It’s wrong of the GMB official to claim that the use of the Swedish Derogation contract is a loophole. When I employ workers in my business, it is on the basis of a permanent contract of employment. I would not expect any of my employees to have a legal claim to be paid at the same rate as the staff employed by another company in the offices downstairs for example, if they were in fact paid more by their employer.
If work coming into my business was inconsistent and I needed a flexible workforce and I offered a guaranteed payment during any lay off, then those employees would still be my employees engaged under a permanent contract of employment and their pay rates would have nothing to do with any staff similarly employed by other companies.
However, staff employed on temporary contracts and engaged under an agency contract, do have rights to equal pay after twelve weeks employment, but some agencies and umbrella companies have contrived to make workers appear to be permanently employed simply to remove those rights.
It is the contriving of pay between assignments which is the loophole; in fact it’s not a loophole, it’s a technique that is used to circumvent the Agency Worker Regulations (AWR).
I would be very surprised if an Employment Tribunal will find for the agencies and umbrella companies if, like many others, a pay rate has been offered which includes a percentage to cover the pay between assignments, which is what converts a temporary contract of employment into a permanent one and one which then falls outside AWR.
The client, agency and umbrella company often understand that the worker will not be paid anything at all between assignments, but other than in the small print, the worker doesn’t know that a payment relating to pay between assignments, whether or not that situation ever arises, has been made.
Pay between assignments (PBA) is generally rolled up in a bonus, commission or other pay and it is subject to deduction of tax and NI. So far so good; Wrong. PBA is an income payment for tax purposes, but I would argue that it is not employment income unless it is actually taken as a payment in the period between assignments. If so, NI contributions are not deductible at the point at which PBA is paid. The payment, most likely having been wrongly assessed under PAYE regulations, will identify PBA as not actually being made for the intended purpose.
The practice of rolling up PBA in agency workers’ pay rates to avoid AWR will no doubt come to an abrupt end after this case is heard, or perhaps even before when it is realised that this practice stands on very shaky ground.