Duty to offer guaranteed hours to agency workers – Part 2

In the first part of this article, we looked at the requirements under the Bill for hirers to make a Guaranteed Hours Offer (GHO) to an agency worker. We now consider how those requirements might work in practice.

This case study uses the following assumptions:

• the threshold for ‘low’ hours is anything less than 16 hours
• the GHO is required to reflect the average hours worked over the relevant reference period
• the relevant reference period is 12 weeks

Case study:

A distribution company, (the Company), is planning ahead for its pre-Christmas rush. This usually starts building in August, peaks during September to November, and tails off again in December.

The Company has a core staff of 50, but according to its forecasted numbers, will need at least another 10 workers during the September to November period, covering around 16 hours each. A couple of them will need to start slightly earlier in August to help with the build-up, although they might only need them for about 10 hours per week during that period.

The Company speaks to the agency that it uses each year and who specialises in supplying warehouse and logistics workers. The agency is more than happy to help and can provide the requested number of workers as required.

As the actual working hours might vary, the agency and hirer agree to provide the agency workers on a zero-hour basis. As such, all of the agency workers will be covered by the GHO regulations.

On 1 August, the first two agency workers (A Team) turn up to work for the Company, they carry out 12-hour weeks for the first 5 weeks, followed by 24-hour weeks for the next 7 weeks.

On 1 September, the other 8 agency workers (B Team) start working for the Company, carrying out 20-hour weeks for the next 12 weeks.

The A Team and B Team will have different 12-week reference periods, starting from 1 August and 1 September respectively. The Company, very diligently, keeps a tracker of all of this and the number of hours worked each week.

The A team scenario

At the end of the first 12-week reference period, and in the absence of any exception, the Company must make a GHO to the A Team who have worked more than zero-hours for the reference period. On average (based on the total number of hours worked over the whole 12-week reference period), the A Team have worked 19 hours per week.

The Company is required to offer the A Team a permanent contract of employment between them and each of the A Team for 19 hours per week.

Both members of the A Team accept the GHO and sign their new employment contracts. They continue to work under their new employment contract with the hirer for 19 hours per week. They also carry out a further 5 hours per week under their existing agency terms.

A second reference period started as soon as the first reference period ended, each lasting for 12-weeks. The Company keeps a tracker of the hours worked in the second reference period in case another GHO might be required. However, the agency arrangement comes to an end at the end of November (5 weeks later).

The A Teams second reference period is less than 12-weeks, the hirer is not required to offer them another GHO for the 5 hours worked under their agency arrangement. As they have a permanent employment contract for 19 hours with the hirer, that particular arrangement does not fall below the low hours threshold and is not subject to the GHO regulations. As such, they continue to be employed permanently, directly with the hirer. The hirer will need to provide the A Team with 19 hours of work per week unless the employment contract is lawfully terminated (keeping in mind that the employee will have day 1 rights of unfair dismissal).

The only potential exception will be where it was reasonable for the hirer to engage the agency worker on a limited-term contract, and the work was not the same or similar as work done under another permanent worker’s contract.  As stated in the first part of this article, it looks as though this will mean that such contracts are limited to specific roles that are only created during peak periods.  It will be interesting to see how the regulations deal with this.

The B team scenario

At the end of the B Team’s 12-week reference period, the agency arrangement also comes to an end. However, the 12-week reference period has still been completed and so, the Company will need to make a GHO to all B Team agency workers. On average, the B Team have worked 20 hours per week across that period.

Of the 8 members of the B Team, 4 of them accept the GHO, the other 4 decline the GHO. Those who declined the GHO leave the Company and return to the agency’s care. The 4 that accepted the GHO all sign new permanent employment contracts and the Company now needs to find 20-hours of work per week for each of those employees going forward.

The Company is now entirely over-staffed, having gained 6 new employees and a total of 118 additional hours of work per week. The Company unfortunately cannot find enough work for everyone and has no choice but to consider making redundancies over the Christmas period.

If we assume that the new day one unfair dismissal rights are in play at this point, the Company cannot just exit the new starters. To act fairly, the Company has to pool all of its warehouse employees and start collective consultation to reduce its headcount by 6 employees in total, the same number of agency workers that accepted the GHO. 

This is seriously bad news for the Company, staff morale, and the new employees who thought they were going to get some regular, permanent work…#shift really does happen.

Our advisers are on hand to provide expert advice and insight into the upcoming changes proposed by the Bill and the impact on your business. If you would like advice or assistance with any of the above, please do get in touch.

For further information on agency-related issues arising from changes to the Bill, look out for our upcoming articles as we deep dive into what this might look like in practice.