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The Taylor Review: Is this the end of agency work?

24 Jul 2017 By Hayley Kirton

The Taylor review included some radical ideas for the future of flexible working, potentially placing agencies in the firing line

In the short time since the publication of the long-awaited Taylor review of modern working practices, plenty has been written about its possible implications for the future of work. But one of its most intriguing effects has been less discussed – it could spell the beginning of the end for employment agencies that supply temporary workers.

“Many employers will have perceived the focus of the Taylor review to be the gig economy but, in fact, it is much broader – it is apparent that Taylor and his panel have concerns over the treatment of some agency workers and want the government to act,” says Diane Gilhooley, head of the global human resources group at Eversheds Sutherland.

While the report, which estimates that there are as many as 1.2 million agency workers in the UK, does not dispute the importance of a flexible workforce to businesses, it adds that some employers are falling back on agency staff “when they could be more forward thinking in their scheduling”.

The proposals put forward by Matthew Taylor, chief executive of the RSA, include extending a right to agency workers who have been with the same employer for 12 months or more to request a direct contract with that hirer. Large employers would be required to publicly disclose how many agency workers they are using.

Calling the review a “promising step... to start closing loopholes and protecting workers”, Chris Moore, president of group operations at The Adecco Group UK & Ireland, says: “The UK’s contingent labour market remains one of the economy’s biggest assets. But to harness this, we need employers to be more transparent.”

Although the Recruitment & Employment Confederation welcomes the Taylor review, chief executive Kevin Green says: “We have some questions about the recommendations, including that employers should be obliged to report on their use of agency workers, as it’s unclear how this would benefit individuals and could create unnecessary bureaucracy for businesses.”

The proliferation of agency work has sparked interest among legislators over the last few years, amid reports that it has become commonplace for large retailers in particular to staff distribution centres solely with agency workers who have fewer rights than almost any other part of the labour market. The Resolution Foundation think tank has said agency workers are being routinely ‘exploited’ by employers.

The Taylor review proposes to act in this area by culling the Swedish derogation rule within the Agency Workers Regulations (AWR). This rule, named because it was introduced at the Swedish government’s request, creates an exemption to the general rule that agency workers should be granted the same basic pay as comparable employees after a 12-week qualifying period. While the AWR expressly prohibits employers from structuring work specifically to avoid equal pay, the Taylor review researchers came across examples where this had clearly been happening, including instances where workers were pressured into accepting such terms 11 weeks into their contract.

“The reason we decided in the end – we thought quite deeply about it – to get rid of the Swedish derogation, is that it’s clear it is being abused and we think the flexibility that employers and agencies want can be found without using that derogation,” Taylor said shortly after the report’s publication.

However, agencies warn that there may be unintended consequences. “The Swedish derogation provides agency workers with full employment rights, and was agreed by the government and all stakeholders including unions as part of negotiations in 2009 to implement the Agency Workers Directive,” says Green. “We are concerned that any attempt to amend the AWR risks watering down the rights for individuals and would create uncertainty for business.”

Although none of its members use the Swedish derogation rules regularly, Samantha Hurley, operations director at the Association of Professional Staffing Companies, adds: “It is illogical to simply demonise all use. Obviously, abusing regulations to avoid paying workers is scandalous, but we urge the government to tackle individual cases of abuse – where the model is used to avoid the obligation of basic comparable pay – rather than abolish certain worker models completely.”

Philip Harman, partner in the employment and pensions group at law firm DAC Beachcroft, says: “This opt out is used extensively in the sector and there is the counter argument that, rather than operating as a disadvantage to workers, it provides a degree of pay security for agency workers in between assignments in return for waiving the right to parity of pay with comparable employees. A repeal would result in significant upheaval to those areas of the sector relying upon the opt out.”

The Taylor review at a glance

  1. ‘Worker’ status should be replaced by the idea of ‘dependent contractors’ to sit between self-employment and full employment. They would have greater employment rights than workers do currently, and there would be clearer guidelines on determining employment status.
  2. Anyone employed on a zero-hours contract for 12 months or more should have the right to request fixed hours.
  3. Gig economy platforms should pay the average worker 1.2 times the minimum wage, though no individual minimum rate of pay was mandated.
  4. Individuals should be able to determine their employment status before going to a tribunal. Businesses that fail to reflect tribunal rulings on the status of their workers could be fined.
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