Unions call for 'Swedish derogation' to be banned

Union group, the TUC is calling for the so-called Swedish derogation contracts, used by umbrellas and agencies in relation to the Agency Workers Directive, to be banned.

The TUC has lodged a formal complaint with the European Commission against the UK Government for failing to implement the Agency Workers Directive properly, which, it claims, has led to tens of thousands of agency workers being paid less than permanent staff despite doing the same job.

The TUC complaint says that the UK Government's flawed implementation of the EU Directive has allowed the abuse of the so-called 'Swedish derogation' - where, it claims, employment agencies routinely pay agency workers far less than permanent staff doing the same job.

The Agency Workers legislation which gives similar rights to agency workers as employees came into effect in October 2011. Contractors who are 'genuinely in business on their own account' are excluded from the protection, while contractors working through umbrella organisations are included. Several umbrella organisations and agencies are using the 'Swedish derogation' which originates from the EU consultation period for the legislation when the Swedish delegation negotiated an 'Opt Out'. It has commonly become referred to as the 'Swedish Derogation' model.

A Swedish derogation contract exempts the agency from having to pay the worker the same rate of pay, as long as the agency directly employs individuals and guarantees to pay them for at least four weeks during the times they can't find them work.

The unions, who pushed for this Directive have always been concerned it could be open to abuse or misuse. Now, the TUC has gathered evidence from workplaces where agency staff are paid up to £135 a week less than permanent staff, despite working in the same place and doing the same job.

The TUC claims that in Sweden, where these contracts originate, workers still receive equal pay once in post and 90 per cent of normal pay between assignments. However, the TUC claims, in the UK workers have no equal pay rights and are paid half as much as they received in their last assignment, or minimum wage rates, between assignments. Agencies can also cut their hours, so receive as little as one hour of paid work a week.

Evidence gathered by the TUC claims that Swedish derogation contracts are used regularly in call centres, food production, logistics firms (lorry drivers working out of retail warehouses), and parts of manufacturing.

The Directive said that countries must prevent the misuse of Swedish derogation contracts. The TUC believes it has evidence that the UK Government has failed to provide adequate protection for agency workers and that the right to equal pay is being widely flouted.

Ban

The TUC is calling for Swedish derogation contracts to be banned.

The number of workers on Swedish derogation contracts has grown rapidly since 2011. Around one in six agency workers are now on these contracts, according to agency group the Recruitment and Employment Confederation.

The TUC says that employer organisations are often keen to praise the flexibility of these employment contracts but the reality for many thousands of workers is job insecurity, a lack of basic rights at work and, in the case of many agency workers, pay rates far below that of colleagues who have permanent contracts, says the TUC.

The TUC believes that the growing exploitation of agency workers on Swedish derogation contracts, along with the rise of zero hours contracts and involuntary temporary work, show that behind improving employment statistics lies an increasingly insecure and vulnerable workforce.

TUC General Secretary Frances O'Grady said: "The recent agency worker regulations have improved working conditions for many agency workers without causing job losses. Yet again business organisations have been proved completely wrong in claiming that decent rights at work cost jobs.

"However, the regulations are being undermined by a growing number of employers who are putting staff on contracts that deny them equal pay. Most people would be appalled if the person working next to them was paid more for doing the same job, and yet agency workers on these contracts can still be treated unfairly.

"When even Conservative MPs complain about the 'Swedish Derogation' you know it is time for the Government to toughen the law. That's why we are calling on the European Commission to investigate the problem and take steps to prevent the abuse of agency workers in the UK.

"Swedish Derogation contracts are just one more example of a new growing type of employment that offers no job security, poor career progression and often low pay."

Big business group, the CBI, had long opposed the introduction of the EU-inspired Agency Workers Directive, before negotiating and agreeing acceptable terms.

Nightmare

Katja Hall, CBI Chief Policy Director, said: "The TUC appears to have conveniently forgotten that it signed up to the Swedish derogation as part of the deal that brought in the Agency Workers Directive.

"While businesses find the directive a nightmare to administer, the final deal carefully balanced the needs of businesses and employees - and the Swedish derogation is a key part.

"Many firms prefer to pay an agency to provide temps using the Swedish derogation rather than face the bureaucracy involved with complying with the directive. This is perfectly understandable and entirely within EU law."

Umbrellas

Like many freelancers, umbrella workers will now, once again, be concerned that they are going to be caught up in someone else's battle.