New agency triumph as Government moves to abolish Swedish Derogation

Telecoms & Financial Services

Just months after the CWU secured BT’s belated agreement to long-standing union demands for an end to the use of exploitative ‘Pay Between Assignment’ (PBA) contracts, the union’s wider political campaigning has notched up an even bigger victory.

On Monday this week the Government announced proposals that, if enacted, will abolish PBA contracts in their entirety – something that been the ultimate aim of seven years of CWU campaigning under the ‘Closing the Loopholes’ and ‘Close the Gap!’ banners.

Under the new legislation announced in response to the recommendations made by the Taylor Review of Modern Working Practices, the Government has signalled its intent to close a legal loophole in the UK Agency Worker Regulations that allows agency workers to be paid inferior pay rates to permanent employees.

That travesty of unequal pay for identical work by colleagues working side-by-side has been tirelessly highlighted by the CWU since 2011 when PBA contracts were first introduced by a recruitment industry that immediately cottoned on to the so-called ‘Swedish Derogation’s’ potential to sidestep the equal treatment aims of the EU’s Temporary Agency Workers Directive on account of the way the exemption had been introduced in UK law by the then Coalition Government.

Fulfilling the worst fears of the CWU, which had highlighted the danger of the legal loophole throughout the Tripartite discussions and subsequent consultation on the details of the UK’s Agency Worker Regulations, at a stroke employment agencies started to introduce PBA contracts.

Previously unheard of in the UK, the contracts cunningly utilise the  ‘Swedish Derogation’ that had ironically been introduced at the request of various Scandinavian countries to protect the exceptionally good terms traditionally enjoyed by high–end contract workers.

In those countries agencies have traditionally secured agency workers with valuable specialisms on their books by pledging to pay them ‘between assignments’ at rates that virtually matches the premium rates they receive when actually working, on what are typically genuine ‘short-term’ assignments.

Under the UK’s interpretation of the EU Directive, however, the Swedish Derogation was effectively turned on its head – allowing employment agencies (and by definition their client companies) to circumvent the duty of equal treatment on pay by issuing PBA contracts to even relatively lowly paid agency workers on extended (even indefinite) assignments – simply by offering a minimal level of pay for a limited time, when they were ‘between assignments’.

At a stroke, the introduction of what quickly became the ‘default’ agency contract issued by Manpower when employing staff to work in BT call centres effectively placed a ticking time bomb under huge victory that had just been won for an earlier generation of the CWU’s agency members, thousands of whom went on to equal pay when the Agency Worker Regulations first came into force.

Given high levels of staff churn, within just a few years the legacy AWR contracts had become a minority of the total – and by the time BT agreed to phase out its use of PBA contracts earlier this year, just a handful of agency workers who’d been taken on prior to 2011 remained on the hard-rom equal treatment terms.

Closing the loophole

The Government’s proposed scrapping of the Swedish Derogation within the UK Agency Worker Regulations is part of a number of legislative changes that take forward recommendations made not just by the Taylor Review of Modern Working Practices but also by two cross-party Select Committees.

Assuming the proposed law change makes its way onto the statute book – by no means a certainty in today’s uncertain political environment, the legislation announced this week would:

  • Close the loophole by repealing the Swedish Derogation – which currently allows agency workers to be employed on cheaper rates than permanent counterparts.
  • Extend the right to a day one written statement of rights to workers, going further to include detail on rights such as eligibility for sick leave and pay and details of other types of paid leave, such as maternity and paternity leave;
  • Quadruple maximum employment tribunal fines for employers who are demonstrated to have shown malice, spite or gross oversight from £5,000 to £20,000; and
  • Extend the holiday pay reference period from 12-52 weeks, ensuring those in seasonal or atypical roles get the paid time off they are entitled to.

In theory, such an outcome would tie up unfinished business within the CWU’s last two agency campaigns – but, following previous let-downs, assistant secretary Sally Bridge stresses the union will be monitoring events forensically and vigorously challenging any backtracking that may occur.

“If there’s one thing the CWU has learned over well over a decade of continuous campaigning on behalf of our agency members, it’s that hard won victories can all to easily be snatched away by a combination of political forces and powerful vested interests,” Sally points out.

“At face value, however, this week’s Government announcement represents a complete vindication of years of CWU campaigning on an issue on which our union has led the trade union movement.

“When we received the good news earlier this year that BT was phasing out the use of exploitative PBA contracts the CWU immediately made the point that, while BT has already done the right thing, these contracts remain rife in the wider world of work.

“As such, the CWU won’t consider it ‘job done’ for our agency campaigning until PBA contracts have been abolished once and for all…and we won’t be taking our eyes off the ball – particularly in the current febrile political environment!”