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Below the minimum: Agency workers and the minimum wage

Issue date

Temporary Agency Workers Directive

Introduction

Research by the TUC shows that safeguards introduced in the Conduct of Employment Agencies and Employment Businesses Regulations 2003 are doing little to prevent the exploitation of agency workers by unscrupulous employment businesses.

The Regulations were introduced with the stated aim of safeguarding the rights of work seekers by helping to ensure that agency workers receive the rights to which they are entitled and by stamping down on abuses.

The 2003 Regulations were supposed to improve the rights of temporary agency workers by:

  • Extending the ban on fees for work-finding services.
  • Limiting agencies’ ability to charge temp-to-permanent fees.
  • Making it unlawful for an agency to withhold pay if a worker cannot produce a timesheet.
  • Requiring agencies to obtain information about any health and safety risks and the steps that the hirer is taking to prevent or control those risks.
  • Requiring agencies to inform workers of either the rate of pay payable to the worker, or the minimum rate of pay; details of when the worker will paid; and the amount of paid holiday that will be given.

But the TUC has evidence of apparently widespread continuing abuse of agency workers, in particular migrant workers, by some employment businesses or ‘temp agencies’. The TUC is particularly concerned at the practices of some agencies which routinely make deductions for items such as cashing a pay cheque; for transport; and for providing equipment and/or uniforms, with the result that the worker’s pay then falls below the national minimum wage. In some cases these deductions can swallow up most or all of a week’s wages.

Migrant agency workers are especially vulnerable to this type of exploitation because of language difficulties and a lack of knowledge about UK employment law.

Use of sweeping contract clauses to allow deductions

Some employment businesses seem to be circumventing legislation requiring the worker’s express agreement to deductions by inserting general clauses in contracts to the effect that 'the Company shall be entitled to deduct from salary or any other payments due to you in respect of your employment, any monies due from you to the Company'.

Such clauses are then used to make deductions for a host of non-specified items including transport, equipment, uniforms and meals.

Under sections 13 and 15 Employment Rights Act 1996, a deduction can be made from a worker’s wages only if it is required or authorised by statute; authorised by the worker’s contract - provided that the worker has been given a written copy of the relevant terms or a written explanation of them before the deduction is made; or agreed to in writing by the worker before the deduction is made.

Under sections 8 and 9 of the 1996 Act, employees - but not workers - have the right to an itemised pay statement detailing any deductions made. An agency worker will only have the right to an itemised pay statement if he or she is an employee of the agency. The result is that it is sometimes impossible for agency workers to know what deductions are being made from their pay, and for what reason.

National Minimum Wage Legislation

Other than deductions for National Insurance, tax, overpayment/advance of wages, trade union subscriptions, etc. and unforced payments (where, for example, a bank worker chooses to bank with his or her employer), the only ‘benefit in kind’ for which a deduction may be 'counted towards' national minimum wage pay is accommodation, subject to a current limit of £26.25 per week, or £3.75 per day. If a worker’s pay falls below the national minimum wage solely as a result of the deductions mentioned above, then there is no breach of the legislation. In all other cases, the employer must ensure that any deductions made do not bring the worker’s pay below the national minimum wage.

But case studies gathered by the TUC reveal that some temp agencies are:

  • Making deductions for "unforced" payments for benefits such as meals, which in reality the worker has no choice but to accept as part of the package, and then counting those deductions towards the minimum wage.
  • Counting deductions for items such as uniforms, equipment, transport towards national minimum wage pay, contrary to the NMW legislation. In one case, workers had £500 deducted from their wages, allegedly in payment for their return fare to Spain. The TUC has also been told of workers being charged for health & safety equipment, in direct contravention of the law.
  • Counting deductions above the accommodation offset limit (currently £26.25 per week) towards national minimum wage pay.

The TUC has also received reports of migrant agency workers being forced to live in over-crowded, sub-standard accommodation and then being charged over the odds for that accommodation.

The NMW legislation allows for a worker to either bring action in an employment tribunal for recovery of any shortfall between the amount he or she is paid and the amount due under the national minimum wage, or for the worker to make a complaint to the Inland Revenue enforcement agency. Unfortunately, though not surprisingly, many workers are reluctant to pursue either course for fear of losing not only their job, but also their accommodation.

