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3 months ago by Dan Barfoot

Goodbye Swedish Derogation – Hello Umbrella Company

CMD Swedish Derogation blog

The abolition of Swedish Derogation will come into play from April 2020. As it stands, the Swedish Derogation sits under the Agency Worker Regulations (AWR) as an exception to the framework, in that after 12 weeks of continuous temporary employment, the Temporary Worker must be paid the same rate as a comparable permanent member of staff.


The Swedish Derogation currently allows Temporary Workers to be paid between work assignments with the compromise that they relinquish their right to the same pay parity as a permanent member of staff after the 12-week qualifying period.

 

The premise for the Swedish Derogation was to allow Temporary Workers stability between assignments or periods of no work. To support them with the flexibility to keep income coming in even if that was under a compromised pay. A lower hourly rate for a longer period. However, this hasn’t always been the case. Research under The Department for Business, Energy and Industrial Strategy displayed in The Good Work Plan has identified case studies investigating how the Swedish Derogation isn’t being used for its intended purpose. They highlight that sometimes Temporary Workers “are never paid between assignments and there are lots of artificial ways to get around this.” They highlight how contractual stipulations are being misused to avoid paying Temporary Workers. For example, contracts can state that Temporary Workers must be “constantly available for work, with some contracts specifying anywhere in the UK…If people can’t accept this work (which may only be for a few hours) they do not receive pay between assignments.” This has led to ethical questions being posed over the Swedish Derogation and Recruitment Agencies refusing to tender contracts under this framework. Ultimately, the underlying reasoning behind the abolition of the Swedish Derogation was to encourage clients to take on permanent members of staff, providing greater security and stability for employment and the labour market overall. 

 

For many businesses and recruitment agencies the abolition of the Swedish Derogation could have huge financial implications as after the 12-week AWR qualifying period, the Temporary Worker must be entitled to the same rate of pay as a comparable permanent member of staff. 

Many Recruitment Agencies could also find themselves very busy re-visiting client terms and pay rates, which will not only be a substantial administrative task but also require some time-consuming negotiation dependent on the pay gap presently in place under Swedish Derogation Contracts. 

 

For CMD Recruitment, this won’t be the case. We recommend that most of our clients use AWR Day 1 rights, meaning, the Temporary Worker would be on the same pay parity and entitled to the same benefits as a permanent member of staff from Day 1 of their temporary assignment rather than wait until the 12-week qualifying period has ended. We have found this hugely encourages equal treatment between temporary and permanent members of staff enhancing team cohesion and clarity for all. And from our side, it ultimately becomes a simple and effective working relationship between us and our client’s reducing administrative burdens of calculations and diary keeping for AWR change. 

 

2020 looks to bring an array of changes to the employment and recruitment field. With the likes of The Good Work Plan pinned as the ‘vision for the future of the UK Labour market’ by the government, it is clear frameworks and policy change are to support employment rights - strengthening the stability, clarity and fairness of Temporary Workers. 

 

For more information please contact CMD Recruitment.