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Tuesday, 5 July 2011

Agency Worker Regulations

Agency Worker Regulation will be coming into effect on the 1st of October this year. The regulation aims to allow temporary and freelance workers who have been hired through an agency or are with an umbrella company the same rights as permanent workers. This has caused some confusion in relation to who is actually covered by the system and possible negative outcomes contractors and freelancers could face under AWR. The likelihood of AWR’s conditions changing prior to October 1st is quite high due to the uncertainty surrounding it. Until then, here are the main points to consider when looking at Agency Worker Regulation:
  • AWR’s main principle is to support lower paid agency workers who are more likely to face un-equal pay compared to permanent workers.
  • If a contractor or freelancer initially receives more pay than permanent employees, their pay will not have to be reduced to the amount received by a permanent employee within the same company.
  • The regulation is only implemented to temporary workers who have been working at a company for 12 weeks.  After this time period they are eligible to:
    • Annual leave
    • Rest periods,
    • Equal pay to that of permanent employees,
    • Staff facilities such as health care, transport, use of staff conteen.
  • AWR does not cover pensions, redundancy cover, long-term service awards and sick pay.
  • AWR does not cover individuals who are:- self-employed, contractors who work through managed service contracts or those who operate through their own private limited company

From the outset, AWR will be beneficial to lower paid temporary workers. However, this in turn may affect higher paid contractors. If the conditions are to stay the same or similar to how they stand at the moment then there is a possibility that the amount of contractors working through private limited companies will increase substantially, which will mean that IR35 will be more widely used, subjecting more contractors to tax investigations. Moreover, AWR conditions will mean that there will be extra admin to be taken care of by agencies. This may result in lower contractor rates in order to stay within budget. Furthermore, this may unfairly cause employers to create contracts that are under 12 weeks long so they are not obliged to comply with increased employee rights.

It is vital to keep up to date with AWR, as although the conditions may not directly affect the majority of contractors, the knock on effects may reach higher paid contractors and freelancers who are outside of AWR, meaning some major changes in the contractor market.   

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