An “undercutters’ charter” allows companies to offer agency workers less than half the rate of pay than staff doing the same job, trade unions warned today.

A legal loophole, dubbed the “Swedish Derogation”, allows companies to keep cut-price temporary workers on contracts for years on end.

The loophole allows bosses to pay agency staff less, even when they do identical roles to permanent colleagues, the Trades Union Congress (TUC) revealed in a new report.

As a result, the TUC says agency workers are paid £1.50 less an hour, on average, than permanent staff. However, at some workplaces this pay penalty can be as high as £4 an hour or £7 for those working anti-social shifts.

Young workers aged 16 to 35 are particularly vulnerable to this sort of contract, the analysis found.

And 421,000 agency workers have been employed by one firm for more than one year.

In one example, some agency workers at BT call centres were paid around £500 less than their permanent staff colleagues, despite doing similar jobs.

The TUC said that BT call centres have around 97% agency workers, with just 3% permanently employed.

In another example, Argos was found to be paying agency workers £4.36 an hour less than permanent staff – a whopping 63%.

All the examples cited by the TUC involved “pay by assignment” contracts in which an agency agrees to pay people’s wages for up to four weeks when companies have no need for staff.

TUC General Secretary Frances O’Grady said: “Employers are keeping people on agency contracts to drive down wages.

“Two people working next to each other, doing the same job, should get the same wage. But bosses are exploiting a loophole in the law that allows them to pay agency workers less.

“The government must scrap this loophole now – it’s an Undercutters’ Charter.

“The Taylor Review called for agency workers to stop being treated like second-class citizens. Ministers must get on with ending the Undercutters’ Charter.”

An Argos spokesperson said: “We take the treatment of all colleagues – whether they are directly employed by us or indirectly via a third party agency – extremely seriously.

“Individual agencies are responsible for their employee contracts. However we carry out regular audits to ensure they meet or exceed both our standards and legal requirements across our transport and logistics network.”

BT did not respond to HuffPost UK’s request for comment.