cxc global guide to awr - agencies

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Recruitment Agency quick guide to the Agency Workers Regulations

The Agency Workers Regulations (AWR) come into effect on 1st October, and are probably the biggest change to hit the business environment for contractors and temps since the Managed Service Company legislation in April 2007. The legislation is called The Agency Worker Regulations 2010, available at http://www.legislation.gov.uk/uksi/2010/93/pdfs/uksi_20100093_en.pdf, and there are also some guidelines called, surprisingly, Agency Workers Regulations Guidance! See http://www.bis.gov.uk/assets/biscore/employment-matters/docs/a/11-949-agency-workers-regulations-guidance.pdf.

CXC Global has solutions that address all the various payment options specified in the legislation. See below for a high level review of overall approach to the legislation, and the key points of each payment solution. If you would like detailed advice concerning you specific circumstances, please contact CXC Global for a consultation.

Overview

The introduction of new legislation inevitably changes the risk profile of your business. Uncertainty increases, at least in the short term, until a few test cases have been brought and we can begin to build a view of how the courts interpret the new legislation. The AWR are quite vague, so the Department for Business, Innovation and Skills (BIS) has provided guidance as to how it interprets the legislation. But remember, guidance is only guidance, and any legal actions brought under the AWR will be determined primarily on the basis of what is written in the legislation. And even if your interpretation of the legislation is supported by the findings of an Employment Tribunal, you would probably still prefer that you hadn’t had to spend time and money successfully defending your case at all.

There is a four step process to low hassle, low risk implementation of the AWR:

Review each of the sectors in which your business operates in order to understand how established practices in the sector fit within the framework of the legislation

Determine a risk profile for each of the AWR engagement models that you propose to use in each sector, to ensure that you can accept the risk / cost combination of each. Remember that actions brought under AWR will most likely originate from individual workers or their representatives (e.g. Trade Unions), rather than government bodies

Liaise with end clients and suppliers (umbrella companies) to agree the engagement models to be used, and the information flows and deadlines required to support these structures

Develop and test process for the whole contract chain, from end client through to ‘Agency worker’

Sector

Sectors where engagements do not exceed 12 weeks are outside of the scope of much of the AWR. Requirements are limited primarily to the end client ensuring that ‘Day 1’ rights of access to on-site facilities and information are provided. CXC’s new AWR Agency portal tracks elapsed time on 12 week assignments, warning you when the 12 week period is about to expire, and ensuring that no payments are made through CXC umbrella once the 12 week period has expired. The contractor will be paid through CXC’s standard umbrella product.

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Higher paid professionals in business on their own account are outside of the scope of all aspects of the AWR. It is worth spending time with your clients reviewing engagement contracts and work practices, to determine which engagements fall into this category. CXC has a partner, MyOnline Accounting http://www.myonlineaccounting.co.uk, who can help your contractors set up and administer their own limited company businesses.

In many sectors you will find that your contractors and temps are paid more than their permanent employee comparators, so full compliance with AWR is the way to go. The contractor will be paid through CXC’s standard umbrella product.

In some sectors, none of the above conditions apply, so you may need to resort to the ‘Swedish Derogation’ or ‘Pay between assignments’ (PBA) model. Under PBA, contractors sign away their rights under the ‘pay’ (regulation 5) component of AWR, but are compensated for this by being entitled to up to 4 week’s pay if there is no suitable work between assignments. Although the pay rate is set at just 50% of normal rate, or National Minimum Wage if this is higher, there is still the tricky issue of determining who covers this cost. It is worth reviewing contractor pay rates with your client to see if a small increase in pay might allow contractors to work under a full compliance model, and still work out cheaper than covering the cost of the pay between assignments. If this is not possible, CXC has a flexible PBA product.

Risk Profile

Engagements that last no more than 12 weeks have a low AWR risk profile, provided that this is genuinely the way that assignments are structured in this sector! The AWR contains anti-avoidance measures and punitive fines for breach. Creating a bank of contractors who are circulated around a list of assignments lasting 12 weeks is likely to be a breach of the regulations. If your contractors are working in a heavily unionised sector, this is one of the avoidance strategies that trade unions will be looking out for.

Operating as a ‘profession or business’ adds another tier of vaguely worded legislation to the already familiar areas of IR35 and MSC compliance. Some commentators have drawn very close parallels between IR35 and AWR, but this is not strictly correct since IR35 is tax law, and AWR is employment law. You can however significantly reduce your risk of action under AWR by:

Asking contractors to sign a declaration that they are in business on their own account – this demonstrates that you have taken reasonable steps to engage the contractors correctly and is a defence under regulation 14

Asking the contractors to sign a declaration that their limited company is working outside of IR35. A contractor working outside of IR35 is very unlikely to take action under AWR because this undermines his/her IR35 status.

The PBA structure is a concession within the legislation, and falls outside the key objective of the legislation, which is to provide temporary workers with a core of entitlements at least as good as their permanent co-workers. Whilst CXC has the systems in place to handle the additional compliance requirements of this model, contractors may have some questions for their recruitment agency as to why the PBA requires them to sign away their rights under regulation 5 insofar as they relate to pay. The inclusion of the PBA within the AWR was the subject of protracted negotiation between the TUC and CBI, so we can expect wide scale implementation of PBA within unionised sectors to be subject to scrutiny by the trade unions. For example, Manpower and BT have already been targeted by the Communications Workers Union for introducing PBA contracts on all new assignments at some BT Retail sites. Recruitment agencies will need to form their own opinion about the reputational and litigation risks for themselves and their clients.

Client and Supplier liaison

The key to smooth implementation of AWR is good communication up and down the contract chain. Before the 1st October End Client, Recruitment Consultancy, and Umbrella Company need to establish communication routes and processes for the transmition of compliance information, such as start date, expected end-date, assignment type and comparator ‘pay’ data. Individual recruitment consultants, client staff responsible for procurement , and umbrella company staff need to have a compliance information checklist to ensure that each party in the chain has the information required.

The Recruitment Consultancy and End Client also need to agree which engagement structures will be used in which circumstances, and ensure that the umbrella company is aware and able to provide them.

CXC operates on its own in-house IT platform, supported by in-depth developer resources, so we are able to integrate with your document management and approval systems to smooth the flow of information.

Summary

In most situations, implementation of AWR does not present significant compliance or risk hurdles. A properly planned implementation strategy with reliable partners will deliver the results that your clients and contractors want.

CXC Global has been providing compliant contractor payment solutions since 1992 and is ready to work with you on your AWR implementation project.



cxc global guide to awr - agencies

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