NMWM05110 - Entitlement to National Minimum Wage: agency workers

Relevant legislation

The legislation that applies to this page is as follows:

• National Minimum Wage Act 1998, section 34

General

Special provision is made in the National Minimum Wage Act 1998 to ensure that agency workers are entitled to the National Minimum Wage even if they are not otherwise defined as a “worker” under section 54 (NMWM05020).

In these circumstances a worker is supplied by an agent to do work for a third party (the principal). The work is done under a contract or other arrangement between the agent and the third party (the principal).

Section 34 is required because in an agency situation there is a contract between:

• the agency and the third party (the principal needing staff);

and yet:

• there may not be a contract between the principal and the person who will do the work;

nor even

• between the agent and the person who will do the work.

Section 34 provides that, for the purposes of the Act, the agency worker is deemed to have a worker’s contract with either the agency or the principal (whichever is responsible for paying them). If neither the agency nor the principal have this responsibility then the contract is held to be between the agency worker and whichever of them actually pays the worker.

The only exception to the agency provisions is where a worker is supplied as part of specific schemes to provide training, work experience or temporary work for a limited period (NMWM05330). In these circumstances the legislation provides an exception and the party who arranges the training is not considered to be the ‘employer’ of the worker.

Agencies sometimes enter into arrangements with workers to be engaged through umbrella companies, composite service companies and managed service companies (NMWM06080).