Agency workers being paid less than employee counterparts

The agency workforce is losing out on up to £400 million a year because they are paid less than their employee equivalents, according to new analysis.

The Resolution Foundation analysis says that 85 per cent of agency workers have been in an agency job for more than three months entitling them to equal pay under the law in almost all circumstances. However, that 85 per cent 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, says the Foundation. Agency-employed managers receive 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, the Foundation says 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. The Foundation says 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.

The 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). The Resolution Foundation says these contracts are widely abused and is calling for the loophole to be closed and for the Government to ensure the current law is enforced.

Lindsay Judge, Senior Policy Analyst at the Resolution Foundation, said: “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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