From the guidance it looks as though those contractors who are genuinely operating outside of the scope of IR35 will be excluded from the regulations. The draft document points to the employment status guidance published on the Business Link website as a way of determining whether or not a worker is genuinely in business on their own account. This may encourage contractors, agencies and clients to go the extra mile and put in place more extensive service based agreements which accurately show the relationship between the parties and the services being delivered to the client. At the moment most agencies use a standard ‘bodyshop’ contract which includes certain IR35 friendly terms however the degree of information normally included showing services to be delivered is normally minimal. By including full details of services to be delivered by the contractor and preferably back-to-backing the service schedules all the way to the end client organisations may be able to shore up their IR35 and AWR status. Contractors should also go the extra mile by ensuring they agree not only an IR35 and AWR friendly contract but also by demonstrating their self employed status through actual day to day work practises.
In response to the publication of the draft document the Director of Policy & Professional Services at the Recruitment & Employment Confederation (REC), Tom Hadley, said that “We recognise the genuine effort that was made to consult and take on board the views of recruiters. Our initial response to the guidance is mixed but we had concluded some time ago that the document would not the “be all and end all” in terms of making the AWR workable for them. Some of the main areas of uncertainty and concern for recruiters – such as the tracking of the 12 week qualifying period, the definition of pay and the mechanics of demonstrating equal treatment – have been covered. Other positive areas are the use of practical examples and flow charts within the notes which will be useful and more clarity on which bonuses are in and out of scope of the Regulations.”
The Chair of the Freelance & Contractor Services Association, Stuart Davis, also said that “FCSA has been extensively involved in the development of AWR guidance, and ultimately we’re pleased with outcomes so far. Government has sought to strike a careful balance between safeguarding vulnerable low-skilled workers and avoiding damage to the highly-skilled flexible workforce, as highly skilled freelancers and contractors choose to work in distinctive way. They are achieving this so far. I’m confident that freelancers, recruiters and agencies will be able to work with this guidance and that the government is striving to ensure that AWR doesn’t adversely affect the flexible workforce.”
The draft guidance provided by the Department for Business Innovation & Skills (BIS) is available at http://www.bis.gov.uk/policies/employment-matters/strategies/awd. The BIS will now make the draft available for comment until the 15th April after which time the BIS will consider any further recommendations before finalising the guidance and publishing a final document on the Business Link website by the end of April 2011 or soon afterwards. Companies across the UK will then be able to prepare for full implementation of the new regulations on the 1st October 2011. As yet many companies have not made strides to get their house in order for the new regulations however this should now change with the final draft of the AWR guidance paper.
Swedish Derogation Model
The so called ‘Swedish Derogation’ model is a clause included in the original Agency Workers Directive (AWD) by the Swedish delegation which means that the rights to equal pay don’t apply to workers employed on a permanent basis by an umbrella company. In order for the model to apply a contractor must:
- Be genuinely employed by the Umbrella Company with a permanent contract of employment
- Be paid in periods between assignments at a rate not less that 50% of the contractors regular fees on the National Minimum Wage (NMW)
- Be assisted in finding work by the Umbrella Company or Agency
- Receive all other statutory rights under employment law
For this model to work Umbrella Companies would need to change the way that they work and offer services above and beyond what they presently do. For many smaller companies this is likely to be very difficult as margins received from umbrella business are normally very small (e.g. £15 per week). Only the larger companies who can afford to automate much of the process and focus freed up resources on offering additional services (such as finding the contractor work) are likely to survive.
At Commonwealth Contractors we partner with OISC Registered Private Immigration Firms and Tier 2 Licensed Healthcare and IT Consultancies who may be prepared, where required, to sponsor an individual on a Tier 2 Visa (formerly UK Work Permit). If you are a highly skilled International professional and you would like to work in the UK Commonwealth Contractors can help. Our OISC Registered Partners specialise in Tier 1 General (formerly Highly Skilled Migrant Programme) visa applications and can assist those highly skilled individuals that either wish to apply or extend a Tier 1 General Visa.
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