Below are some of the common misconceptions contractors have whilst using an Umbrella Company and the actual truth behind the myths:
Fact: Limited Company contractors will only fall outside of the scope of the AWR if they are in business on their own account i.e. outside of IR35.
It is also worth noting that if individuals are found to be inside IR35, any attempt to manipulate a contract to say that contractors are outside IR35 when, they are in-fact inside, will be viewed as avoidance.
Guidance issued in June 2011, states:
"If the arrangements do not reflect the reality of the relationship (e.g. despite the wording of the contract, the actual reality is that the individual is not in business on their own account and they work under the supervision and direction of the hirer) or are an avoidance tactic, then individuals are likely to fall into scope of the Regulations.
Fact: The day 1 rights are the responsibility of the hirer i.e. the end client.
It is however, the agency's responsibility to gain confirmation from the client that the day 1 provisions will be met.
Fact: The AWR is not retrospective so, for contractors already on assignment, the 12 week qualifying period will begin from 01st October 2011.
From 01st October 2001 workers will be entitled to facilities and job information from Day 1 of the assignment.
Fact: The regulations are intended to give agency workers equal access to facilities and job vacancies that comparable employees receive. Examples include:
- Transport services
- Common room
- Mother and baby room
It does not mean that agency workers are given 'enhanced' access rights; so for example, they would be expected to join a waiting list if there was one. Nor does it give them instant access to service or loyalty based benefits such as discounted goods or gym membership. Another example would be if the hirer has 50 employees but only 10 parking spaces available, the agency worker would not be entitled to a space.
Changing hirer every 3 months means the AWR doesn't apply
Fact: Potentially this is true but in reality just how feasible is it to keep providing different candidates to the hirer every 11-12 weeks for the same assignment. It's difficult enough finding one suitable candidate, let alone 4 in a year!
It is also worth noting that if a worker is taken on for a third assignment with the same hirer, after two 12 week assignments with 6 week breaks in-between, it could be considered as a deliberate attempt to avoid completion of the qualifying period.
The simple answer is they can't. Recruiters should be very cautious of any umbrella company that says all their workers will be outside the scope of the legislation. A worker must be in business on their own account, and this will be determined by their working practises not the contract, in order to fall outside the scope of the contract. If the worker is under the supervision, direction and control of the hirer then they will fall inside the scope and contracts written to suggest otherwise will be seen as avoidance.
Fact: No. The 12 week qualifying period is determined by time spent at the Hirer's site.
Therefore, if a worker has been in the same position at the site for 10 weeks before they come to your agency then you will need to ensure that the AWR are complied with 2 weeks after they sign up.
Fact: No. The qualifying period applies to calendar weeks, which means that, even if the worker only works one day a week, they will still fall within the legislation after 12 weeks.
Fact: No, in this case basic conditions must be identified without a comparator.
Fact: No, you will also need to consider other things such as overtime, shift allowances and performance related bonuses.
Fact: No. The individual will still be considered within the scope of the legislation.
Fact: If the two companies are part of the same legal entity they will be viewed as being one and the same for the purposes of the legislation.
Fact: No. If a worker is pregnant and cannot complete their assignment for Health & Safety reasons they must be found alternative work at the same or better rate. If another position cannot be found then they must still be paid the remaining value of the assignment.
Fact: No. If the Hirer has rest breaks or holiday entitlement that exceeds the statutory minimum then the temporary worker must have the same entitlement.
Fact: No. In order for the qualifying period to be re-set the new role must be substantively different.
Fact: No. The Swedish Derogation Model means that the workers are employed by the umbrella company under a full contract of employment. The umbrella company will fulfil requirements for mutuality of obligation by making payment between assignments which means that, providing it is stated in the contract, the section of the legislation that relates to equal pay will not apply. The worker will still be inside the scope of the AWR and will still have the same entitlement to basic terms and conditions of employment as permanent workers at the hirer's site.
Fact: No. The legislation is designed to ensure equality for temporary agency workers; permanent workers are protected by other quality laws.
Fact: No. The qualifying period applies only to the time spent at the hirer's site.