BIS Edward Davey To Work On Agency Workers Directive (AWD)

The Recruitment and Employment Confederation’s Head of Policy, Anne Fairweather, said that “The REC will be making immediate representations to ensure that the industry’s concerns are taken on board and that the vital role of agency work is well understood. The current economic climate makes it more important than ever to implement the regulations in a way that protects the flexibility of the UK labour market. As part of this, we need to work closely with the new Government on the official guidance that will underpin the regulations and bring much needed clarity to some of the requirements. The practical feedback from recruiters will play a key role in informing this guidance document.”

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, 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.

Commonwealth Contractors

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