Agency Worker

An agency worker is an individual employed by a recruitment agency and supplied to a company on a temporary basis. Unlike direct hires, these workers remain on the agency’s payroll while performing work for the hiring company. They often fill short-term vacancies, assist with seasonal demand, or provide specialised skills for project-based work.

How to hire agency workers

When hiring agency workers, the arrangement typically involves three parties:

1. The agency:  Acts as the employer and pays the worker’s wages.
2. The worker: Provides services to the hiring company but does not have a direct employment contract with them.
3. The hiring company (client): Uses the worker’s services but does not take on employer responsibilities.

Employers benefit from flexibility and reduced administrative burdens, as the agency handles recruitment, payroll, and compliance obligations.

Key differences of agency workers from contractors and permanent employees

Understanding how agency workers differ from other types of workers is essential:

• Contractors or freelancers: Typically self-employed and responsible for their own taxes, insurance, and compliance with labour laws. They have a direct contractual agreement with the company hiring them.
• Permanent employees: Hired directly by a company, enjoying full employee benefits, stability, and long-term contractual rights.
• Agency workers: Work temporarily for an employer but remain under the agency’s payroll, often with limited benefits and job security compared to permanent employees.

Are agency workers entitled to benefits?

The rights of agency workers vary by country, but in many jurisdictions, they are entitled to certain protections. In the UK, for instance, the Agency Workers Regulations 2010 grant them key rights, including:

• Equal pay: After 12 weeks in the same role, agency workers must receive pay and benefits equal to permanent employees in similar positions.
• Working time regulations: They are entitled to rest breaks, holiday pay, and limits on working hours.
• Protection against discrimination: Agency workers have legal protection against workplace discrimination.
• Access to facilities: They must have the same access to workplace facilities (e.g., canteens, childcare, parking) as permanent staff from day one.

However, they typically do not receive long-term benefits such as redundancy pay, pensions, or private health insurance unless the agency provides them.

Companies leverage agency workers to maintain agility, reduce costs, and enhance operational efficiency. Here are some advantages of hiring agency workers:

Flexibility

Labour demands fluctuate due to seasonal peaks, market shifts, or unexpected absences. Agency workers allow businesses to scale their workforce up or down as needed, ensuring they maintain productivity without the risks of overstaffing. This adaptability helps maintain operational efficiency without long-term hiring commitments.

Faster hiring process

Recruitment can be time-consuming, but agencies maintain a pool of pre-screened candidates who are ready to work. This enables businesses to fill vacancies quickly, reducing downtime and keeping operations running smoothly.

Reduced administrative burden

Since the recruitment agency is the official employer of the worker, it handles payroll, tax compliance, contracts, and HR responsibilities. This allows businesses to focus on core activities rather than dealing with employment paperwork and regulatory compliance.

Access to specialised skills

Many industries require niche expertise for short-term projects. Hiring agency workers provides access to skilled professionals without the need for permanent employment. This is especially beneficial for industries such as IT, healthcare, and engineering, where specific skill sets are in high demand.

Labour laws governing agency workers vary significantly across different countries. Employers must understand local regulations to ensure compliance and avoid legal risks. Below are some key legal requirements in major regions.

United States

In the United States, agency workers are typically classified as employees of the staffing agency, rather than the client company. However, both parties have shared legal responsibilities in some cases. Here are some legal considerations:

• Fair Labor Standards Act (FLSA): Ensures agency workers receive at least minimum wage and overtime pay.
• Occupational Safety and Health Administration (OSHA): Holds both the staffing agency and client company responsible for ensuring a safe work environment.
• Joint Employer Liability: Under National Labor Relations Board (NLRB) rulings, the client company may be considered a joint employer. This means they’re responsible for certain working conditions, including collective bargaining rights.
  Anti-Discrimination Laws: The Equal Employment Opportunity Commission (EEOC) prohibits discrimination based on race, gender, age, disability, and other protected categories, and this applies to both staffing agencies and host companies.

