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AWR – What is the Swedish derogation model?

The AWR is due to become law in October 2011. Industry service providers are planning in advance to minimise the impact of the new rules on clients and contractors.

The main aim of the AWR is to provide the same basic rights to temporary workers after 12 weeks on an assignment as permanent workers are already entitled to.

Some of the new rights include holiday entitlement, equal pay, working hour arrangement, and access to staff facilities.

Limited company contractors who are genuinely in business on their own account should not be affected by the new rules, however, all umbrella company workers will be.

Several ‘solutions’ to deal with the AWR are being considered by umbrella scheme providers – the most popular is the ‘Swedish Derogation Model’, which is named after an EU concession gained by Sweden following earlier AWR discussions.

What is the Swedish derogation model?

Under this model, agency workers cannot claim their rights for equal pay if they are permanently employed by the umbrella company. This also means that the umbrella must pay the contractor between assignments.

Other conditions include:

– The permanent contract between umbrella and contractor must have been formed before placement on the first assignment.

– The employer is obliged to find future work for the contractor.

– Contractors must be paid a minimum amount between assignments, which is at least 50% of their basic pay while on contract (and must not be less than the National Minimum Wage).

As one of the first umbrella companies to announce their intentions from October, Lisa Keeble from Contractor Umbrella told us why her particular scheme had opted to go down this route:

“By adopting the Swedish Derogation model we are giving our current and all future recruiter partners assurance that all their candidates will be working under a full Contract of Employment and receiving payments between assignments. Consequently, the concern for recruiters over guaranteeing equal pay is automatically removed. As it has now been confirmed that the legislation will also apply to contractors working through a PSC, if their working practices fall inside IR35, a considerable administrative burden has been placed on UK recruiters.”

Uncertainty over AWR implementation

It will come as no surprise given the uncertainty that exists over the AWR that experts are divided over whether the Swedish model is viable in all cases.

The final Government guidance was published on Friday. The Recruitment & Employment Confederation (REC) says that some important questions remain – confirmation over how genuinely self-employed workers will be treated, information on the specific benefits that may or may not come under the definition of pay, and details on payment during rest breaks as part of equal working time.

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Last updated: 7th December 2020