Government consults on Agency Workers Directive

Date: June 08, 2009

Agency Workers Directive causes uproar within the recruitment industry. A 12 week consultation, currently in progress, could lead to the introduction of damaging legislation for temporary workers and umbrella companies...

The Department for Business, Enterprise and Regulatory Reform (BERR) has published a consultation document on the implementation of the EU Agency Workers Directive. They are seeking views on who should be covered by the Directive, as well as reviewing the definitions of pay and holiday entitlement. The consultation is also considering issues such as; the duration of working time, the 12 weeks qualifying period, how the principle of "equal treatment" should be established, liability for compliance, and dispute resolution.

We are told that the new rules have been the subject of negotiation between the Government, employers' groups and the unions. Under the Directive, temporary staff will receive pay and conditions entitlements after working for 12 weeks in a given job. Employers will also be prevented from releasing staff after 11 weeks and then re-employing them, as a way of circumventing the regulations.

The consultation process will run for 12 weeks; until 31 July 2009. It is thought the legislation will be passed at some point this year, although the government does have until December 2011 to bring the new rules into force.

Pat McFadden, the employment relations minister, has stated that the government is determined to ensure that people get a fair deal at work. This includes agency workers who play a vital role in the UK economy. The aim of the Directive is to ensure the protection of temporary agency workers by applying the principle of equal treatment and ensuring that workers receive the relevant working and employment conditions. These include policies on the duration of working time, overtime, breaks, rest periods, night work, holidays and public holidays and pay rates.

Business organisations have expressed concerns that the new rules could hamper economic recovery, or limit the flexibility of the UK's labour market. The Confederation of British Industry believes that, although the directive has been agreed in Brussels, there are still many questions remaining about how it should be implemented in the UK. They believe that it would, for example, be nonsense to introduce redundancy rights in a company where agency staff work, but are not employed. The British Chambers of Commerce have urged a delay in implementing the Directive's regulations. They suggest that the success of the UK economy over recent years has been down to the flexible labour market and they do not believe that this is the right time to introduce measures that reduce this flexibility and add further cost to business. They believe the Government's priority should be to honour their commitment to move a million people back into employment. The Government must also ensure that this Directive does not undermine this vital initiative.

OrangeGenie find the EU Agency Workers Directive extremely damaging in its current form as contractors employed by umbrella companies have been included within the definition of an ‘agency worker'. The inclusion of contractors seems to indicate either an ignorance of the umbrella industry or points toward political interference for a two specific reasons:

Firstly, umbrella companies employ contractors so they already benefit from full employment rights. OrangeGenie sees no reason for further intervention and legislation in addition to existing laws such as the Employment Rights Act, Health and Safety at Work, and National Minimum Wage.

Secondly, the Directive is rightly aimed at protecting the rights of vulnerable workers (low pay, quick turnaround, as well as language barriers etc). However, over 60% of OrangeGenie's contractors earn over 3 x times the UK national minimum wage. This does not, in OrangeGenie's opinion, make them vulnerable workers.

Graham Fisher, OrangeGenie's Managing Director, argues that "left in its current form, the Directive will be damaging, and, in relation to contractors employed through umbrella companies, completely unnecessary. This consultation follows on from a similar exercise conducted by HM Treasury and HMRC last year, it was quite clear that they did not understand the industry and this consultation proves that we do not have joined up government. We can see that we will be caught up in a host of legal wrangles over which piece of legislation takes precedence and this is bound to have a detrimental effect on the contracting industry."

This directive, if accepted in its current form, will clearly disincentivise employers from taking on contractors. In reality, many contractors themselves do not want this type of protection. Professional contractors recognise that they do not have the same rights as normal workers. They are angry that this directive will damage their chances of finding contract work, by threatening the role of a contract worker within an end user organisation."

OrangeGenie also sees the unintended consequence of the Directive, which grants an opt-out to contractors who run their own limited company. HMRC have recently completed their own consultation on contractors' expenses. Their review signalled an approval of umbrella companies as a cost-effective means of tax collection. With 100,000 more limited companies the cost of collection will rocket, hardly a great demonstration of a united government?

A copy of the consultation can be found at:
http://www.berr.gov.uk/files/file51197.pdf

For further information please contact Julian Ward, Sales Director:

Tel: 07725 563005

Email: Julian.Ward@orangegenie.com