We feel it is important that agencies and clients keep up to date with the legalisation that impacts directly on their contractors.
Most recently, the Agency Legislation was implemented to determine a freelance workers true employment status by introducing tests to determine Supervision, Direction and Control.
Over the last 10 years, the Agency Workers Regulations (AWR) and IR35 have significantly affected contractors, agencies and umbrella companies alike.
The Agency Workers Regulations (AWR)
The Agency Workers Regulations (AWR) were published in January 2010, and in turn, came in to force on the 1st October 2011. The AWR is designed to protect agency workers from exploitation, giving them the same basic employment rights as their permanent co-workers. It sets out a series of milestones and outlines which rights workers are entitled to.
Although the agency worker will be entitled to the some equality with a permanent employee, they are not granted to ‘full’ equality as sick pay (above the statutory minimum), redundancy, pensions and maternity/paternity leave are not included.
AWR is always in affect but is only activated by the contractor themselves to ensure the agency and SmartWork are adhering to the workers statutory rights granted by the legislation.
For more information on the regulations themselves, please read HMRC’s guidance.
IR35 does not apply to umbrella employees however we’re sure you will encounter many contractors who may be deemed to be inside IR35 and in which case it is important to know the basics and what this might entail for your candidates.
IR35 has a reputation for being terribly confusing; this is mainly because being caught by IR35 or not greatly depends on a freelancer’s individual situation, your working practices and the particular contract that they are carrying out.
IR35 is a piece of government legislation that was put in place to combat disguised employment. Contractors who do not meet the definition of self-employment set out by HM Revenue and Customs (HMRC) and are seen as disguised employees, may find that they are caught by IR35, which will increase their tax and national insurance obligations. The legislation was first put in place in April 2000 with the purpose of preventing contractors from receiving the benefits of permanent employment, such as job security, as well as the tax benefits that are available to limited company contractors.
For simplicity, many agencies and clients would like to have one-size-fits all approach to IR35 – where all contracts are the same but working practices vary and is a key component. IR35 is of course concerned with the reality of the terms and conditions between the individual supplied and the end client which is why it is necessary to review the written contractual terms AND the working practices themselves.
This means that you could have the most ‘IR35-friendly’ contract in existence but if your working practices do not reflect this then you would be considered to be inside IR35.
We can offer IR35 reviews for all contractors via our sister company MyAccountant to ensure full compliance and peace for mind for both the contractor and agency.