Experts have called on employers and the government to demystify agency workers’ employment status after a recently released report found many did not know “key facts” about their jobs and were missing out on their legal entitlements.
The report by The Resolution Foundation found a lack of information about entitlements, and in some cases intentional obstruction, was leading agency workers to miss out on £500m a year in lost holiday pay alone.
In 2017, agency workers missed out on an estimated £290m because of the pay disparity between permanent and agency staff.
It suggested a “complex legal jigsaw” meant firms could “contract agency workers in a bewildering variety of ways” with different implications for pay and entitlements.
It also uncovered poor awareness of the right to participate in workplace pension schemes, despite more than 500,000 agency workers being eligible to be auto-enrolled.
The report said: “Agency workers appear to have low levels of knowledge about the core benefits to which the majority are entitled. While there is clearly good practice in the industry, with some agencies providing easy-to-understand information about holiday pay and other rights, obfuscation is also widespread.”
Deductions for uniforms, administration, travel costs and insurance were also eroding pay packets, and employers were using the practice known as “Swedish derogation” – or pay-between-assignment contracts – that allows them to pay agency staff lower rates than comparable staff for more than the 12 weeks stipulated by the Agency Worker Regulations.
The report follows the recent leak of plans suggesting the government expects to act on a number of recommendations made in the 2017 Taylor Review, including introducing legislation to clarify the criteria that determines employment status and potentially closing the Swedish derogation loophole.
The Resolution Foundation said it was “paramount” workers be given a written statement from day one outlining their role and rights. Currently, only employees are entitled to such a statement, which employers have a month to produce.
The report also said the boundary between self-employment and other legal forms of employment was blurry for many, but said the confusion for the self-employed was “nothing compared to whether participants could distinguish if they were a worker or an employee.”
Clarity on holiday pay was also viewed as essential, alongside more effectively communicating to agencies themselves that rolling up holiday pay – where extra pay is added to wages instead of paid holiday leave – is unlawful.
Only employees are entitled to all statutory employment rights, however, workers are entitled to some, including the national minimum wage, those relating to working hours and annual leave.
Lindsay Judge, senior research and policy analyst at the Resolution Foundation, said: “The varied nature of agency work presents a real challenge for policy makers, who must address poor regulation and poor practice while preserving the widespread positive aspects of the work.”
The report concluded agency work was still a popular form of employment for many people, and said the government should adopt a balanced approach to improve conditions in the sector without undermining flexibility where it works for workers and firms.
Ian Brinkley, acting chief economist at the CIPD, added the report highlighted significant problems faced not only by agency workers but also many regular workers.
“We fully support the recommendations for better enforcement of existing rights and campaigns to raise awareness among all workers, with special efforts to reach the most vulnerable groups and to also consider further regulation of the labour market to address specific abuses,” he said.
The Department for Business, Energy and Industrial Strategy has not responded to a request for comment.