Agency Workers Regulations – what contractors need to know

Change is coming

The Agency Workers' Regulations could lead to some major adjustments in the way that temporary workers are handled between staffing companies and umbrella companies. The basic principle of the regulations is to provide temporary workers with the same rights as their directly recruited counterparts – these being the permanent employees at the place they are conducting the work. The regulations as they stand today, however, are likely to change before they are implemented in October 2011.

Who's liable?

Currently, the regulations clearly state that liability sits on the shoulders of the temporary work agency, thus any breach of equal treatment rights that the agency is responsible for will fall back on them if a claim is made by their candidate. In the agency's defence, if they can prove 'reasonable steps' have been taken to get the relevant information from the end-user to ensure equal treatment, then the end user would be liable for breach of the regulations.

Where an umbrella company is involved in the chain, the contract between the staffing company and the umbrella will determine both parties' reliabilities in the event of a breach of regulation. In addition, it is likely that there will be a chain of indemnities for breaches of the regulations; from end client to agency and from agency to the umbrella.

Who's excluded?

Contractors that are seen to be in business in their own right will be excluded, thus those operating through their own limited company will not be affected by these regulations. As a business in their own right, the buck stops with them, meaning the recruitment agencies would have no liability should the contract worker fall over the 12-week period. In this instance, as a director and employee of their own limited company, it is unlikely they will claim unequal treatment against their own limited company.

IR35, or IR35-style measures, will be essential

In relation to this, it is likely that the IR35 status of assignments is going to become essential when these regulations come into effect, and it is important that contract workers get the right advice as to whether they fall inside or outside IR35.

What to do next?

Sit tight. There is not much any of us can do until the current regulations are reviewed. As things stand, the regulations are going to leave some in a tight spot which is why some providers offering just one solution are scaremongering already. As a firm providing multiple solutions, we are geared to adapt to the regulations which will be set in October 2011.

Article based on the edited comments of Gerry Gregoire, consultant for contractor accountancy firm Danbro.