Compensation win for agency worker paid through an umbrella company

umbrella companyCamden UNISON has won a four figure pay settlement for a member who was an agency worker in a school, paid through an umbrella company.

Like many temp agencies nowadays, the member was forced to accept payment not from the agency itself but through an umbrella company.

Umbrella companies use complex pay arrangements essentially to underpay workers, and dodge their employer tax and National Insurance contributions.

This particular company also used a get out from the equal pay Agency Worker Regulations called the “Swedish derogation”. This meant they were paying our member just £6.80 per hour, compared to permanent colleagues doing the same work who were being paid £11.57 per hour.

UNISON challenged this with the umbrella company, and we eventually took them to ACAS, where they agreed to pay the member compensation.

To any other workers who find themselves in the same situation, the member had this to say:

“If you are an agency worker who thinks they are being paid unfairly I recommend joining Unison. They help you understand your rights, offer advice and represent you when you need them. I did, and they won me compensation which I never thought would happen.”

The member had also subsequently been appointed as a permanent member of staff at the school.

We have also raised this issue at the schools joint consultative committee (JCC: regular meetings between the union and management) and the corporate JCC, to try to ensure Camden stop using these companies which exploit workers, dodge tax, avoid the equal pay regulations and flout the council’s London living wage policy. We will keep members informed of any progress in this matter.

In the meantime if any other agency workers believe they are being underpaid or need help understanding umbrella company pay arrangements please speak to your local rep or contact John Shepherd (, and you can join UNISON and receive our full support.

For the benefit of other workers/reps we include here the legal argument we used to negotiate the compensation.

We made the argument that the Swedish derogation gave agencies a get out to the equal pay regulations, because in Sweden agencies pay their employees a substantial salary when they are in between assignments, which is comparable to their salary when working.

The “permanent contract” this agency worker had with the umbrella company was only for 350 hours per year. whereas their assignment was for 35 hours per week. So we argued that the permanent contractual salary of the employee was not a liveable wage, comparable to their salary when on assignment, so the Swedish derogation should not apply in this instance.

To our knowledge this argument has not been tested at tribunal or appeal tribunal.

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