A European directive that could have given IT contractors the same rights to holidays, sick pay and redundancy payments as permanent staff looks set to be dropped after Britain failed to reach agreement with other European states.
The Temporary Agency Workers Directive came to grief last month when European ministers failed to reconcile differences between France and Britain over when the new employment rights should apply.
The directive had caused some disquiet among contractors in the UK, who feared that it would erode the distinction between contractors and permanent staff and make it more difficult to challenge the Inland Revenues IR35 tax.
City Law Firm, Tarlo Lyons said that in practice the Department of Trade and Industry would have difficulty applying employment rights to British contractors, the vast majority of whom operate through personal service companies.
The directive's demise has been welcomed by employers groups, including the CBI and the Institute of Directors, who said it would have damaged the economy and would lead to higher unemployment for contract workers.
But trade unions said they were disappointed. Amicus, which numbers IT professionals among its membership, said there was still a need to give greater protection to contract staff.
Observers said the directive is unlikely to be revived under the next presidency of the European Union. Italy is said to regard it as a low priority.
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Tarlo Lyons
CBI
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