The Agency Worker Regulations have definitely got the industry talking since they came into force on 1st October and more questions have been raised than answered. ContractorUmbrella would like to redress the balance so here are the answers to the current Top 10 questions about the AWR.
If you have any further questions please do not hesitate to contact a member of our team on 01206 761 326 or info@contractorumbrella.com.
In reverse order, at number 10 we have:
Q. What solutions are there to the AWR and how do we build in an opt-out to the contract?
A. There are no solutions to the AWR, it is enshrined in law and has to be complied with as it stands. Unlike the Conduct of Employment Agencies and Employment Businesses legislation of 2003, no opt-out has been negotiated and any attempt to avoid responsibility would be viewed by the powers that be as avoidance.
Coming in at number 9…………………………..
Q. Is the Swedish Derogation a loop-hole that will put all our contractors outside scope of the AWR?
A. The Swedish Derogation Model is a very strange name for something that umbrella companies have pretty much been doing for the last few years. Umbrella companies must offer employment under a full contract of employment which has provision for payment between assignments in order to satisfy mutuality of obligation as laid down by HMR&C. This was an existing business model, which is why section 10 was included in the legislation; it is most definitely not a loophole and is recognised by the Government, the British Retail Consortium and the CBI as a legitimate option for temporary workers.
New in at 8……………………………………………..
Q. If I ask workers to sign a disclaimer declaring that they are outside the scope of AWR I should be covered shouldn’t I?
A. Definitely not. Whether or not someone falls inside the scope of the AWR will be determined by their working practises. Ultimately a tribunal will make the final decision and using such a disclaimer would not alter their decision; it could make your position worse.
Dropping 2 places at number 7………………………………….
Q. As long as I make sure the contractor is earning 10% more than someone in a permanent position there won’t be any pay claims will there?
A. Pay is defined very clearly with the AWR so rough calculations are likely to cause problems. All of the following need to be taking into consideration when working out a pay comparator:
- Basic Pay based on the annual salary an agency worker would have received if recruited directly
- Overtime payments
- Shift allowances
- Unsocial hours allowances
- Risk payments for hazardous duties
- Payment for annual leave
- Bonus or commission payments attributable to the quantity or quality of work done by the individual.
- Non-contractual payments which have been paid with such regularity that they are a matter of custom or practise
- Vouchers or stamps which have a monetary value.
Up 1 at number 6……………………………………..
Q. Does all this mean that temporary workers will have to be given company cars and will be entitled to redundancy pay?
A. Don’t panic! The AWR do not give all the rights of a permanent worker to temporary workers. Temporary workers will have no entitlement to occupational sick pay, occupational pensions, occupational maternity, adoption or paternity pay (statutory rights are no affected) and will have no entitlement to redundancy pay either contractual or statutory. You also won’t need to provide company cars or offer loans for season tickets.
Straight in at number 5………………………………………………..
Q. How are we going to make sure that Day 1 rights are in place.
A. Day 1 rights are the responsibility of the Hirer and therefore all you can do is let the Hirer know what those rights are and ask for confirmation that your temporary workers will have the same access to facilities and information about job vacancies as permanent workers at the site.
A non-mover at number 4…………………………………………
Q. The umbrella company we work with has offered a complete indemnity against any claim under the AWR so I don’t need to worry do I?
A. Yes I am afraid you do. If you have not fulfilled your own obligations under the legislation and a claim is brought against you either for unequal treatment or avoidance, a tribunal will decide who is liable and apportion financial penalties accordingly. Indeed, blanket indemnities may well be viewed as an attempt to abdicate responsibility.
New in at number 3……………………………………..
Q. The hirers we work with are very large organisations and use a lot of temporary workers. Surely if we move them around the individual companies in the group or from division to division we shouldn’t fall foul of the AWR should we?
A. Yes you will. Companies which form part of the same legal entity will be considered to be one company for the purposes of the legislation and moving a temporary worker between sites will only affect their rights under the AWR if the roles are substantively different.
A non-mover at number 2…………………………..
Q. We have suggested that all contractors operate through a Limited Company so that they will be outside scope. We will have no liability will we?
A. Probably. Limited Company contractors will not automatically be outside the scope of the AWR. This issue is very specifically dealt with in the guidance published alongside the Regulations; there would need to be no supervision, direction and control of the worker in order for them to be considered outside scope; the tests used to determine status will be the same as those used for IR35. As with IR35, it will not be sufficient for a contract to be written with the intention of putting the individual outside the scope of either the legislation or IR35, an investigation or claim would result in the necessity of providing proof that the contract was representative of reality.
And at number 1……………………………………………………
Q. Nothing will happen until there has been a test case so why should I bother doing anything until then?
A. A legal precedent will clarify the position for everyone but doing nothing is really not an option. The legislation is in depth and complicated and will require extensive additional administration from everyone and, unfortunately, getting it wrong or doing nothing is likely to attract financial penalties. Compensation that can be awarded to an individual has no maximum but a minimum award of 2 weeks pay, there is the potential for class action suits and the penalty for avoidance is £5000 per infringement.
Working with a compliant umbrella company can certainly help relieve some of the stresses associated with this new legislation; two heads are better than one after all! ContractorUmbrella has been working extensively with specialist employment lawyers Blake Lapthorn so that we could be in a position to offer advice and reassurance to our recruiter partners.
We know that our Top 10 doesn’t even scratch the surface for most of you but our top team of advisors, including an ex senior HMR&C inspector, will be more than happy to answer any other questions that you have.
Visit our website www.contractorumbrella.com. Alternatively you can speak to one of our expert advisors on 01206 761 326 or email us at info@contractorumbrella.com
