Limited company contractors and the Agency Workers Regulations
Posted Oct 25, 2011
On 1st October 2011, the Agency Workers Regulations became law. The aim of the new new rules is to provide agency workers with equal treatment to permanent staff members after 12 weeks on an assignment.
From day one, agency workers must have access to facilities available to other workers, such as access to the canteen, and childcare support.
After 12 weeks on the same job, agency workers will then be entitled to receive equal pay, and the same basic working conditions as other workers.
Although umbrella company contractors are certainly included within the AWR scope (umbrella companies are adapting their current business models in favour of AWR compliant ones), the ambiguous nature of the AWR Government guidance has resulted in confusion over whether or not limited company contractors are also affected by the new rules.
According to the most recent Government guidance, the definition of an 'agency worker' excludes individuals who are in a 'profession or business undertaking carried out by the individual'; where the hirer is a client of customer of the individual. In other words, where a genuine business relationship exists, and the contractor is not under the direct supervision and control of the end client.
Limited company contractors who are truly in business on their own account should therefore be out of scope, although contractors are not automatically excluded just by virtue of working through a limited company. It seems likely that limited company contractors will be asked to 'self certify' their AWR status with recruitment agencies, to comply with the terms of the legislation.
Just as in the case of IR35, it is the true working practices of a contractor which will determine whether or not the Regulations apply or not, rather than the written terms of the contracts between contractor, agency and client.
Although there is no legal link between the two pieces of legislation, if a contractor is not caught by IR35, he will almost certainly not be caught by the AWR. If a contractor falls within the AWR scope, they are likely to also be caught by IR35.
Ultimately, in the event of a dispute over whether or not a contractor is caught within the AWR scope or not, the Courts can determine the employment status of the individual, by looking at the relationships which exist between the parties.
Further AWR resources
You can read the May 2011 Department of BIS AWR guidance here (PDF).
PCG – a useful guide to working with freelancers, together with general compliance advice.
Professional Passport - essential AWR guide for limited company as well as umbrella contractors
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