Agency workers want umbrella pulled from above them

There are around 1.15 million people employed via agencies in the UK, according to the trade body, the Recruitment & Employment Confederation (REC).

Its latest annual survey, based on 585 recruitment firms and published in October 2014 put the value of the UK’s recruitment industry at £28.7 billion in financial year 2013-14, an increase of 8% on the previous year; most of this revenue came from temporary/contract business (91%).

Workplace Report carried out a survey of workplace representatives to establish the experience of the use of agency workers in unionised workplaces and some 60 replies were received from union negotiators.

The use of agency workers is generally on the increase for a number of reasons. In the public sector, for example, agency workers are used to fill vacant posts, while longer-term reviews are carried out to meet budget cuts.

On the other hand, the number of agency workers used by Waverley Borough Council has increased as a result of permanent posts not being filled, increases in workloads and to help on specific projects. Around 15% of posts in the planning department are filled by agency workers.

In many of responses to the survey, the use of agency workers varied with many employers using agency workers to cover seasonal fluctuations in demand, sickness amongst permanent workers and skill shortages.

At Fylde Borough Council, agency workers are widely used in the parks department with the proportion of agency workers reaching 53% in summer, but only 25% in winter. For the first 12 weeks most agency staff are on the National Minimum Wage (the 2014-15 adult rate is £6.50 an hour), but after that they are paid the same as permanent employees. The majority of the agency workers are employed for six months over the summer.

In manufacturing, the Old Bushmills Distillery in Northern Ireland, part of the Diageo drinks conglomerate, uses agency workers to cover seasonal variations. The bottling and maturation areas have 25% agency workers at peak times, but while most agency workers are only employed for short periods, some have been with the company for six or seven years. Agency workers doing manual work, such as cleaning, lidding and putting cases on the lines for lidding, are paid the National Minimum Wage. Some agency workers doing more skilled work are paid higher rates.

The rep told Workplace Report: “The rights of the agency workers, to be paid equally and treated equally, are too easily circumvented by companies who know the agency worker is too scared to speak up for themselves. The law is not strict enough and the equality should be automatic after the 12-week period is completed.”

However, many respondents referred to the fact that use of agency workers was long-term and in many cases an intrinsic part of ongoing operations. For instance, at Fowler Welch road haulage in Washington, the rep said the company is “heavily reliant” on agency drivers with roughly half supplied by agencies. In this instance the agency drivers are apparently paid more than direct employees doing exactly the same work.

Some respondents referred to employers ceasing to use agency workers, but not always for positive reasons. At Heron Foods, agency workers have been replaced by directly employed staff on 16-hour contracts and when permanently employed full-time staff leave they are also replaced by part-time staff.

The result is de-skilling “as the former multi-skilled warehouse operatives are replaced by staff who are in work for six hours at a time and are only capable of one task”. The pay rates are the same for full and part-time staff and “this causes resentment amongst the full-time staff who are required to be multi-skilled and flexible for the same money”.

Pay rates

The experience of agency workers varied considerably between industries. In many, agency workers received the same or similar pay as directly employed workers, but in a few cases agencies are reported as paying lower rates than direct employees receive.

Meanwhile, some respondents report that in areas where recruitment is difficult agency staff receive higher pay than direct employees. At Morrisons, Stockton, “agency workers are paid significantly less than core drivers”.

At Heatrae Sadia, agency workers, despite doing the same work as directly employed workers, are reported to have “much lower” pay. And at Weston College, the pay of agency workers is again reported as lower than that of direct employees. However, at BAE Systems, Rochester, the pay of agency workers is higher than that of direct employees despite doing the same work. At BP, it was reported that the company appear to be trying to use more and more contractors to drive tankers; the drivers’ union Unite were looking into this.

Agency workers at the Sellafield nuclear processing plant in Cumbria are either on higher pay rates because they are highly skilled and/or specialists or lower skilled agency staff are having their pay aligned with permanent staff of similar skills.

At Buckinghamshire County Council, the use of agency staff has increased sharply, especially among social workers for children’s services, and the agency workers are paid more than permanent staff for the same work.

At JaguarLandRover’s Solihull plant, agency workers comprise up to a maximum of 10% of the workforce. Although agency workers do the same jobs as direct employees they are paid 70% of the starter rate, but after 12 months they move onto JLR contracts subject to attendance and performance. A response from the DHL convenor made clear that, under the DHL Automotive (JaguarLandRover contract) agreement, new starters move up to the full rate after two years.

Umbrella companies

The often tortuous nature of the employment relationships arising from the use of agency workers is highlighted at the Marks & Spencer distribution centre at Swindon.

Although the distribution centre is owned and used by M&S it is run by DHL under contract. DHL then use a recruitment agency, 24-7, to provide agency workers. These agency workers are given employment contracts in the name of Tempay Ltd.

The issue of umbrella companies was raised by a number of our respondents. At logistics company Norbert Dentressange, the rep referred to “bogus self-employment through umbrella companies with one employee working at the same place of work for a decade”. The proportion of drivers supplied by agencies in this instance was over 70% of the workforce and, while agency drivers receive the same basic pay as direct employees, their overtime rates are lower.

