Rehan Pasha, employment adviser at law firm Squire Sanders considers the pros and cons of taking on temporary workers as PBA staff from a recruitment agency and the potential pitfalls to avoid.

The Agency Workers Regulations 2010 came into force on 1 October 2011, with the main aim of equalising agency workers’ pay with that of their employed counterparts after a 12-week qualifying period. However, the regulations also set out an alternative approach, namely the ‘Pay Between Assignments’ model (PBA). In a PBA contract, agency workers give up the potential for pay equality in return for a guarantee that they will be paid for a minimum of four weeks when they’re not working. They become employees of the recruitment agency that places them (and thereby obtaining the legal protections that only an employee can enjoy).

Several newspapers, trade unions and employee representative groups have questioned whether this PBA model is entirely lawful or if it is a loophole that will be closed off once the first cases have been decided at an employment tribunal. Many recruitment agencies, and their clients, are placing their workers on PBA contracts and this situation has led to further confusion about the legislation.

The first point to make clear is that the PBA model is a lawful process. Not only is it expressly set out as an option in the regulations themselves, but also in the European directive upon which the regulations are based. So it seems unlikely, although theoretically possible, that the government will fundamentally revise the Agency Workers Regulations to make the PBA model unlawful.

Although the issues regarding pay for the worker entering into these PBA contracts has been discussed at length in the media, the advantages for such a worker have been somewhat overlooked.

If an individual is ‘temping’ there is no obligation upon the recruitment agency to find that temp any work. The situation is quite different under a PBA contract, as the recruitment agency is then under a positive obligation to be continually looking for and offering the PBA employee additional work. Not only that but the recruitment agency is required to offer work of a type and at a rate of pay and location previously agreed with the PBA employee.

That in turn leads us onto the most significant single benefit – the right to be paid for at least four weeks, even if the worker is not carrying out any work, before the recruitment agency is able to lawfully terminate a PBA contract. The sum that the agency worker is paid is 50 per cent of the maximum salary he received over the previous 12 weeks. This provision makes it more costly for a recruitment agency to dismiss a PBA employee compared to a standard employee if both have only been employed for a brief period of time. It is also a benefit that non-PBA workers are not entitled to.

Although the recruitment agency will potentially be paying its PBA employees a lesser hourly rate than they would if they were temps, there are some significant limitations in taking the PBA route.

Under a PBA contract, the individual becomes an employee of the recruitment agency and obtains significant employment law protection rights that he would not have as an agency worker.

The most important of these rights include those not to be unfairly dismissed and to obtain a redundancy payment. In addition PBA employees will be able to bring grievances against their recruitment agency employer and will most likely need to be taken through a formal process when they are being disciplined or dismissed, both of which can take significant time to manage and can result in employment tribunal claims.

The recruitment agency will need to provide employer’s liability insurance for all PBA employees, in addition to ensuring that they have access to a pension. The time and effort involved in actively seeking further work for the PBA employees and ensuring that they are appropriately managed should not be underestimated and these costs have to be absorbed and borne by the employer recruitment agency.

Ensuring that taking on agency workers is still cost-effective for businesses whilst increasing the legal protection and pay that agency workers receive can be a difficult circle to square. Although it seems fair to say that PBA employees may receive a lower rate of pay than those agency workers who have worked for an end user for more than 12 weeks and benefit from pay equality under the AWR, this focus entirely disregards the other advantages workers gain as a result of entering into a PBA contract.

For many individuals in the current economic climate, having the promise of regular, sustained and protected employment may be preferable to a short-term higher rate of pay but with uncertainty around any longer-term engagement.