At Horsfield & Smith, we understand that managing agency workers can pose unique challenges, especially when it comes to ensuring compliance with employment law and auto enrolment obligations. The Agency Workers Regulations, which have been in place since 2011, introduce specific rules regarding the treatment of agency workers. As businesses increasingly rely on temporary workers, it is essential to stay compliant with these regulations, particularly in how they interact with the requirements of auto enrolment pensions.
Here’s a detailed guide on how these regulations affect your responsibilities as an employer and what steps you can take to ensure your business complies with the law while managing the intricacies of filling P11D forms and other benefits for agency workers.
What are the agency workers regulations?
The Agency Workers Regulations came into effect on 1 October 2011, creating a legal framework designed to give agency workers the same basic employment rights as employees directly hired by a company. After a 12-week qualifying period, agency workers must be treated equally in terms of pay, benefits, and working conditions compared to their directly employed counterparts.
From the first day of an assignment, agency workers are entitled to certain rights, such as access to shared facilities and information on job vacancies. However, the most significant impact occurs after the 12-week period, where they must be offered the same terms and conditions as permanent employees. This includes entitlement to benefits like holidays, overtime pay, rest breaks, and crucially, participation in a workplace pension scheme under auto enrolment rules.
How do these regulations impact auto enrolment?
Auto enrolment has been a mandatory requirement for employers since 2012. Employers must automatically enrol eligible employees into a workplace pension scheme and make contributions on their behalf. The Agency Workers Regulations add another layer of complexity to this requirement by ensuring that agency workers must be included in the same pension scheme as directly hired employees after 12 weeks of employment.
This means that once an agency worker reaches their 12-week qualifying period, the employer must calculate their qualifying earnings and ensure they are enrolled in the appropriate pension scheme. Employers are also responsible for making the necessary employer contributions and ensuring that agency workers receive the same tax relief on their contributions as permanent staff.
Employers need to be aware that the 12-week qualifying period cannot be bypassed or artificially interrupted to avoid enrolling agency workers into a pension scheme. The regulations are clear that breaks between assignments of less than six weeks will not reset the qualifying clock, and certain breaks—such as those due to illness, maternity, or paternity leave—will simply pause the clock rather than reset it.
Why is auto enrolment crucial for agency workers?
The inclusion of agency workers in auto enrolment is significant for ensuring that all eligible employees, regardless of their employment status, have access to a workplace pension scheme. Agency workers, like permanent employees, are entitled to build up retirement savings, and it is the responsibility of both the agency and the employer to ensure that this happens once the 12-week threshold is crossed.
Employers need to be mindful of the additional costs and administrative burdens associated with auto enrolment for agency workers. The employer must track the earnings of these workers carefully to determine whether they meet the qualifying earnings threshold for auto enrolment, which was set at £10,000 for the tax year starting April 2023. Additionally, if an agency worker opts to leave the scheme, employers must ensure that the appropriate procedures are followed to remove them from the scheme while keeping accurate records of contributions and deductions.
As businesses prepare for further changes in April 2026, when the state pension age may increase, understanding how to manage the auto enrolment process for all workers, including agency staff, will be more critical than ever. The long-term financial wellbeing of your workforce—and the legal compliance of your business—depends on it.
How does this affect filling P11D forms and taxable benefits?
Agency workers, like permanent employees, may be entitled to certain taxable benefits that need to be reported to HMRC. After the 12-week qualifying period, agency workers must be offered the same benefits in kind as their directly employed counterparts. This could include the use of a company car, private health insurance, or other workplace perks.
When offering such benefits, employers need to be prepared to complete and submit the relevant paperwork, including filling P11D forms for each worker. P11D forms are used to declare any benefits in kind or expenses that workers have received during the tax year. For agency workers, this might include taxable benefits such as company cars, mileage allowances, or credit card expenses.
If you are unfamiliar with the process of filling P11D forms, or if you need help understanding how benefits in kind should be reported, Horsfield & Smith can provide expert guidance. Ensuring that all taxable benefits are properly declared is crucial for avoiding penalties and staying compliant with HMRC regulations.
The financial implications of agency workers regulations
The costs associated with complying with the Agency Workers Regulations go beyond simply paying agency workers the same rate as directly employed staff. Employers must also account for the increased administrative burden of tracking worker eligibility for auto enrolment and managing benefits like holiday pay, overtime, and taxable benefits.
For many businesses, these additional costs may be passed on by agencies in the form of higher fees, especially when agencies themselves bear some of the liability for ensuring workers are treated fairly. Employers must be prepared to handle these costs effectively while ensuring they remain compliant with both employment law and tax obligations.
Another potential cost is related to the risk of claims being made by agency workers. If an agency worker believes they have been treated unfairly or have not been given the same terms and conditions as permanent staff, they may file a claim with an employment tribunal. These claims could result in financial penalties or reputational damage to the business. Staying compliant with the regulations—especially when it comes to auto enrolment and filling P11D forms—is the best way to mitigate these risks.
Managing compliance with Horsfield & Smith
At Horsfield & Smith, we specialise in helping businesses manage the complexities of employment law, tax compliance, and benefits reporting. With over a century of experience in Bury, we understand the challenges businesses face when dealing with agency workers and the intricate details of complying with the Agency Workers Regulations.
Our expert team can help you ensure that your business remains compliant with both auto enrolment obligations and the requirements for filling P11D forms. We’ll take care of the administrative burden, allowing you to focus on running your business and ensuring that your workers are treated fairly and in line with the law.
Whether you need assistance in setting up a workplace pension scheme, managing taxable benefits, or simply staying on top of changes in employment law, Horsfield & Smith is here to help.
How Horsfield & Smith can help you
Navigating the complexities of the Agency Workers Regulations and ensuring compliance with auto enrolment and filling P11D forms can be overwhelming. However, at Horsfield & Smith, we have the expertise to make the process straightforward and manageable.
Our team can assist with everything from setting up and managing workplace pension schemes to completing and submitting P11D forms for your employees and agency workers. We will ensure that your business is fully compliant with employment law and tax obligations, giving you peace of mind.
For more information or to discuss how we can support your business, get in touch with Horsfield & Smith today. You can email us at theteam@horsfield-smith.co.uk or call us on 0161 761 5231.
