The Agency Work Act - Understanding the New Regulations

The Agency Work Act - Understanding the New Regulations

In this article, we provide an overview of The Agency Work Act, detailing the situations in which it applies and the essential considerations you, as an employer, should be aware of, particularly regarding the 24-month rule.

The Agency Work Act governs how employers can engage temporary agency workers and aims to protect employees' rights. As of October 1, 2022, the Act requires client companies (User Undertakings) to offer permanent employment to workers who have been hired for more than 24 months. This article will guide you through the complex regulations related to agency staffing, helping you ensure compliance and make informed decisions.

Agency Work Act - Understanding Its Implications

The Agency Work Act (2012:854) is grounded in the EU's directive on temporary agency work. It establishes regulations for client companies that hire labor and for staffing agencies that supply this labor. The Act applies when staffing agencies assign workers to client companies, where the employees perform their duties under the client's control and supervision.

When Does the Agency Work Act Apply?

To determine whether the Agency Work Act is applicable, it’s essential to focus on the actual relationship between the staffing agency and the client company rather than solely on contractual definitions. Establishing the Act’s applicability can be particularly challenging with consultants or specialists. A thorough assessment is necessary, considering several factors:

• Employed for Assignment: The Act is relevant only if the staffing agency has hired the employee specifically for the purpose of assigning them to a client company, with the work being performed under the client’s direction.

• Control by the Client Company: It must be clear whether the client company or the staffing agency has control and oversight of the employee. Indicators that the client company is in charge include the employee receiving tasks from a manager at the client company and being part of a team on-site. Even if the employee is hired for their expertise, the Agency Work Act will apply if they are under the client's supervision.

• Provision of Tools and Resources by the Client: Additional signs of the Act's applicability include whether the employee performs their tasks on the client company's premises and uses their tools. It is also significant if the employee reports hours directly to the client or if the client sets the working hours.

• Completion of a Defined Task: If the tasks are clearly defined and the employee is not under the client's ongoing supervision, the Act may have limited applicability, such as when an employee is hired to perform specific, well-defined tasks within a project.

When Is the Law Not Applicable?

The law generally does not apply in situations where a client company temporarily borrows or hires personnel, meaning that the employee is not employed by the staffing agency with the intent to be assigned. It’s also essential to consider if the assignment is confined to a specific project. Furthermore, the Act does not cover individuals hired as independent contractors or freelancers.

Changes to the Agency Work Act in 2022

On October 1, 2022, amendments to the Agency Work Act were introduced. According to Section 12a, client companies must offer hired employees either a permanent position or compensation equivalent to two months' salary if the employee has been assigned for more than 24 months within a 36-month period at the same operational unit. This change enhances opportunities for hired workers to secure permanent employment with the client company.

Offer of Employment

An offer of employment must be made within one month after the 24-month period has elapsed. The client company can set the timeframe within which the employee must respond, but this must be reasonable and allow adequate time for consideration. If the employee accepts, their employment with the staffing agency ends without any further action required.

The law does not specify the type of employment or salary that must be offered, other than that the offer should be "reasonable." The interpretation of what constitutes a reasonable offer will depend on future case law, but it is crucial that the offer is genuine and not structured to encourage the employee to decline. The client company is not required to create a new position for the employee.

If the Employee Declines the Employment Offer

If the client company offers a permanent position and the hired employee declines, the offer is considered expired. This means the employee can continue to be contracted indefinitely without any requirement for new employment or compensation.

Compensation

If the client company chooses to provide compensation of two months' salary, this must occur within one month after the 24-month period has passed. The compensation is based on the employee's salary from the staffing agency and is paid directly to the employee. This payment is taxed as salary, and the client company is responsible for paying employer contributions. However, the compensation does not count toward pension or vacation pay. After the compensation is paid, the client company can continue to hire the employee as before.

What Happens If the Offer of Employment or Compensation Is Not Timely Provided?

If the client company fails to offer either a permanent position or compensation within one month after the 24-month period has elapsed, the affected party may file a claim for damages within four months, according to Section 16. After four months, no claims can be made.

What Should Employers Consider?

When hiring consultants, it is vital to remember that consultancy work can also fall under the Agency Work Act. Therefore, it is necessary to carefully evaluate your work models and employment structures to ensure compliance with the regulations. Client companies should also assess whether to offer employment or compensation based on their operational needs. Alternatively, it may be more advantageous to terminate the contract before the 24-month mark to avoid obligations under the Act.

More Information

Lag (2012:854) om uthyrning av arbetstagare