Limited company and umbrella company contractors have retained the right to opt out from the Conduct of Employment Agencies and Employment Business Regulations, according to the just-published government response to the consultation of March 2009 by the Department for Business Innovation & Skills (BIS).
BIS had originally proposed to widen the scope of the Conduct Regulations and remove the opt out for limited company and umbrella company contractors, believing that some contractors were ‘vulnerable’ and therefore being forced to opt out against their will.
However, according to the government’s response: “The consultation has not provided convincing evidence of vulnerable workers suffering detriment in this respect”. It adds: “We do not think that there is sufficient justification for taking further action at this stage.”
Lobbying campaign for contractors
There were 349 responses to the original consultation. Among these were those arguing for the opt out to remain, including key contracting industry organisations such as the Professional Contractors Group (PCG), the Service Providers Association and the Association of Professional Staffing Companies (APSCo).
According to Ann Swain, Chief Executive of APSCo, the move is an important victory for contractors and recruiters: “If the opt-out had been withdrawn, the red tape burden on recruiters and contractors of automatically having to comply with the Conduct Regulations would have imposed significant additional costs.”
Clearly the lobbying has been effective with government heeding advice from the sector, as the response goes on to say: “The evidence provided by the professional bodies that represent contractors and umbrella company providers is that any changes [to the regulations] would have an adverse impact on legitimate contractors.”
If the opt-out had been withdrawn, the red tape burden on recruiters and contractors of automatically having to comply with the Conduct Regulations would have imposed significant additional costs
Ann Swain, APSCo
Umbrella companies still under the spotlight
Despite taking no action at this time, BIS says that it will maintain a watching brief and may commission further research to better understand the profile of umbrella company workers.
The consultation goes further, saying: “We will also continue to gather evidence…to get a more detailed understanding of this issue, in particular the scale and nature of low paid workers that are employed via umbrella companies. This evidence will determine any future action that we take.”
With the spectre of further action by the Treasury and HMRC over umbrella company contractor expenses looming in the Pre-Budget Report, umbrella companies appear to be receiving more than their fair share of joined-up government attention at present.
“Concentrate on finalising the AWD regulations”
According to Swain, now that the government has accepted there is insufficient evidence of the opt-out being used to exploit vulnerable workers, it should move on: “It should focus on finalising the Agency Workers Directive (AWD) regulations and getting the employment market back on track before it returns to this issue again.”
It remains to be seen whether BIS will react as readily to contracting sector organisations that respond to the current second stage consultation underway on the proposed AWD regulations.
But with the news that the Conduct Regulations opt-out has been retained, umbrella and limited company contractors can continue to run their contracting businesses without the associated costs and administrative burdens that come with the regulations.
Published: Tuesday, November 17, 2009
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