Tougher, targeted enforcement is needed to tackle bad practice in agency worker hotspots across Britain

Published on Jobs, Skills and Pay

Government should close equal pay loophole to help tackle £400 agency worker pay penalty

New task-forces are needed in agency worker hotspots such as Barking and Dagenham, Leicester, Sandwell and North East Lincolnshire to target poor practice and shore up the positive aspects of agency employment, the Resolution Foundation says today (Saturday) in the final report of its two-year investigation into agency work.

The good, the bad and the ugly lifts the lid on Britain’s often ignored agency sector that employs around 950,000 workers, more than the number of people on zero-hours contracts. It calls on the government to use its response to the Taylor Review to ban ‘Pay Between Assignment’ contacts and ensure greater clarity of agency workers’ rights at work. However, it adds that action needs to go beyond changes in the law to focus on enforcing existing rules in agency worker hotspots across Britain.

The investigation concludes that many workers enjoy the flexibility that agency work brings, and are positive about the agencies that employ them. However, it also finds widespread experiences of poor and sometimes unlawful practice, undermining both the reputation of agencies and the living standards of agency workers.

The Foundation argues that workers are particularly vulnerable to exploitation where agency work is concentrated in areas with more limited alternative employment opportunities. It notes, for example, that workers living in Barking and Dagenham are twice as likely to work for an agency than the UK population as a whole, while local unemployment is also twice as high.

The report calls for stepped up enforcement in such areas, recommending the establishment of Agency Enforcement Task-forces in areas such as Barking and Dagenham, Leicester, Sandwell and North East Lincolnshire. Task-forces in these areas should be brought together by the Employment Agency Standards Inspectorate (EAS) and include the local authority, HMRC, police, the Gangmasters and Labour Abuse Authority (GLAA), Health and Safety Executive and Jobcentre Plus.

This final report of the investigation notes that while many agency workers see significant upsides to working in this way, the downsides can also have a significant impact on their living standards. Agency workers face an average penalty of around £400 a year compared to direct employees with identical qualifications doing identical jobs. The report finds that there are four separate pay penalties that can affect agency workers, including:

  • Unfair pay – Firms are using ‘Pay Between Assignment’ contracts to get around equal treatment obligations that take effect after 12 weeks of continuous service. The report shows that agency workers with more than 12 weeks of service still face a £275-a-year pay penalty.
  • Holiday pay – A lack of information about entitlements (or in some cases intentional obstruction) is leading agency workers to miss out on £500 million a year in lost holiday pay.
  • Future pay ­– There is also poor awareness of agency workers’ right to participate in workplace pension schemes, despite over 500,000 agency workers being eligible to be auto-enrolled.
  • Deducted pay – Deductions for uniforms, administration, travel costs and insurance, are eroding pay packets, with workers complaining that some agencies are registering them to voluntary schemes without their consent.

The Foundation recommends that the government tackle these agency worker pay penalties in their forthcoming response to the Taylor Review by repealing ‘Pay Between Assignment’ contracts that allow firms to avoid paying agency workers the same as directly employed staff. It also calls for action to boost awareness of rights by requiring agencies to provide a written, standardised statement outlining workers’ entitlements on the first day of work.

The good, the bad and the ugly concludes that the popularity of agency work for many people, with most workers interviewed for the investigation offering both positive and negative experience of agency work, means the government should adopt this balanced approach to improve conditions in the sector without undermining flexibility where it works for workers as well as firms.

Lindsay Judge, Senior Research and Policy Analyst at the Resolution Foundation, said:

“Agency work has been largely absent from recent discussions about the modern world of work, despite almost a million people being employed via an agency. The varied nature of agency work presents a real challenge for policy makers, who must address poor regulation and poor practice while preserving the widespread positive aspects of the work.

“Our investigation has found that agency workers face an average annual pay penalty of around £400 compared to direct employees. The government should tackle this immediately in its response to the Taylor Review by banning ‘Pay Between Assignment’ contracts that currently give firms a legal way to avoid equal pay obligations.

“As well as reforming poor regulation, the government should stamp out unlawful practices through tougher, targeted enforcement work. Agency Enforcement Task-forces should be established in areas like Barking and Dagenham, Leicester and North East Lincolnshire, where the combination of a high concentration of agency work and high levels of unemployment leave workers especially vulnerable to unlawful practices.”