Seismic shift or damp squib?

After many years of outlawing rolled up holiday pay, it has now been permitted, from April 1st. What is it?

Until now, recruitment agencies have needed to accrue a minimum of 12.07% of workers' earnings, which are then paid out when workers take their holiday. The frequent failure to do so, and to funnel the significant proceeds back to agency profits, has blighted the industry. A leading figure at one of the industry's foremost trade associations told us that it was the single biggest problem the association deals with. Now, agencies are permitted to add holiday pay to the hourly rate. In this way, workers are guaranteed to get all that they are owed. For example, somebody on the London Living Wage of £13.15 would have had £1.59 in accrued holiday pay under the existing arrangements. Now, they can receive £14.74 which will include holiday pay.

Will this happen? Will it work?

We suspect not. Firstly, are companies that use agency workers going to be happy, if those workers' payslips show a significantly higher hourly rate than their own permanent workers? Secondly, part of the Agency Worker Regulations, and the whole basis of holiday pay for temporary workers, is that workers are encouraged to take holidays and only receive holiday pay when they do so. This would be negated if added to the hourly rate.

There will be advantages if the new rules are adopted. Job adverts will appear to offer a higher hourly rate and, therefore, attract more candidates. A further, and possibly significant, consequence, is that large users of agency staff could insist that their agencies adopt rolled up holiday pay. Doing so would ensure a much more level playing field between the few agencies that have fulfilled their obligations and actually paid out all their holiday pay accruals and those, (the majority) that have exploited the rules to their considerable advantage. In a climate where talk is of end users of labour being increasingly liable for compliance within their supply chain, perhaps it may be fear of the consequences of being liable for historic non payment of holiday pay by their suppliers that could move the dial?

The coming months will probably see the new permission ignored; were large agency users to insist upon it, there would be very many deeply embarrassing conversations to be had.