Yesterday we ran a piece from our resident HR expert Lesley about the Agency Workers Regulations, or AWR for acronym fans. So now we know how it will affect Agency Workers from an employement point of view – but how will it effect the freelancing and contracting industry as a whole?
Put simply, if you are a Sole Trader or operate your own Limited Company it shouldn’t have any impact on you, you lucky people. Those who will be effected are those who operate through Umbrella Companies.
In plain English the AWR, which is a massive piece of legislation being handed down from our European overlords, means that Agency Workers (read more about the difference between Workers and Employees) will be afforded the same rights and privileges as full-time employees after 12 weeks service in a given job.
Umbrella Companies, which are used by some freelancers and contractors as a mean of taking care of their tax obligations, are in for a torrid time when the new regulations come into force in October as the freelancers and contractors using their service are technically Agency Workers – the agency in this case being the Umbrella Company. This means they would have to be afforded the same pay and holiday allowances as full-time employees.
Obviously the thought of having to give their clients holiday pay and suchlike has made Umbrella Companies turn inside out with disgust – as they usually only act as an intermediary, passing on money made by freelancers and contractors as and when they make it.
Some Umbrellas believe they won’t be effected, and are planning to continue to operate as normal. The other solution being put forward by some Umbrella firms is called the “Swedish Derogation Model” – catchy name, right? This approach would see Umbrella Companies taking on their freelancers and contractors as full employees (see earlier link for more information on the difference between the two), meaning they avoid the regulations completely.
However this opens a whole other kettle of fish, as the freshly-employed freelancers and contractors would now be entitled to a raft of other benefits – chiefly they would have to be paid at least half of their day rate even when they weren’t working for a third party (often called the “hirer” – i.e. the freelancer’s client, but the Umbrella Company is sandwiched in the middle there acting as the actual employer – as you can see this whole mess is pretty confusing).
This could lead to a couple of bizarre situations. Firstly it could mean slightly unscrupulous Umbrella Company clients could take holidays on half pay if they can wrangle some time between gigs.
The second, slightly more serious consequence is that Umbrella Companies will now be taking a much more active role in securing their freelancers and contractors jobs, as every day not working is a day the Umbrella Company has to pay them half their rate. This has seen many Umbrella firms getting cosy with recruiters as they prepare for the huge changes in October, and also raised concerns that the less fiscally-robust Umbrella firms may simply not survive the changes.
Another consequence could be Umbrella companies and their new recruitment agency BFFs pushing freelancers and contractors in their charge towards placements they may not want to take on (either because they are not in their field of expertise or because the rates of pay aren’t attractive), simply so the Umbrella can have some income from them.
Naturally a positive spin is being put on the changes, with Umbrella Companies using words like “synergy” and “collaboration”, when in actuality they probably want to say “The EU is wrecking our business model and we’re not bloody happy about it.”
Nobody knows what the final make-up of the changes brought on by the Agency Workers Regulations will be, but one thing’s for sure – it’s not going to be pretty for Umbrella Companies.
