The Swedish Derogation Model

When the Agency Workers Directive (AWD) was being negotiated by the European Community the Swedish Delegation had the good sense to insist upon certain provisions being inserted to limit the extent of the directive.

The delegation negotiated a provision whereby the Regulations do not apply to cases where;

  • An ‘Agency Worker’ is employed on a permanent employment contract by a Temporary Work Agency or Umbrella Company, AND
  • He or she receives equal pay in-between assignments

The provisions have been built on to form the so called Swedish Derogation Model.

Are you a highly skilled expat IT Contractor? Are you looking to maximise your contract earnings and work towards a future visa extension or transfer? If so Commonwealth Contractors can help!

At Commonwealth Contractors we partner with Umbrella Companies and OISC Registered Immigration Advisors as well as Tier 2 Licensed Employers and Consultancies. To discuss your situation with an experienced advisor call Commonwealth Contractors now on 0330 390 9021 or Submit your Details and we will get right back to you!

How the Swedish Derogation Model Works

In order for the Agency Worker to be outside of the regulations;

  • The Agency Worker must have a permanent employment contract with the Agency or Umbrella Company, AND
  • The employment contract MUST have been entered into before the first assignment. The contract must include written terms, details of pay rates, the method of calculating remuneration, location of the initial assignment, the type of work, the expected hours of work etc, AND
  • Between assignments the agency must pay the Agency Worker the “minimum amount” and takes reasonable steps to seek suitable new assignments for the Agency Worker, AND
  • The “Minimum Amount” must be at least 50% of the workers basic pay while on assignment (However, it cannot be less than the £5.80 an hour for workers aged 22 and upwards)

In practice, most contractor payment vehicles that are not personal service companies run by the worker, traditionally have set a salary equal to the minimum wage, with the balance of the package paid as bonuses or expenses.   This means that meeting the Swedish Derogation is not necessarily very difficult where this is the objective of the parties.  You should always consider what you want and clearly state it at the outset.  Generally, for lower level staff whose underlying objective is actually to obtain permanent end-user employment, AWR may offer some advantages, but it also imposes costs of monitoring and compliance on the client / end-user.  For high level professionals who want to be contractors / consultants, structuring yourself clearly outside AWR can have advantages as saving the client / end-user compliance costs can help maximise the billable rate achieved (ie if the client knows that the total cost of engaging your services is the hourly rate, then that rate can be higher than if the cost is an hourly rate plus ongoing monitoring & compliance costs, up front information gathering, etc )

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