Agency Workers Regulations (“AWR”) is likely to significantly effect the working practices of contractors that choose to use Umbrella agencies. To me it feels like a bit of an unintended consequence, the legislation was not aimed at Umbrella workers but the structural similarities between Umbrellas and temping agencies make it inevitable.
What is AWR?
AWR is a piece of legislation that aims to give those working for temping agencies the same rights as those in full time employment. So after 12 weeks of continuous employment a temp gets equal pay and working hours, holiday pay, paid time off for ante-natal appointments, etc.
Why does it effect Umbrellas?
On the face of it Umbrellas look a lot like temping agencies. The end employer has a contract with an agency to provide suitable labour. Although the nature of the workers tends to be very different ultimately users of Umbrella companies have a very similar legal relationship with the Umbrella as temp workers do with a temping agency so are equally caught up in it.
So what’s going to happen to Umbrellas?
In short, we don’t know yet (pointless post then?!). It’s likely that Umbrellas will try and find a solution by looking at something called the Swedish Derogation Model, which is named after a concession made in previous AWR negotiations. This removes the need for equal pay but still means that agencies will have to pay workers during a gap in assignments (though potentially 50% of normal pay) and the Umbrella is required to find future for the worker. So it still leave the Umbrella agency required to do things that really don’t fit with the original intention.
I expect that because of this the fees charged by Umbrellas is going to have to increase to an extent where they are no longer economically viable.
I contract through an Umbrella what should I do?
For now you can probably sit tight and wait to see how the dust settles, if you do find that the relationship with the Umbrella becomes radically different or more expensive than was originally intended then you should look towards setting up a Limited Company and trading through that. In effect this means swapping the Umbrella agency fees for Accountancy fees but a good accountant (perhaps a Caprica Online accountant ….) will be able to take all the hassle away and there’s also a good chance you will end up saving money by paying less tax.