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The Agency Workers Regulations and The Swedish Derogation Model

The Swedish Derogation Model is a fancy name for something that all umbrella companies have been doing for the last couple of years which is why the consideration was made under section 10 of the Agency Workers Regulations.

In order for an umbrella companies’ employees to be able to claim home to work travel, they must be working under an over-arching contract of employment. This is a requirement from HMR&C so it’s not the sort of thing that umbrella companies can ignore!

An overarching contract has to contain ‘mutuality of obligation’ which is a fancy way of saying the umbrella has to do something for the contractor and the contractor has to do something in return. HMR&C have decided that the minimum mutuality of obligation that they want to see in an overarching contract is the umbrella company making payment between assignments – exactly as required in the Swedish Derogation Model.

ContractorUmbrella’s Contract of Employment must be signed by our employees before we can sign the business to business contract with our recruiter partners and the employee begins assignment under that contract. The Contract also explains that the individual will receive a salary from ContractorUmbrella that is not less that minimum wage and that, over and above that, they may receive a profit related bonus. The bonus is dependent on ContractorUmbrella generating revenue and therefore potential profit for themselves; this can only happen if we receive payment from the recruiter that we have invoiced for work done by our employee under assignment. Once payment is received a bonus payment is made to the individual that is subject to PAYE and a margin is retained by ContractorUmbrella.

We also have an addendum (or addition) to the contract which gives details of the employee’s assignment specifications and criteria for additional assignments e.g.

  • Preferred locations for future assignments
  • Maximum hours to be worked
  • Minimum hours of work offered
  • The nature of the work to be undertaken

The Contract of Employment must also state that the worker realizes that, under a permanent contract of employment with ContractorUmbrella they have no entitlement to equal treatment under section 5 of the Agency Workers Regulations in so far as they relate to pay.

As each assignment comes to an end, ContractorUmbrella has to make every effort to source an additional assignment for the employee and will therefore work with recruiter partners to achieve this aim. This is a requirement of the AWR but it is also a requirement that the worker make themselves available to work on assignment and they cannot complain of unequal treatment if they do not do so.

The AWR state quite clearly that Day 1 rights are the responsibility of the end client but it will be for a tribunal to decide fault in the event of any claim. Therefore, ContractorUmbrella has produced recruiter information forms which ensure that we and our recruiter partners will comply with the requirements of the AWR

The AWR is a highly significant piece of legislation which is having a huge impact on the recruitment industry and ContractorUmbrella wants to work towards building relationships with recruiters that will ensure compliance and a mutually beneficial working relationship. To this end we would be quite happy for one of our senior advisors to visit your offices to explain the AWR from the umbrella company perspective.