The DTI Employment Agency Standards Inspectorate, whose role is to ensure that users of agencies, particularly workers , are not subjected to harm, can investigate and take action against rogue agencies up to and including a banning order or criminal prosecution. However, again many workers are reluctant to make themselves known to the DTI for fear of retaliation by the agency.

Case studies

A number of deductions were being made from the wages of a group of Portuguese workers employed by an agency, but there was nothing on their payslips to say why and for what the deductions were being made. In addition, the agency had made a deduction of £400 in respect of return flights home but the workers had no idea how the cost of the return journey was calculated, nor whether they will in fact receive their return flights from the agency when their assignments come to an end.

A group of workers from the Czech Republic signed up to what looked like an excellent working opportunity with a temp agency. They were quoted an attractive hourly rate for assignments and would have their accommodation needs met by the agency. On arrival in the UK, however, they were given a written statement which specified an hourly rate below the national minimum wage. With no English, no accommodation and no money to return home, they signed the agreement.

They then found that their take-home pay was even less than that specified in the agreement. In some instances, they would receive what barely amounted to pocket money and, on occasion, they would receive no payment at all after deductions.

Shortly after arrival in the UK, the workers had been told to hand over their passports so that the agency could register them under the Workers Registration Scheme [1] . In some cases, the agency had failed to return the passports after 6 months, leaving the workers with little choice but to continue working for the agency.

Those workers who did protest about their treatment found themselves out of work and evicted from their accommodation. Some of them were threatened with physical assault.

Further information about the experiences of migrant temporary agency workers in the UK can be found in the TUC reports Propping up rural and small town Britain and Forced Labour and Migration to the UK.

Conclusion

These continuing abuses show that the piecemeal approach to regulating the agency sector adopted by the Government is failing and illustrate why the European Temporary Workers Directive is so vital.

How the European Temporary Workers Directive would help:

The Directive would give UK agency workers the right to equal treatment with a comparable permanent employee on issues such as job security, pay, working time and holidays, maternity rights and protection against discrimination.

The Directive would also ensure that agency workers are informed of any vacant posts in the user undertaking to which the worker is supplied, and that agency workers are not prevented from applying and accepting such posts once their assignment comes to an end.

Further, the Directive would improve temporary agency workers’ access to training and career development opportunities.

The TUC supports the introduction of equal treatment rights for agency workers from day one. Labour Force Survey statistics (Spring 2004) show that 74% of all UK agency workers would lose out on rights to equal treatment if a 12 month qualifying period were introduced, whilst 53% would lose out under a 6 month qualifying period.

Any qualifying period is likely to lead to employers using short term contracts to avoid the new rights, which would mean many agency workers would never benefit from new rights.

  • Honour its commitment to support the principle of the Temporary Agency Workers Directive and seek an early agreement on the Directive with other EU Member States.
  • Withdraw from the coalition - consisting of the UK, Ireland, Denmark, Germany, Poland Slovakia and Malta - that is blocking progress on the EU Temporary Agency Workers Directive.
  • Increase the resources available to Department of Trade and Industry inspectors so that any agency flouting the law may be successfully prosecuted.

Agency working fact-file

Fact: Only 28% of agency workers positively choose agency work over a permanent job and around 40% are temping because they could not find a permanent job (LFS 2004).

Fact: Improving the quality of agency temping could make it a more popular option. The number of part-time workers in the UK has grown by 7% since part-time workers won equal treatment rights in 2002.

Fact: Despite strong employment growth, all forms of temporary work have fallen in absolute terms and as a share of the workforce since peaking in1998 (7.9%) to 6.5% in 2002 and 6% in 2004.

Fact: Since 2002 when equal treatment rights were introduced for employees on fixed term contracts, the number the agency workers has fallen by 14% whilst the number of staff on fixed term contracts has only fallen by 8%.


[1] Nationals of the new EU Accession States (except Malta and Cyprus) are required to register with the Home Office if they plan to work in the UK for more than one month. A fee of £50 is payable on registration.

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