Knowledge Zone

Updates to Swedish Derogation – what you need to know.

Posted on in Industry Insights

A date has been set for the abolishment of Swedish Derogation contracts.

 

From 6 April 2020 Swedish Derogation contracts will be abolished.

The new legislation removes opt-out of pay comparisons and pay between assignments which means that agency workers will not be entitled to receive pay between assignments however they will be entitled to the same hourly rate of pay as a permanent employee after 12 weeks.

So, what does this mean?

Ultimately the new regulations mean that businesses will be impacted financially. A recent Impact Assessment from the Regulatory Policy Committee estimated that additional costs associated with the removal of Swedish Derogation contracts could amount up to £380M to hirers across the UK.

The abolition of Swedish Derogation means that industry standards will rise and workers will have a higher level of protection.

Key points:

  • Be prepared – start to plan the implementation of these changes at the earliest opportunity. It is less than 12 months away!

  • Plan these changes into your future budgets to take into account the impact of cost increases.

  • Ensure that your current agency is fully onboard and supports the new legislation. They should work with you to start the transition from Swedish Derogation contracts as soon as possible and to help streamline and simplify the process.

  • HMRC will be placing more scrutiny on the use of agency workers so it is integral that everyone involved in the supply of temporary workers operate in a transparent manner and are aware of their legal obligations.

What is Swedish Derogation?

A type of contract where a worker is directly employed by an agency and placed on assignment with an end client.

It is a controversial model that avoids some of the rules of the Agency Workers Regulations (AWR) 2010 in particularly a right to equal pay after 12 weeks service.

Many labour users have taken advantage of Swedish Derogation contracts to reduce the cost of temporary labour as they can pay the temporary worker less than a permanent employee undertaking the same roles.

 

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