Companies hiring agency workers in the U.S. must review joint employer risks, particularly in states with stricter labour protections, such as California and New York.

United Kingdom (UK)

The Agency Workers Regulations 2010 (AWR) grant equal pay and benefits to agency workers after 12 weeks in the same role. Workers are entitled to paid holiday, rest breaks, and statutory sick pay. Agencies must be licensed and comply with Conduct of Employment Agencies and Employment Businesses Regulations 2003.

When hiring agency workers in the UK, employers must keep in mind that they cannot use agency workers to replace striking employees.

European Union (EU)

For countries under EU, the Temporary Agency Work Directive (2008/104/EC)  ensures equal treatment for agency workers in terms of pay and working conditions.

Many EU countries have additional national laws, such as restrictions on long-term agency work and sector-specific protections. Collective bargaining agreements may influence agency worker rights in certain industries.

Australia & New Zealand

In Australia, agency workers (labour hire employees) are protected under the Fair Work Act 2009, ensuring fair pay and working conditions. Some states require labour hire licensing schemes, such as in Queensland and Victoria.

Meanwhile, In New Zealand, agency workers must receive the same minimum entitlements as direct employees under the Employment Relations Act 2000.

Both countries enforce workplace health and safety obligations for host companies.

Canada

Employment laws vary by province, with agency workers covered under local employment standards legislation.

In Ontario, the Employment Standards Act (ESA) 2000 mandates that temporary workers receive equal pay to permanent employees. On the other hand, Quebec enforces strict rules under its Labour Standards Act, preventing excessive reliance on agency workers. Federal regulations may apply in industries like banking and transportation.

Engaging agency workers effectively requires a strategic approach to ensure compliance, productivity, and long-term workforce success. Companies must establish clear policies, provide proper onboarding, and work with a reputable staffing agency to navigate legal complexities and optimise workforce management.

A trusted staffing partner, such as CXC, can provide expert guidance on contract management, worker classification, and compliance with labour laws, ensuring businesses mitigate risks while maximising the benefits of a flexible workforce.

Choose a reputable staffing agency

The right agency will act as an extension of your HR team, handling recruitment, onboarding, and compliance matters.

A trusted staffing provider should:

• Conduct thorough background checks to ensure candidates are skilled, reliable, and a good fit for your organization.
• Ensure full compliance with local labor laws to prevent misclassification issues and avoiding penalties.
• Provide clear and transparent contracts to outline worker rights, employer obligations, and dispute resolution processes.
• Offer ongoing support to include payroll processing, benefits administration, and performance tracking.

When selecting a staffing agency, businesses should prioritise experience, industry expertise, and a strong compliance track record.

Define clear job roles

A well-structured job description helps agency workers integrate seamlessly into the workplace while reducing misunderstandings and performance gaps. Organisations should:

• Clearly outline job responsibilities, performance expectations, and reporting structures to eliminate ambiguity.
• Communicate the scope and duration of the assignment upfront to set realistic expectations.
• Ensure agency workers receive proper onboarding and training, including workplace policies, safety protocols, and company culture insights.

Providing clarity from the start enhances efficiency, improves engagement, and boosts retention rates among temporary staff.

Monitor compliance

Regulatory requirements vary by country, and businesses must stay compliant with local labour laws. This includes:

• Ensuring agency workers receive fair wages and benefits in accordance with legal mandates.
• Regularly reviewing contracts to reflect current legal requirements.
• Collaborating with staffing agencies to maintain workplace safety standards.

Assess long-term workforce strategy

While agency workers provide flexibility, businesses should also consider the long-term impact of temporary staffing on workforce planning and business continuity. Leaders should:

• Assess whether temporary staffing aligns with long-term business objectives and operational needs.
• Identify opportunities to transition high-performing agency workers into permanent roles to retain top talent.
• Regularly review workforce composition, balancing cost-effectiveness with business stability, productivity, and employee engagement.

By strategically integrating agency workers into the broader workforce plan, companies can enhance agility, optimise costs, and build a resilient, high-performing team.