Contractors may experience little noticeable change once the Agency Workers Regulations come into force on 1 October 2011. But, as Crawford Temple, Chief Executive officer of Professional Passport, explains: “Contractors can help themselves by ensuring they have all the facts to hand when challenged over AWR by agencies and clients.”
Temple says that careful preparation by agencies, clients and contracting services providers will largely mitigate the impact of the regulations on contractors. However, some clients and agencies may be less well prepared than others.
“All but a fraction of umbrella company contractors already know they will be in the scope of AWR, and many service providers have developed AWR-compliant trading models for their contractor employees,” says Temple. “In addition, many limited company contractors are being asked by clients and agencies to self-certify as ‘in business on your account’ to ensure they remain out of scope.”
Further AWR guidance for contractors
According to Temple, when contractors encounter recruiters and clients who try to place them in the ‘in the in-scope of AWR box’ by default, a sound knowledge of the regulations can make a huge difference. That’s why Professional Passport has published its own AWR guidance, The Contractors Guide to The Agency Workers Regulations.
“Contractors may find some recruiters and clients won’t hire them because they incorrectly assume there is a risk they will have to match pay and conditions,” says Temple. “But contractors who have done their homework by reading informed guidance can confidently challenge this assumption and demonstrate they are out of AWR’s scope. This will help them win contracts.”
Knowledge of AWR can also help umbrella company contractors discuss their situation with their umbrella solution provider, as there may be more than one AWR-compliant solution on offer from that provider.
Professional Passport’s guide includes useful flowcharts to help contractors determine their status under the regulations. It also has a ‘frequently asked questions’ section, answering the most common queries Temple’s team encounters when dealing with contractors.
Contractors should not confuse IR35 with AWR
“IR35 and AWR have been incorrectly closely associated in some contracting media,” explains Temple. “There is no legal link between the two sets of legislation, although IR35 and AWR do share a very similar evidence base.” The evidence that might clearly suggest that a limited company contractor is in-scope of AWR may also be the same evidence that would indicate that a limited company contractor is inside of IR35.
Contractors may find some recruiters and clients won't hire them because they incorrectly assume there is a risk they will have to match pay and conditions
Crawford Temple, Professional Passport
But Temple warns that recruiters and clients are not making the same distinction: “Limited company contractors are being asked to self-certify that they are a ‘in business on your own account’ and therefore outside of AWR. Those that do so are being sent ‘IR35-friendly’ contracts as a result. Those that don’t are being sent the agency/client contract version, which is written in such a way as to confirm the contractor is inside IR35.”
And when contractors receive the latter, ‘IR35-unfriendly’, version Temple says some clients and recruiters may go as far to request that the accountant confirms all fees paid under that contract are subject to IR35’s deemed payment.
The other big difference between IR35 and AWR is who enforces it. Temple explains: “IR35 is enforced by HMRC. With AWR, it’s the contractor who is in control. Even if a contractor is technically in-scope, they can choose not to take action, particularly when in fact their pay is considerably higher than the client employees they work alongside.”
AWR won’t affect umbrella contractors, but recruiters’ preferred supplier lists will
Most umbrella company contractors won’t be directly affected by AWR because their existing service provider will simply move them into a compliant trading model. However, some established contractors using an existing umbrella solutions service provider may find the recruiter’s preferred supplier list (PSL) could force the contractor to change umbrella company.
“Those recruiters that don’t already have them will increasingly move towards preferred suppliers lists, because the AWR compliance processes can be streamlined and costs lowered by working with long-term partners,” says Temple. “A contractor might win a new contract with a new agency, and be told by that agency, ‘We don’t work with your umbrella company, so if you want the work, move to one on our preferred supplier list’.”
But despite all the planning and risk management, Temple believes that uncertainties will remain until the legislation is tested in the courts, particularly over issues such as the limited company contractor test to define ‘in business on your own account’.
“Genuine contractors were never meant to be the target of AWR and for many there should be no change to their working practices when the regulations come into force,” says Temple. “However, a good working knowledge of AWR and its implications will help contractors navigate around the obstacles created by agencies and clients who perhaps don’t know as much about AWR as they should.”
Contractors can download a free copy of The Contractors Guide to The Agency Workers Regulations from Professional Passport’s website by clicking here. Agencies who wish to understand the regulations in greater detail can request a copy of Professional Passport’s Recruiters Guide How to deal with Providers post Agency Workers Regulations by contacting Professional Passport directly.