Entrenching inequality: how companies learned to stop worrying and learn to love the EU Directive on agency work

Companies and agencies are jointly profiting from an opportunistic clause in the EU’s Directive on temporary agency work, whose transposition into national law in the UK in October is already having a negative impact, reports IUF affiliate Unite.

To circumvent the requirement that after 12 weeks of continuous employment agency workers should enjoy equal access to pay and some, but not all, benefits – there is no equality of treatment when it comes to redundancy notice, redundancy pay or pension benefits – companies and agencies are working together to make these workers permanent employees… of the agency.

Under what is called the “Swedish derogation”, permanent employees of what are notionally temporary employment agencies are no longer considered to be temporary workers. In company-speak, the operation brings ‘synergies’ to the demand for ‘flexibility’. The real synergy provides the user enterprise with generous cost savings and allows the agencies to expand their colonization of the labour market.

At brewer Carlsberg, for example, Unite has had an understanding that agency labour in logistics would be limited to around 15% of the workforce. That percentage has been exceeded, but despite entering into discussions with the union on reviewing the situation, the company has instructed all its agencies to convert temporary workers on their payroll into “permanent employees”. At the same time, Carlsberg is seeking to entrench CBA language which would start new hires at 80% of the pay of longer-serving employees, moving to 90% after a year.  Despite strong efforts by Unite to agree a further step up to 100% after two years’ work, Carlsberg has refused to reach agreement. The ‘synergy’ here is low pay rates for an increasing portion of the directly employed workforce and the institutionalized denial of equal terms and conditions for the growing army of agency workers.

“Derogation” has already become widespread in the retail sector. A spokesperson for supermarket giant Tesco told the Financial Times on October 24 that “The derogation is being used very widely across the economy by the agencies as a way of ensuring that agency work remains competitive and flexible. The approach has been recognised by the government, the British Retail Consortium and the CBI.” What is missing in this statement is the role of the agencies’ clients in encouraging and implementing the practice.

On October 26, the Financial times reported that one agency was moving 8,000 of its 25,000 temporary workers on to permanent contracts – including those working at a DHL operation supplying parts to a Jaguar Land Rover car assembly factory, where Unite members were being pressured to sign contracts giving them up to GBP 200 less per week!

And on October 31, a spokesperson for the Morissons supermarket chain told the JustFood internet food industry publication “”The recruitment agencies we work with have been considering how they will comply with this legislation for some time. They have proactively considered using this model or are already employing their workers. Through our network of agency suppliers, Morrisons will be offered temporary workers who may be employed by the recruitment agencies with contracts of employment referred to as Swedish Derogation.” The Morissons workers slated for “derogation” are employed in both logistics and food manufacturing.

With the growing tendency for companies to lock in two-tier agreements, temp workers who escape “derogation” will find the comparison against which equal treatment is measured is starter pay at or barely above the legal minimum, with few or no benefits.

Unite Food, Drink and Tobacco National Officer Jennie Formby says that “Agency work has traditionally been seen as a stepping stone to permanent work with the host company; these moves have created what will now probably be a permanent two-tier labour structure. The irony is that the regulation on agency work that we all looked forward to as a vehicle for improving the lot of precarious workers has in fact entrenched low pay and minimum conditions.”