Implementation of the Agency Workers Directive may be 19 months away (AWD is due for Implementation in October 2011) however many questions have yet to be answered, including how best to calculate the 12 week derogation period, how those operating Contractor Limited Companies will be affected by contracts inside the scope of IR35 and how relationships with Umbrella Companies will have to change. With Britain relying so heavily on highly skilled contract professionals the implementation of the AWD needs to run smoothly so as not to negatively affect the UK Economy.
Thankfully, industry bodies such as the Recruitment and Employment Confederation are pressing the Government on the need for a smooth transition. The REC Director of External Relations, Tom Hadley, said on the run up to the 2011 Implementation “We are moving forwards in terms of understanding the practicalities of implementing equal treatment measures in the UK. The REC’s in-house legal team is preparing detailed opinions on the priority areas flagged up by members and we will be looking for these ‘hot topics’ to be addressed in the Government’s official guidance. There will also be scope for a more substantial review of current interpretations if the Conservatives win the general election. Looking ahead, the industry needs to stay focused and united to ensure that the incoming Government understands and responds to our concerns. Mature leadership is needed – now is not the time for grandstanding gestures or for seeking judicial reviews on peripheral issues.”
What is the Agency Workers Directive?
The Agency Workers Directive is a piece of legislation designed to protect the rights of low paid agency workers.
Designed by the European Community (see below), the legislation gives agency workers the same pay, terms and conditions of employment, maternity / paternity benefits as workers who are permanent employees of a client company. These employment rights are either given:
- As soon as the agency worker starts working for the client, OR
- After a certain length of time known as the ‘derogation period’ (agreed to be 12 weeks by the CBI, TUC and the Government).
How will the Agency Workers Directive affect Highly Skilled Contractors?
Obviously the AWD has been a big concern for many highly skilled contractors who benefit significantly from their independence and are not interested in gaining the same employment rights as perm employees after 12 weeks. In particular those contractors operating Contractor Limited Companies outside the scope of the IR35 legislation stood to lose the most, due to the fact that they would lose the ability to take income in the form of profits and thereby saving significant amounts in National Insurance Contributions.
Thankfully at least, when the draft regulations were released they excluded those:
- Working as Self Employed
- Operating a Contractor Limited Company
- Employed on Managed Service Contracts
Therefore, at present, when the Agency Workers Directive comes into place those operating a Contractor Limited Company outside the scope of IR35 will not be affected by the legislation. However, those individuals using an Umbrella Company will gain the same employment rights as perm workers after 12 weeks. This could spell the end of Umbrella Companies as we know them as contractors would be unable to claim business expenses associated with a temporary workplace unless all assignments were for less than 12 weeks each.
Deferred Introduction of the Agency Workers Directive
Thankfully, the introduction of the Agency Workers Directive has been deferred until October 2011, giving:
- Industry bodies the opportunity to discuss the implementation with the Government (as the REC is doing)
- Employment Businesses time to adjust the contractual framework of their businesses and educate their workforces on new processes and procedures, AND
- Giving those organisations who provide services to contractors time to find possible alternatives to Umbrella Companies
The European Union and the Agency Workers Directive
The general aim of the AWD is to help the European Union “become the competitive and mist dynamic knowledge based economy in the world, capable of sustaining economic growth with more and better jobs and greater social cohesion”, specifically:
- To improve the quality of temporary agency work by applying the principle of non-discrimination
- To establish a suitable framework for the use of temps throughout the European Union
Independent Contracting (Freelancing) and Recruitment Agencies in general are a very British way of doing business. Flexible working practices have been going on for decades in the UK and Recruitment Agencies are well established and comply to high professional standards. However, this is not the case in other parts of the European Union, such as in Italy where Recruitment Agencies were illegal up until recently. The Agency Workers Directive is an effort therefore to protect the interests of low level workers who may be exploited by unscrupulous employers.
Commonwealth Contractors is a collection of highly skilled professionals from the Commonwealth and beyond. We partner with OISC Registered Immigration Partners capable of professionally representing Tier 1 Visa Applications / Extensions AND Tier 2 Licensed Consultancy & Associated Trust Partners who may be prepared, where required, to sponsor a Medical, Information Technology or Engineering Professional on a Tier 2 Visa (formerly UK Work Permit).
We can also advise on Contacting vehicles such as Contractor Limited Companies and Umbrella Companies. If you have either secured a contract or believe that you will do shortly feel free to contact Commonwealth Contractors in order to discuss your individual circumstances and work out what option is best for you.
To find out more call Commonwealth Contractors now on 0330 390 9021 or Submit your details now and we will get right back to you.Please be prepared to send a copy of a recent CV so that we can pass to interested partners.