Agency workers lose 400m in 2017 due to lack of parity with employee peers

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The agency workforce is losing out to the tune of £400 million a year because they are paid less than their employee equivalents, new analysis published by the Resolution Foundation has shown.

Of these workers, 85 per cent have been in an agency job for more than three months, entitling them to equal pay under the law in almost all circumstances. However this subset of agency workers is still losing £300 million a year due to lack of pay parity with similar employees.

The Foundation’s analysis compares the hourly wage of agency workers and employees with the same personal characteristics (such as age and ethnicity) doing the same type of work (for example in the same industry and occupation). This shows that between 2011 and 2017, the average agency worker was paid 23p less an hour than a directly comparable employee.

The agency pay penalty varies considerably by occupation. Agency-employed managers actually see a bonus, which may be in part compensation for missing out on pension contributions. There are also premiums for being an agency worker in less predictable sectors, such as social care where legally required staff ratios allow agencies to command a higher price to fill last minute gaps in staffing schedules.

Other than those two occupational classes, however, agency workers experience a pay penalty across the board which adds up to £990 a year for the average administrator who works through an agency, £800 a year for the average sales or customer service staff and £285 a year for the typical worker in an elementary occupation. These large impacts are unlikely to be fully explained by people willingly taking a pay hit to avoid unwanted aspects of employee work, being less motivated or lacking specific skills.

These pay penalties exist despite the Agency Worker Regulations 2010 which gives those with 12 weeks-plus of continuous service in the workplace pay parity with comparable employees. However, the 2010 Regulations allow agency staff to forgo their right to equal pay with direct employees in return for a contract that offers pay between assignments (a ‘Swedish derogation’ contract). But such contracts are widely abused, as noted by the government commissioned Taylor Review of Modern Working Practises among others.

The Resolution Foundation’s analysis shows that closing this loophole and enforcing the current law should be a key element of the Government’s forthcoming response to the Taylor Review.

Lindsay Judge, Senior Policy Analyst at the Resolution Foundation, said, “Agency workers deserve to be paid the same as employees if they’re doing the same job, so the government should look to close the loophole that allows agency workers to sign away their right to equal pay. With the government-commissioned Taylor Review noting this abuse, we’re hopeful that 2018 will be the year of action on fair pay for agency workers.

“Many workers prefer the flexibility that agency work can sometimes offer, and are willing to be paid less as a result, but those doing the same job on the same terms as employee colleagues deserve to take home the same day’s pay.

Workers are losing £400 million a year as a result of the agency pay penalty, equivalent to £990 this year for the average agency admin worker.

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