A normal agency contract is not a contract of employment, nor a contract of service. The courts have agreed that an agency worker is not an employee of the agency, nor an employee of the client. The two key conditions for a "contract of service", i.e. mutuality of obligation and control, are not met by either the agency or the client. You are not, therefore, entitled to the employment rights and benefits that are available to "employees".

Although you are not an employee, you are treated as an employee for payroll purposes. As long as it is the agency that pays you, the agency must deduct tax and employee NICs through the payroll and pay employer NICs on your earnings.

An agency contract does not satisfy the definition of "workers". However, the legislation brings agency workers into the scope of some employment rights, including the national minimum wage and the rights set out in the Working Time Regulations.

However, some agencies issue contracts of employment to their workers that spell out the terms of their employment and, as a result, they become employees of the agency. If you are in this situation, you are entitled to all employment rights available to employees and workers.

Also, more recently, the courts are starting to take the view that, where an agency worker works for an employer for more than a year and, during that time, becomes largely integrated into the workforce, e.g. by coming under all of the employer's rules applying to proper employees and by receiving workplace benefits that are provided for proper employees, it is possible for "mutuality of obligation" to arise, turning the agency contract into an employment contract. However, time has yet to indicate whether that is likely to happen often in practice.

If this explanation does not answer your question and you cannot find the answer to your question by doing a search elsewhere in PayPerShop, please click here and explain what it is that you still do not understand.

Is there another question you would like to see answered in PayPerShop? If so, please click here and send us your question.