee agency workers’ rights. The government must, however, also ensure that it walks the line carefully and never encroaches on people’s freedom to freelance,” he said.   

Lindsay Judge, senior research and policy analyst at the Resolution Foundation, said the changes were welcome news for the nearly one million workers who are employed through an agency. “Guaranteed payslips should help staff better understand their rights at work, while ending ‘pay between assignment’ contracts will help stamp out unfair pay,” Judge said.

“Scrupulous firms should have nothing to fear from these common-sense reforms.”

Judge called on the government to ensure the new regulatory changes were properly policed through tougher, targeted enforcement work. 

Duncan Brown, head of HR consulting at the Institute for Employment Studies (IES), said the direction of travel was toward ensuring workers, however they are contracted, had certain minimum protections at work and were made fully aware of their rights and benefits on starting work.

He added the changes were supported by most responsible employers, pointing to Hermes’ recent introduction of a new employment model for its drivers as an example of the voluntary action employers have taken to ensure the rights of their workers.

In February, delivery firm Hermes introduced a new “self-employed plus” employment model to fix its troubled relationship with gig economy workers. Under this contract, couriers can opt to utilise up to 28 days’ paid holiday and can also individually negotiate their pay rate to earn at least £8.55 per hour over the course of a year – more than the minimum wage, which is currently £8.21 an hour.

While welcomed by some, including the GMB union, which helped negotiate the deal, others raised concerns that the new status was only “muddying the water” to create confusion for workers and did not address the ongoing anomalies between tax status and employment status.