At Nestlé Tutbury, Derbyshire, around a third (30%) of the workforce is supplied by a firm called PMP Recruitment Ltd, which is owned by the Ullmann family through the Cordant Group.

The number of agency workers at Heatrae Sadia has increased to around a third of the workforce. The agency workers are hired through The government has opened up the possibility of action against umbrella companies in the draft Finance Bill 2015. The government is expected to publish a discussion paper soon to inform possible action in the chancellor George Osborne’s 2015 Budget. However, this only involves the issue of home-to-work travel, a fairly minor aspect of the wholesale abuse involved in umbrella companies. And as Parliament will be dissolved on 31 March before the May 2015 general election period starts, even this small measure is unlikely to become law.

Meanwhile, the abuse by umbrella companies will continue unfettered. Construction union UCATT’s 2014 report, The umbrella company con-trick, sets out the scale of this abuse. One is to pass on to workers the cost of employers’ national insurance contributions with the result that workers are paid less than the agreed rate. According to the report, some UCATT members have been switched to payment via umbrella companies without their knowledge. By using umbrella companies employment agencies save the cost of employers’ national insurance contributions.

An example of an umbrella company mentioned in the UCATT report is Crest Plus Exchange Ltd, a subsidiary of Crest Plus Operations Ltd. In the year to 5 April 2014 the parent company reported turnover of £128 million and pre-tax profits of £0.7 million. They describe their activities as “a range of contracting projects and the provision of accounting services”.

It had 389 employees paid on average £25,175 in the year. However, the three directors received £261,988 between them with the highest paid getting £102,215 plus £33,705 in pension contributions. The company is owned by three people, Andrew Robertson, Russell Taylor and Derek Harling, who received £250,000 in dividends between them.

The NASUWT teaching union has published a report on supply teachers and the use of umbrella companies. It advised their members to seek advice on the terms of the contract with the recruitment agency and the umbrella company. If an umbrella company tried to make work conditional on an agreement with them members were advised to report this to their union rep.

The advice also covers the need to avoid claiming tax-related expenses without first obtaining legal advice, and to check payslips to ensure that PAYE and National Insurance contributions have been deducted.

The NUT teaching union has also issued guidance to members on agency supply teachers and umbrella companies. Its guidance was very concerned about some of the practices adopted by umbrella companies. It advises members to obtain appropriate advice before committing themselves to any contractual relationship with such organisations.

Members who are already in employment with an umbrella company are advised to always check their payslips carefully to confirm that the correct deductions have been made, and never to sign any document exempting an agency or umbrella company of any liability.

The NUT describes the umbrella company arrangement as involving four parties — the teacher, the school, the agency and the umbrella company. The teacher’s employment contract is with the umbrella company, not the agency.

Typically, says the NUT, the agency will agree an assignment and pay rate with the school and then contact the teacher about the assignment. The umbrella company receives the payment from the school for the work undertaken by the teacher. It processes the payment, deducting PAYE income tax, employee’s and employer’s National Insurance contributions and the umbrella company’s fee. The residual sum is then paid to the supply teacher as net pay.

The NUT says that teachers are frequently persuaded to agree to an umbrella company arrangement because they are attracted by potential tax savings on expenses and allowances. The legal change referred to above in the Finance Bill will close the loophole which umbrella companies were exploiting in relation to travel expenses.

Union agreements to end use of agency workers

In some workplaces unions have successfully negotiated agreements to ensure that all workers are directly employed, except for limited use during busy periods. One example is Nestlé Logistics where a local agreement has led to all workers being directly employed. The unions at Nestlé are seeking to reduce the number of agency workers in the factories.

Some of respondents to the Workplace Report survey reported that no agency workers were being used, following union pressure to ensure all workers were directly employed.

At BT, the CWU communication workers’ union has negotiated an agreement which has meant that 270 agency staff are being offered permanent contracts. It formed part of the Workforce 2020 agreement on pay, grades and terms and conditions. The company also committed to talks on a regular basis about further conversions.

CWU deputy general secretary Andy Kerr welcomed the conversions: “We have fought against this injustice in the workplace so this announcement from BT is a fantastic step forward.”

The UCU university and college staff union has been running a Stamp out casual contracts campaign, which seeks to get staff employed via agencies transferred to direct employment, and they have achieved some successes, including at Wiltshire College.

Unite’s report, The case for organising agency workers — dispelling the myths, sets out the arguments employers use in favour of using agency workers and systematically demolishes them. It argues that it is essential to organise agency workers and as an absolute minimum to close the loophole of the Swedish derogation (see box above).

In September 2013, the TUC submitted a formal complaint to the European Commission over the UK government’s flawed implementation of the Agency Workers Directive, which allowed the abuse of the Swedish derogation.

There has been a promise by the Labour Party to abolish the Swedish derogation if it wins the 2015 general election. It will come as no surprise that this initiative has not been well-received by the recruitment industry.

Kevin Green, chief executive of the Recruitment & Employment Confederation (REC), described Ed Miliband’s comments as “another episode of random business bashing”.