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Contracting and the AWR: using the law to gain competitive advantage & win contracts

ContractorCalculator and Parasol review the Agency Workers Regulations, identify where to find the source legislation and the official guidance, and then summarise key points to enable contractors to convince agencies and clients that it does not apply to them. This is the second in a series of articles published by ContractorCalculator in association with Parasol, providing expert guidance for contractors on the Agency Workers Regulations.

Contractors who can demonstrate a thorough knowledge of the Agency Workers Regulations (AWR) and argue convincingly that it does not apply to them will gain competitive advantage when dealing with clients and agencies who view them as a threat.

When the regulations come into force on 1 October 2011, it will be important for all contractors, whatever trading option they are using, to understand whether AWR will affect them and, if it does, what actions they need to take.

Limited company contractors are likely to be out of the scope of AWR by virtue of being a “business undertaking”. And umbrella contractors will typically choose providers offering either a full employment umbrella solution, with elements of what’s also known as the Swedish Derogation, or matched permanent pay.

Understanding the legislation will help win over clients and agencies

For some time after AWR comes into force, it is likely that contractors will encounter clients and agencies that have little or no understanding of AWR. That lack of understanding may lead them automatically to assume that contractors are agency workers and are therefore a threat to their business.

But contractors having a good understanding of AWR will be in a much stronger position to win over such clients and agencies. In fact, at least until the regulations are embedded into the UK’s business psyche, they may well become a source of competitive advantage. What that could mean is that the best contracts will go to contractors who can argue most convincingly that AWR does not apply to them.

the best contracts will go to contractors who can argue most convincingly that AWR does not apply to them

Understanding where to find the source legislation and what it actually says are important steps towards contractors gaining the confidence to convincingly argue their case.

What is legislation and what is guidance?

The best place to find out what the law actually says is to go to the source legislation and associated documents. There are three documents, and a further class of documentation, that contractors should be aware of:

  • The Agency Workers Directive (AWD): the original directive issued by the European Commission and ratified by the European Parliament on 19 November 2008. It is this directive on which all member states’ individual legislation must be based
  • The Agency Workers Regulations (AWR): the UK legislation, based on the directive but ‘gold plated’ by the government, laid before Parliament on 21 January 2010 and due to come into force on 1 October 2011
  • Guidance from the Department for Business Innovation and Skills (BIS): BIS is the government department sponsoring AWR. At the time of writing, its ‘final’ guidance for agencies and hirers was published in May 2011. BIS is expected also to publish guidance for workers before the legislation comes into force in October 2011.
  • Unofficial guidance and guides (like this one): The internet abounds with unofficial guides from a number of sources. Many of these guides are informative and useful; others include numerous inaccuracies and in some cases are downright wrong on some crucial aspects of AWR. Approach with caution.

What the law actually says

The Agency Works Regulations legislation is 36 pages long. The 6 pages of the original directive became 18 pages of core legislation in 5 parts, and a further 18 pages of accompanying schedules in two parts. As legislation goes, it’s actually relatively short and accessible. The key elements are:

PART 1 explains the definitions of agency workers and temporary work agencies. Clause (2)(a) contains the crucial phrase of most interest to limited company contractors, which confirms that an individual is not an agency worker if they are carrying out a “business undertaking”

PART 2 lays out the rights that agency workers will receive on the first day of each assignment and after 12 weeks. It also explains how the ‘qualifying period’ of 12 weeks works, how to calculate pay, and many other practical details. Part 2 also contains Regulation 10, also known as the Swedish Derogation, which may prove to be a solution for some umbrella company contractors who wish to remain out of the scope of AWR.

PART 3 largely covers what action agency workers can take to ensure they are granted the new rights and what to do if those rights are infringed. Part 3 also includes anti-avoidance measures. There is less material of interest here for genuine contractors.

PART 4 deals with special cases and exemptions, while PART 5 is a technical note referring to the main schedule 2. SCHEDULE 1 is a technical note, but SCHEDULE 2 details how the AWR will integrate with existing legislation. This schedule is as long as the core legislation. These sections contain little that is of interest to contractors.

However, Parts 1 and 2 of AWR are of crucial importance, because they explain who is in the AWR’s scope and who is outside it. But, in some respects, their real value is that they drive the guidance from BIS, which is what most agencies and clients will turn to when considering whether a contractor is an ‘AWR risk’.

The third part of this series will provide a detailed explanation of who is likely to be inside and outside the scope of the Agency Workers Regulations when they come into force on 1 October 2011.

Published: 16 July 2011

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