Many of our clients are concerned about what will happen to their agency workers during the lock down. We've answered the most frequently asked questions which include furloughing and public funding.
1. Can agencies furlough workers?
The Government has confirmed in its updated guidance that agency staff can be furloughed, provided they were paid via PAYE on 28 February 2020. This also includes agency staff employed by umbrella companies.
It is for the agency and the worker or, in the case of umbrella companies the umbrella company and the worker, to agree whether the worker should be furloughed. The ability to furlough remains subject to the other requirements, namely the worker should not perform any work.
The end user will not be responsible for furloughing the worker as they will not be on its payroll.
However, please note different considerations apply if you are a public sector employer or receive public funds. The guidance states:
“Where employers receive public funding for staff costs, and that funding is continuing, we expect employers to use that money to continue to pay staff in the usual fashion – and correspondingly not furlough them.”
Further guidance was published by the Cabinet Office: Guidance notes on Payments to Suppliers for Contingent Workers. impacted by Covid19 and should be consulted.
2. If agencies furlough staff, can they ask their clients (the end user) to pay for the hours the worker should have worked?
Any payment obligations will depend on the precise terms of the agreement between you (as end user) and the agency. Therefore, you need to consider, carefully, the wording of your specific contract with each agency you engage.
However, as a general principle, we would expect that most agreements would work on the basis that the agency is required to provide services to the client (which will be delivered by the workers) that will usually be identified in a separate assignment or call-off document and the agency is then paid for the services delivered. If the workers have been furloughed, then it is difficult to see how the agency is able to deliver the services and, therefore, what you could be asked to pay for.
Also, to the extent that an agency was to claim that a non-payment of one of its invoices for the furloughed workers was a breach of contract, it could be argued that any amount of loss it suffered for such non-payment should be discounted by the amount of the compensation for that worker that the agency had received/ should receive from the government for that period. To avoid any further claims being made by agencies, then you could look to bring current assignments to an end by terminating them in accordance with the terms of your agreement or indeed terminating the whole agreement in accordance with its terms.
Even if you are not contractually liable to pay fees for staff who are no longer working, there are other issues you should consider. Agencies may incur additional costs of making claims for furloughed staff and may also have extra payroll costs. You may, therefore want to reach a compromise, particularly if you are likely to have an ongoing commercial relationship with the agency (or the specific worker) and want to retain some goodwill.
3. Can you terminate agency staff arrangements to cut costs if you've furloughed your own staff?
a. Private employers
Yes, provided the commercial terms agreed between the agency and the end allow this. If you choose to end the assignment with the agency worker and they are permitted to do so under the contract there is no obligation to continue to pay the salary of the agency worker. This will not breach the Agency Worker Regulations 2010 “AWR” unless you’ve terminated the agreement for a reason where the agency worker did (or you think they’ve done) one of the following things:
•brought proceedings under AWR
•given evidence or information in connection with such proceedings brought by any agency worker
•made a request under Regulation 16 for a written statement
•otherwise done anything under the AWR in relation to a temporary work agency, hirer, or any other person
•alleged (in good faith) that an agency or hirer has breached AWR
•refused to forgo a right under AWR
The only clear risk in this situation would be if the agency worker is likely to be deemed to be your employee rather than someone engaged by the agency. If there is already a contract in place between the agency and the worker, the risk of the worker asserting they are employed by you, the end user is, usually, low. However, if you have engaged the same agency worker for a number of years, you may want to take advice before terminating their engagement via the agency.
b. Public or part publicly funded employers
Where the services of the worker are paid for using public funds different considerations apply.
The government guidance is that public funded bodies (i.e. schools) are encouraged to continue to pay agency staff unless and until the arrangement would ordinarily come to an end. This suggests that end users should not cancel contracts. There is, however, no requirement or ‘encouragement’ to continue the assignment beyond the original conclusion date.
If the agency staff carries out work in an area which is not publicly funded you may be able to adopt the approach at 3a.
It is not clear what the implications will be for any publicly funded employer which ignores this guidance. However, it’s possible that HMRC will reject any application and it could also impact on future funding agreements.
4. What are the risks if the employer maintains the assignment with the agency worker?
If you choose to maintain the assignment where there is no current need for the agency worker you will need to continue to pay them in line with the AWR. Specifically, after 12 weeks of an assignment these workers are entitled to the same benefits as comparable employees of the end user; this includes basic pay.
If you as the end user, have furloughed your directly employed staff and have topped up their pay, or have continued to pay your staff without furloughing them, any agency worker you've kept on who has been engaged for at least 12 weeks should be paid in line with your other staff.
This means that it may be appropriate for you to continue to pay the agency (or ‘top up’ the furlough payments, via the agency), to ensure that the obligations under AWR are met. You should review the contract terms between you and the agency and take specific advice on this if you are unsure of your legal obligations.
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