Agency workers

Agency workers are workers engaged through, or by, an employment agency or bureau and supplied to a hiring employer on a temporary basis.

Some agencies employ their workers directly. If you are in this category, your employer should give you an employment contract.

Other agencies contract workers to provide a service to the employer. If this applies to you, you are probably self-employed – though not necessarily for tax purposes – and will have a 'contract for service'.

As an agency worker:

  • You are entitled to the same basic statutory rights and benefits as other workers.
  • Your employer pays the agency, including your National Insurance contributions and Statutory Sick Pay.
  • It is the agency's responsibility to make sure you get your rights under working time regulations.
  • Your employer is responsible for your health and safety.

As a temporary agency worker, you have additional rights under the Agency Workers Regulations 2010. These aim to ensure equal treatment with comparable direct employees.

Some of these rights take effect from the first day of your assignment. Others become effective only after you have completed 12 weeks in the same role. From day one, you are entitled to use any shared facilities, such as a staff canteen or childcare facilities, and to receive information about job vacancies.

After 12 weeks, you are entitled to the same terms and conditions as permanent employees, including pay, working time, rest periods, night work, breaks and annual leave. There are also improved pregnancy rights.

There is more detail on these rights in Law at Work 2020.

The Agency Workers Regulations 2010 guarantee the right to equal treatment in relation to pay, holidays, hours and specified pregnancy rights. However, agency workers – unlike fixed-term employees – do not have a general right to be treated 'no less favourably' than colleagues who are directly employed. This means, among other things, you have no automatic right to be given the chance to apply for permanent jobs.

HMRC deems agency workers to be 'employed earners'. The organisation responsible for paying your wages must deduct PAYE tax and National Insurance at source.

How your employment agency treats you is governed by the Employment Agencies Act 1973 and the Conduct of Employment Agencies and Employment Businesses Regulations 2003. With some exceptions, an agency is not allowed to charge you to find you work. The regulations also limit an agency's right to charge you if it finds you a temporary assignment, and you are then offered a permanent job. It is also unlawful for an agency to withhold your pay because it has not been paid by the employer.

The regulations also mean that, before you begin an assignment, the agency must give you written details covering:

  • Whether you are an employee of the agency.
  • Your pay, and how it is calculated.
  • Holiday entitlement.
  • Other terms of your employment, including notice.

Key Information Document

A change in the law in April, 2020, means that, as an agency worker, you are entitled to what's called a 'Key Information Document', or KID, before you agree contract terms with an employment business or agency. You must also receive a written statement of employment particulars. This applies only if you signed up to an employment business after April 6, 2020.

If your employment involves an intermediary or umbrella company, it must also be given a copy of the KID by the employment business.

The government has published a range of explanatory booklets.

The KID must set out:

  • Your name.
  • The contract type.
  • The 'identity of the employment business' – the organisation you will be assigned to work for.
  • The rate of pay – either the exact rate of pay you will be given, or the minimum rate of pay that the employment business can expect to achieve for you (often expressed as at least the prevailing or current National Minimum Wage or National Living Wage).
  • Pay intervals – how often you can expect to be paid.
  • Statutory pay deductions – a list and description of any deductions required by law, such as Income Tax, National Insurance. The exact amounts are not required.
  • Non-statutory pay deductions – such as private healthcare. These must include either the amount to be deducted, or a description of how it is calculated.
  • Any fees for goods or services, such as the cost of a DBS check. Again, these must include either the amount to be deducted, or a description of how it is calculated.
  • 'Example' statements, showing how deductions will be made to the rate of pay. These should be expressed as real numbers. They may be estimates, but, according to, should 'demonstrate in a realistic way the deductions made to a proposed rate of pay and how these affect a worker's take home pay'.
  • Any non-monetary benefits – use of a work gym, for example.
  • Contact details for the Employment Agency Standards Inspectorate.
  • Where an intermediary or umbrella company is involved in paying you, the KID must show how the income passes from the employment business through the umbrella company, before you are paid the net amount. It must show what deductions are made in the supply chain, and why.

You are also entitled to a KID before agreeing terms if you contract with an employment business to work via a personal service company.

Umbrella companies

Your employment agency might use an 'umbrella company' to process your timesheets and pay, instead of paying you directly. A major problem is that you rarely get any say in these arrangements.

The way this works is that the umbrella company contracts with the organisation that provides the work, then employs you to do it. In effect, the umbrella company slots in between you and the employment agency or business, becoming your 'employer' in the process.

As your 'employer', the umbrella company must deduct PAYE tax from your pay packet, as well as National Insurance Contributions (for both employee and employer), and pension auto-enrolment contributions (also for employee and employer).

The umbrella company typically charges a 'service' fee of as much as £30 a week for doing this. If the employment business or agency does not pay enough to the umbrella company to cover these deductions, you will lose out.

While the use of an umbrella company to pay workers is legal, trades unions have been critical of abuses. Some pay slips are complex, making it difficult to figure out how much you are being paid – or even who is responsible for paying you. The situation is worse if English is not your first language.

Another problem is that the organisation that provides the work is not the party legally responsible for statutory rights such as the National Minimum Wage and holiday pay.

If you work through an umbrella company, this does not diminish your entitlement to the same equality rights, in terms of pay, holidays and hours, as any other temporary agency worker.