The good, the bad and the ugly: the experience of agency workers and the policy response

Published on Jobs, Skills and Pay

In December 2016, the Resolution Foundation published its first report in a new programme of work exploring the world of agency workers. Despite the fact that agency work has been a feature of the UK labour market for at least a century, it has been the subject of limited research especially compared with recently emerging ways of working such as zero hours contracts and the gig economy. Our initial work showed that agency workers are a plural group (although they are disproportionately likely to be young, low skilled, from an ethnic minority or foreign born); that they work across all industries and occupations (especially manufacturing, transport, warehousing and communications); and that they are found across the pay distribution (although there is a downward effect on pay attached to being an agency worker).

We called this first report ‘Secret agents’ because there was so much about agency work that remained obscure. What explained the rising number of agency workers in the economy, for example? Why did so many agency workers consider themselves ‘permanent’ rather than ‘temporary’? Was the pay penalty we discovered willingly accepted by agency workers, or was this something they simply lacked the power to resist? In December 2017 we ran three focus groups with agency workers to explore these and other questions, and tested the insights we gained from this exercise through additional data analysis. What emerged was a truly plural picture, with good, bad and ugly practice regularly encountered throughout the agency worker world. This report captures this, and considers how policy makers can best navigate the complex reality that we reveal.

  • Britain employs 950,000 agency workers – more than the number of people on zero-hours contracts.
  • Many workers enjoy the flexibility that agency work brings, and are positive about the agencies that employ them. However, our research also finds widespread experiences of poor and sometimes unlawful practice, undermining both the reputation of agencies and the living standards of agency workers.
  • Agency workers face an average pay penalty of £400 a year compared to direct employees with identical qualifications doing identical jobs.
  • Agency workers are often unclear on their entitlements and rights. Analysis of the Labour Force Survey shows that agency workers are four times more likely to think they have no paid holiday entitlement than non-agency workers (at 17 per cent and 4 per cent respectively), and almost twice as likely not to know whether they have a right to holiday pay at all (26 per cent to 15 per cent).
  • Lost holiday pay has a real impact on livelihoods: we estimate that in 2017, agency workers collectively missed out on as much as £500 million of unpaid holiday pay. The government could boost awareness of rights by requiring agencies to provide a written, standardised statement outlining workers’ entitlements on the first day of work.
  • Agency workers’ power – which influences their ability to demand rights and respect in the workplace – appeared to be largely contingent on the strength of the local labour market: those that work in more buoyant local economies can up and leave assignments or agencies that offer fewer benefits or treat them poorly.
  • A pay-between-assignment (PBA) contract – also known as a Swedish derogation contract – is a lawful way that agency workers can be paid a lower rate than a directly comparable employee. We consider the pay penalty of 16p an hour that we observe when looking just at agency workers who have been in the same job for three months-plus the best evidence of the prevalence of this type of contract. This constitutes an average of £275 of lost pay for each agency worker employed for three months or more and, in our view, justifies the government repealing the ‘Swedish derogation’, as recommended in the Taylor Review.
  • Agencies should be required to provide a written, standardised statement outlining workers’ entitlements on their first day of work.
  • The Employment Agencies Standards (EAS) Inspectorate should take lead role and pilot enforcement task forces comprising the local authority, the police, the Gangmasters and Labour Abuse Authority (GLAA), HMRC and the Health and Safety Executive in key agency worker hotspots.