• employed or otherwise contracted by a temporary work agency; and
  • working temporarily for and under the direction of a hirer.

The Agency Workers Regulations (AWR) were introduced on 1 October 2011 to protect vulnerable temporary agency workers by ensuring that they benefit from the same basic pay and employment conditions as permanent employees.

Despite good intentions, the reality is that the AWR's scope is much broader than originally assumed and potentially affects all agency workers - irrespective of rate, trade or qualification

All agency workers who are classed as:

An agency worker is entitled to access collective facilities and amenities from the first day of their assignment, such as the canteen, childcare facilities and transport services.

They're also entitled to equal pay and holidays after a 12 week qualifying period, ie if they've worked in the same role for the same hirer for 12 continuous calendar weeks (although there are many circumstances that pause, restart or continue the 12 week clock that we can advise on).

The main types of agency worker who fall outside the scope of AWR or are low risk from AWR:

Option 2: Our umbrella service - My Max

Any other contractors, you will need to assess for AWR risk.

You can view our AWR video which will help explain the information above in a slightly easier to digest format.

Where an umbrella service is suitable, we recommend the 'equal pay' model - where we make sure that the contractor's rate is at least equal to that of a comparable employee after the first 12 weeks.

This is the best option if the client provides a comparator rate and pay is above this, or where the client is willing to raise their rate to meet equal pay. The advantage over the derogation model is that expenses will not be restricted. It's also likely to be better received by the contractor.

We ensure the timely collection of data from the agency using a 'business rules engine' to ensure this information is shared on time between ourselves and the recruitment agency. This engine drives AWR compliance and can be tailored to suit an agency's needs based on certain parameters. After 10 weeks, an automated email will remind the agency that the contractor is approaching their first 12 weeks and will confirm contractor's hourly pay based on what they've earned in the past 10 weeks.

The AWR guidelines state that pay includes wage plus expenses. Calculations of pay rate can vary week by week based on the level of expenses claimed by the agency worker and the number of hours worked.

Option 3: Our derogation umbrella service

On request from the agency, we have a derogation model which in simple terms means that the agency worker gives up his/her entitlement to equal pay in exchange for a permanent contract of employment, with pay between assignments. This may be suitable when no comparator data is available or where pay is below the comparator. This affects pay but day 1 rights remain unchanged.

It's worth noting that the compliance requirements of the umbrella remain the same. There must be an overarching contract of employment in place, a dispensation and supporting expenses policy and the calculations must adhere to minimum wage guidelines.

With this service, the worker would have to agree to give up the right to equal pay in exchange for pay between assignments. This rate would be agreed up front through our New Business take on process, along with the appropriate scope of the worker's future assignments.

In order for the model to work properly, it needs to be made clear that the right to equal pay does not apply. For this reason a contractor may prefer a traditional umbrella unless the agency insists that a derogation model is used.

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The service from PayStream in the early days of my new company has been excellent.PayStream have guided me through all aspects of the set up process and the presentation of information and income statements is again excellent.
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I have been given an excellent and exemplary service. Nothing ever seems too much trouble and this aligned with the new technology you are using to allow PSC clients to look at their business bank statements and run P&Ls for periods of choice, makes you look very good indeed from a client perspective.
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AWR - our advice

What is AWR?

Who's protected?

All agency workers who are classed as:

  • on agency payroll
  • contracted to an umbrella company
  • 'disguised employees' operating through any other structure.

Contractors who are genuinely in business on their own account - often running their own limited company or 'PSC' - fall outside the scope of AWR. This view is supported by the Department for Business, Innovations and Skills (BIS). At PayStream, we have robust IR35 checks to ensure that this is the case.

What does AWR entitle your contractors to?

Our advice

Basic AWR compliance

  • on agency payroll
  • Limited company contractors
  • Agency workers with a contract length less than 12 weeks
  • Agency workers with a higher hourly rate than a comparable permanent employee
  • Agency workers with no comparable permanent employee because their role is unique
Option 1: Our PSC service - My PSC

PSCs may solve an agency's AWR problems for contractors earning above £15 per hour who are interested in working through a limited company. However the contractor needs to be genuinely “in business” to fall outside the scope of AWR. Our IR35 and 'in business' checks ensure that there is clear evidence that this is the case and provides an audit trail should the contractor decide to make a claim.

For those who don't qualify for PSC we have two options with our umbrella service - an equal pay umbrella service and a derogation umbrella service.

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Your contractor might want to look at My PSC
Our limited company service.

With My PSC, your contractors can set up and run their own limited company in the most tax-efficient way possible, with minimum fuss. Not only that but if they sign up now they'll get three months completely free. Find out more.

If you or your contractors would like to talk about My PSC in more detail and find out their IR35 status, please call us on 0800 197 6516, or fill in the form below and we'll be in touch whenever suits you.

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Your contractor might want to look at My CIS
Our special service for the construction industry.

My CIS lets your contractors enjoy all of the benefits of their CIS card whilst cutting down on all of that annoying paperwork - leaving your contractors to get on with their job. Find out more.

If you or your contractors would like to talk about My CIS in more detail, please call us on 0800 197 6516, or fill in the form below and we'll be in touch whenever suits you.

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Your contractor might want to look at My Max
Our umbrella service.

With My Max, your contractors can balance the benefits of continuous employment with the advantages of being a contractor. Find out more.

If you or your contractors would like to talk about My Max in more detail, please call us on 0800 197 6516, or fill in the form below and we'll be in touch whenever suits you.

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