Agency Worker Regulations (“AWR”) and how it will affect IT Contractors
Louise Aldridge – Contractor Care Manager
Judging by the amount of the recent press and umbrella company e-mail shots, you would be forgiven for believing AWR was going to have a major impact on all contractors. By and large, the real impact on IT contractors will be either ‘not at all’ or ‘not a lot’, necessitating nothing more than procedural changes , focussing on the legal agreements in place.
At the heart of the AWR is the principle that temporary workers should receive equal pay and rights to their permanent equivalents at the client. The rules are primarily aimed at lower skilled workers. Being EU based legislation, broadly worded to cover most eventualities, the rules themselves are pretty complex and at times hard to understand. Consequently, different legal advisers and commentators have come up with varying views. In the absence of definitive opinions, this has led to a ‘wait and see’ policy by the majority of employers and agencies. How it will all pan out in practice, is not 100% clear.
Limited Company contractors
IT contractors operating their own limited company, are exempted from the AWR, by virtue of being professionals operating their own businesses. We are implementing, on a rolling basis, a revised limited company contract to accommodate this, but daily rates/notice periods/IR35 status are not impacted.
Should a limited company contractor seek to make a claim under AWR, they would highly likely jeopardise their tax status under IR35.
Umbrella Company contractors
The approach taken here will depend upon the view taken by your umbrella, so it is important you check this with your umbrella.
In the absence of a client being willing to disclose the pay and rights of the equivalent permanent employee (known as ‘comparator’ information), there are two exemptions available to IT contractors, the ‘Pay Between Assignments’ model and the ‘Professions’ model.
The ‘Pay Between Assignments’ exemption (otherwise known as ‘Swedish Derogation’), requires the umbrella to pay a contractor 50% pay for up to a month, if they are between assignments. The actual mechanics for this are not uniform, and some umbrellas may seek to alter the contractors pay, so it would be well worth discussing this with your umbrella, before agreeing to this exemption.
The ‘Professions’ exemption is not publicly recognised by all umbrellas, at present. It is our view, and that of our advisers, that IT contactors can be covered by this exemption. If so, there ought to be no change in how you are treated by the umbrella.
With both of the above exemptions, we will be implementing a revised contract, most probably on a rolling basis, but the daily rate we pay the umbrella and notice periods given will remain unchanged.
Important dates to bear in mind are 1st October, from which agency workers are entitled to equal rights such as staff facilities and vacancy boards. From 25th December agency workers are entitled to equal pay (including performance bonuses, but not pensions) and the same working hours/holidays.
From early next year we can expect to see some high profile legal cases, supported by trade unions, seeking to enforce the AWR rights for lower skilled unionised workers. We will also see umbrella companies starting to take a more uniform approach.