Contractors should be excluded from Agency Workers Directive Regulations
Contractors should be excluded from Agency Workers Directive Regulations according to pay not corporate structure
Artificial distinction between umbrella and limited company contractors
Contractors should be excluded from the Agency Workers Directive (AWD) according to how much they earn, not the corporate structure through which they operate, says giant group plc, the contractor services provider.
The AWD will entitle agency workers who have worked on assignment with the same end user for at least 12 weeks to at least equal treatment as permanent workers. Equal treatment will include equal pay, and basic working conditions, such as access to training, amenities, notice of termination, and so on.
The Government is proposing that umbrella company contractors should be within the scope of the Regulations but limited company contractors should be excluded.
According to the Government, one of the fundamental principles behind the AWD is to protect vulnerable temporary workers from exploitation.
The problem with including umbrella company contractors but excluding limited company contractors from the Regulations is that it risks vulnerable workers being pushed by unscrupulous operators towards limited company structures, says giant.
According to giant, it would be more logical to include all workers within the scope of the Regulations if they earn less than three times the National Minimum Wage while excluding all workers who earn more than this. This would
Satisfy the Governments objective of protecting vulnerable workers
Exclude highly paid contractors and interim managers who genuinely want to work as contractors from the Regulations, thereby ensuring their work prospects are not damaged
According to giant, the way in which the Regulations are currently drafted will lead to situations in which groups of contractors at end user sites are doing the same work for the same pay but some of them are covered by the Regulations while others are excluded.
Matthew Brown, Managing Director, giant group, comments: One of the main purposes of the Directive is to protect vulnerable temporary workers. The most meaningful way to distinguish vulnerable workers from other workers is by income. It is therefore illogical to include or exclude temporary workers from the Regulations on the basis of the corporate structure through which they operate without any reference to how much they earn.
Limited company contractors could still be covered by Regulations if they fail IR35
According to giant, even limited company contractors could be within the scope of the Regulations if they fail the IR35 self-employment test.
For example, an end user could engage six contractors to do the same job at the same rate of pay. Two of them work through umbrella companies, so are caught by the AWD, two work through limited companies but their advisors say they are caught by IR35, so they are also caught by the AWD, while the last two are outside the AWD because their advisors say they are outside IR35.
It subsequently transpires that one of the limited company contractors who was thought to be outside IR35 is, after new advice, within IR35 and is therefore caught by the AWD Regulations and able to bring a retrospective claim. At the time a limited company contractor is placed, no-one will know if the assignment is outside IR35, and therefore if the AWD applies. As a consequence, compliance with the regulations will be required for all limited company contractors at the time of placement.
Matthew Brown says: This does not seem a logical way to protect vulnerable workers and for end users of contractors, agencies and contractors themselves this will be in many instances very complicated.