Rise of the Atypical Worker – Q&A on Temporary Staff

Rise of the Atypical Worker – Q&A on Temporary Staff

Key contact: Claire Knowles

Author: Adam McGlynn

The Coronavirus pandemic has seen a rise in unemployment rates and reports published by both CIPD and the Recruitment and Employment Confederation suggest figures are not likely to improve anytime soon. However, it is not all doom and gloom as the REC’s latest Jobs Outlook report illustrates that a number of employers are intending to recruit over the next 12 months, placing their trust in temporary workers. For businesses looking to use fixed-term employees or agency workers to re-build more efficiently or cover staffing gaps, here are some quick answers to questions you might have.

What does a temporary worker relationship look like?

Temporary worker relationships can come in a variety of forms and the fact that an employee is on a temporary contract does not determine their employment status. At one end of the spectrum you could have a consultant who provides ad hoc services if and when necessary and at the other you could have a fixed-term employee whose term expires after a few months or so. Somewhere in the middle, agency workers can provide services through the client’s commercial engagement with the agency. Each of these examples would provide the business with short term support but the contractual and statutory rights of the parties would look very different.

If I employ someone on a fixed-term basis can I dismiss them before the contract expires?

Sometimes the employee may accomplish their intended goals or the spike in work may reduce. In these circumstances an employer may wish to terminate the relationship early, rather than continue to pay the employee until the expected end date. An employer’s ability to do this will need to be stipulated in the contract, for example through the additional option to serve the employee with notice. Where this option is not included, or the notice procedure is not followed, it may give rise to a wrongful dismissal claim.

A temporary worker who has employment status will acquire unfair dismissal rights after 2 years. It is potentially lawful to dismiss an employee before their expected end date or to not renew the contract following its expiry. Both situations, however, are considered dismissals so the employer must act reasonably and should consider other available options including offering alternative employment.

Can I keep a fixed-term employee after their contract expires?

Yes, parties can agree to renew the contract, either by agreement in the lead up to expiry or by including automatic renewal provisions within the original contract. If the employee is retained beyond the expiry of their fixed-term contract, without a renewal, the law will usually imply similar terms for an indefinite period. Where no notice period has been agreed beforehand the new indefinite contract would have an implied term to provide a reasonable notice period.

Can a fixed-term contract become a permanent contract?

Yes. As above, retaining an employee after the expiry of their contract is one way a fixed-term employee can become permanent. Length of service is another way. Employees engaged through successive fixed-term contracts will be deemed to be permanent after four years’ continuous service unless the fixed nature of their employment is necessary and appropriate to achieve a legitimate business objective.

Can I treat fixed-term employees differently to permanent comparators?

Potentially. Employees cannot be engaged on less favourable terms, or subjected to a detriment, based on the fixed-term nature of their contract. Examples which could result in a claim include lower pay, exclusion from a pension scheme, the inability to participate in benefit packages, and not being considered for internal opportunities such as promotions. However, where the less favourable treatment may be permissible if it is objectively justifiable. It may be justifiable, for example, to exclude sick pay entitlement for fixed-term employees providing urgent short-term cover.

What are agency workers?

Using agency workers can be a useful way to engage short-term services on more flexible and commercial terms. A traditional agency worker is employed by a corporate entity, often known as an agency, which, in turn, contracts with the client to provide services performed by those workers. This article will focus on this traditional construction, however, facts may be more complicated in reality.

Are agency workers employees?

Where there is a tripartite agency relationship, there is no direct engagement between the client and the agency worker and so it is unlikely that they will be deemed to be an employee or worker of the client. The employment relationship will lie between the worker and the agency while the client engages the agency on a commercial basis. However, it is possible for an agency worker to be, or to become, an employee of the client if a direct, contractual relationship is implied by the parties’ conduct.

Can I treat agency workers differently to permanent comparators?

Yes. The protections afforded to fixed-term employees do not extend to agency workers and so there is no obligation to treat them at least as favourably as comparable permanent employees.

Are agency workers entitled to breaks and leave?

Yes. Agency workers are entitled to breaks and leave rights, subject to their employment status. The employing party, most likely the agency, is responsible for observing these rights.

Do I need to conduct an IR35 status determination on agency workers?

An agency worker provides services to the client through an intermediary and so there is the potential that IR35 could apply. If an agency worker were to be caught by IR35 provisions and deemed to be an employee of the client for tax law purposes, then PAYE deductions would need to be made by the client. However, certain criteria apply before a status determination even becomes necessary, including the having sufficient stakeholder rights in the agency itself. Usually, genuine agency workers would not be caught by IR35 and the agency would be responsible for PAYE deductions. For further information on the application of IR35 please visit our IR35 Assist page here.

How can I ensure an agency worker is not deemed to be an employee?

  • Ensure that the commercial relationship between the client and the agency is clearly made out.
  • Payment should be made to the agency in respect of the service they provide, not to the worker directly or based on performance or work done.
  • Use a well-organised agency which observes its obligations as the worker’s employer and takes responsibility for managing their attendance, conduct, and performance.
  • Allow the agency to decide which workers are most appropriate to provide the services.
  • Use agency workers for specific projects or temporary cover rather than long, indefinite periods.
  • Clearly identify the individual as an agency worker rather than holding them out as an employee.
  • If further reassurance is required, then consider requesting a warranty and/or indemnity from the agency as to the worker’s employment status.

If you would like further guidance or support please contact our employment team.

Claire Knowles – Partner

Mark Alaszewski – Associate

Rebecca Mahon – Solicitor

Adam McGlynn – Trainee Solicitor

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