Goodbye to the Swedish Derogation

Goodbye to the Swedish Derogation

Agency workers have the right to be paid the same as permanent employees in comparable roles after the agency worker has been engaged in a role for 12 weeks. This is already the law under the Agency Workers Regulations 2010 (AWR 2010).

“Pay” for the purposes of the AWR 2010 includes certain bonus payments, holiday pay, overtime, shift allowances and unsociable hours premiums. It does not include company sick pay, maternity/paternity pay, adoption pay, pension contributions and redundancy pay.

Currently, there is an exception to the pay-parity rule above, known as the “Swedish Derogation”. A contract which contains a Swedish Derogation clause essentially allows businesses to pay agency workers less if the agency that is supplying the worker pays that worker in between assignments. The Government has estimated that 8-10% of UK agency workers are on Swedish Derogation contracts, which amounts to around 130,000 people.

As of April 2020, the Swedish Derogation will no longer exist. The reason that the Swedish Derogation is being abolished is as a result of the Government’s “Good Work Plan”, following Matthew Taylor’s review in to working practices. The aim is to get more individuals into secure, permanent employment.

Agency workers will still have no right to pay parity for the first 12 weeks. It therefore begs the question, will job security become even more unstable as a result of this change? Whereas at the moment, businesses may look to extend an agency worker’s contract beyond 12 weeks without additional financial outlay if the agency worker is doing a good job, this will no longer be possible. As such, once an agency worker reaches 12 weeks a business will need to decide whether they are happy to pay more for that individual, or else swap them for another agency worker (there are anti avoidance mechanisms in place to prevent businesses moving the same agency worker around a business on different assignments shorter than 12 weeks). Unfortunately, we worry that in some industries, the latter may become the norm.

If you currently engage agency workers on Swedish Derogation contracts or would like further information, please contact our employment team.

Claire Knowles - Partner

Mark Alaszewski - Associate

Rebecca Mahon - Solicitor

Amelia Wheatstone - Solicitor 

Adam McGlynn - Trainee Solicitor

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