Part two of our series on Agency Work Regulations (AWR); an essential piece of legislation directly affecting the umbrella supply chain.
As an agency, it is vital to understand your obligations, and those of Umbrella companies, under the AWR and to take steps to ensure the compliance of the umbrella companies you are using. Failure to comply with AWR can result in significant financial penalties for the umbrella, and potentially the agency and end-hirer, bad PR for agencies and umbrellas, major damage to relationships with workers and end-clients, and the inevitable loss of clients.
Some tips for navigating and ensuring compliance with the AWR:
- Understand the regulations. The AWRs are complex, so it is essential to take the time to understand them. The government has produced a helpful guide to the AWR, which is available online.
- Ensure your umbrella monitors the length of service of your workers. Some of the AWRs only apply after 12 weeks of assignment. Therefore, it is crucial to monitor your agency workers’ service length to identify when they are entitled to the same rights as permanent employees.
- Ensure you provide the umbrella company with the information from the end hirer so they can calculate parity of pay and ensure holiday is like-for-like.
The maximum fine for non-compliance with the Agency Worker Regulations (AWR) is £5,000 per worker per breach. This means that if an agency is found to be in violation of the AWR, it could be fined up to £5,000 for each individual agency worker who was affected by the breach.
It is important to note that the maximum fine of £5,000 per worker per breach is only the maximum fine. In some cases, the actual fine may be lower. The amount of the fine will depend on the specific circumstances of the case, such as the severity of the breach. As the fine is per breach per worker, the number of workers affected works as a multiplier and can generate huge fines. This is in addition to ‘making right’ the pay or leave entitlements.
What can agencies do to ensure the compliance of umbrella companies?
You may be asking yourself what the best steps are, and the number one thing an agency can do to ensure that their umbrella company is complying with the law, is make sure they have FCSA accreditation; this is because to become an FCSA Accredited Member, umbrella employers must undergo a rigorous annual assessment by independent experts from tax, accountancy, and legal professional services firms. This assessment tests the umbrella employer’s compliance with the FCSA Codes of Compliance, which are designed to ensure that umbrella employers are meeting their legal obligations. Section F of the FCSA’s Umbrella code covers AWR in more detail.
Other things agencies can do to ensure compliance:
- Carry out due diligence on umbrella companies. This includes checking the company’s registration status with HMRC, its track record of compliance, and its accredited membership with FCSA.
- Require umbrella companies to sign up to a code of conduct and compliance, such as the FCSA Charter and Codes. This code should set out the company’s commitment to compliance with the AWR.
- Monitor the performance of umbrella companies. This includes checking that workers are receiving the correct pay and benefits and that they are being treated fairly.
- You can learn more about AWR by watching our webinar here: Webinars • FCSA Accreditation
FCSA (Freelancer and Contractor Services Association) is a non-profit membership organisation that ensures its member’s compliance with the law, including Agency Worker Regulations, through yearly assessments.
Note: this article should not be considered legal advice, it is to provide background context and information only.