Two years ago, on October 1, 2022, the so-called “24-month rule” under the Swedish Agency Work Act (the “Act”) came into effect. In short, the rule stipulates that companies hiring a consultant from staffing agencies for 24 months or more must either offer the consultant employment at the company or compensate the consultant with two months’ salary. Although the rule has been in place for a couple of years, it is not until now, on October 1, 2024, that the rule will be applicable. As a result, companies must now review their consultancy agreements and assess which consultants are covered by the 24-month rule. Companies need to understand that inaction or misjudgement could result in costly damages.
The 24-month rule protects contracted consultants, as these individuals do not enjoy the same labour law protection as regular client company employees (i.e., the company hiring the consultant).
When is the client company obliged to offer employment or compensation?
- The consultant has been contracted at the same operational unit within the client company for at least 24 months (within 36 months). The operational unit refers to the same physical workplace.
- The agency from which the consultant is hired meets the legal criteria to be considered a staffing agency. A comprehensive assessment should be made, considering the following factors:
- Whether the tasks performed by the consultant differ from those performed by the client company's employees, does the consultant provide specialised expertise, or are they hired as an additional workforce?
- hether the staffing agency provides supervision of the consultant’s work.
- Whether the staffing agency provides the necessary tools and equipment.
- Whether the consultant’s assignment is clearly defined and limited.
If the consultant provides specialised expertise, the assignment is clearly defined, and the staffing agency offers supervision and equipment, there is a greater chance that the arrangement will fall outside the scope of the Act. It is important to note that even if the client company and the staffing agency have agreed in their contract on how they interpret the applicability of the Act or have clauses preventing the client company from recruiting staff directly from the agency, these agreements do not significantly impact the legal assessment of the applicability of the Act.
It’s also important to know that a new assessment may be required if the consultant’s assignment changes over time.
Who is responsible for assessing and taking action?
- The client company is responsible for assessing the Act's applicability and taking the necessary action regarding the consultant.
- The consultant has no say in the choice of action; they must accept the client company's decision to offer employment or two months' salary as compensation.
The client company should make the offer in writing to ensure that there is clear evidence that it has fulfilled its legal obligations.
What happens if the client company does not act in time?
- The client company risks being liable for damages. How substantial these damages will be for violations of the Act will become clear once the courts begin to apply the new rule, which will occur after October 1, 2024.
In summary, we recommend that companies contracting consultants conduct an analysis of both the staffing agency (to determine whether it qualifies as a staffing agency under the Act) and the individual consultancy assignment (to assess the length of time the consultant has been assigned to the same operational unit). This analysis will help to avoid unnecessary financial consequences for your company.
Please do not hesitate to contact Synch if you have any questions.
Synch is a business-oriented law firm with innovation and technology at its heart. Our mission is to bring calm to any legal question, no matter the challenge. We do this using our curiosity to deeply understand our client's challenges and fully grasp their needs, applying a combination of our knowledge, experience, and the best use of technology through advisory services and packaged solutions.
