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Contractors in a ‘profession or business undertaking’ excluded from AWR, confirms BIS

Contractors in a ‘profession or business undertaking’ will not be covered by the Agency Workers Regulations (AWR) when they come into force in October 2011. This is according to the final guidance for hirers and agencies published by the Department for Business, Innovation and Skills (BIS), which also confirms previous guidance that umbrella company contractors are in scope.

The guidance states that, “the definition of an agency worker excludes those who are in a ‘profession or business undertaking carried out by the individual’ where the hirer is a client or customer of the individual (ie a genuine business to business relationship.” This suggests that genuine contractors in business on their own account will remain unaffected.

However, the guidance also warns that “simply putting earnings through a limited company would not in itself put individuals beyond the possible scope of the Regulations”, and links to DirectGov guidance on how to determine if an individual is an agency worker, a personal service consultant or an independent contractor or consultant.

When a contractor’s status under the AWR is in doubt, the same employment tests used by the courts to determine IR35 status will be applied, and it will be for the courts to ultimately decide if a contractor is in scope. And should a contractor’s contractual arrangements appear to be purely an AWR-avoidance tactic, then it is likely the contractor will be classified as being within the scope of the regulations.

A spokesperson for BIS told Recruiter magazine that “nothing substantial has been changed from the draft guidance published about a month ago” and that “the tweaks which have occurred had been primarily around fine-tuning the wording”.

According to Employment Relations Minister Edward Davey, any last-minute attempts to amend the rules to allay hirers’ and recruiters’ fears could have jeopardised the original agreement brokered between the Confederation of British Industry (CBI) and Trades Union Congress (TUC).

“We looked carefully at the possibility of amending the Regulations to address employers’ concerns,” Davey explains, “but were forced to conclude that we could not do so without putting the 12 week qualifying period at risk. This qualification period is something that is a key flexibility that we know is vital to business.”

Published: 09 May 2011

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