It has been suggested that the implementation of the Agency Workers Regulations will make it harder for umbrella company contractors to secure a mortgage.

Mortgage lenders have always viewed the employment status of contractors with risky eyes. Contractors and freelancers have struggled to persuade banks and building societies that they receive payment from a third party, especially when expenses and payroll fees feature on their payslip.

Furthermore, lenders say that AWR has made their lending decisions even more complicated because payslips do not show what an individual really earns.

Some lenders will grant a contractor mortgage on the value of a gross annualised contract, but in order to qualify the contractor needs to be named on his or her contract. And this is where the problem lies.

Since the introduction of AWR, a lot of umbrella companies have firmed-up on their contractor’s employment status. Increasingly, contracts do not mention the name of a contractor, meaning they cannot avail of specialist mortgages based on contract rate. The payslips that they do receive also mention various headings and deductions that make mortgage companies wary.

Despite these seemingly insurmountable obstacles, umbrella company contractors should not be tempted to tell lies on their mortgage application forms. They must come clean about their employment status and if they are working on a short-term contract, the lender must be informed, Failure to do so could see them charged with mortgage fraud.

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The Agency Workers Regulations should not prevent organisations using umbrella company contractors to build a flexible workforce, according to the REC.

The REC insists that UK companies still have a variety of options including the Swedish Derogation Model that has already been adopted by Tesco. The Confederation stressed that this is a legitimate supply model and should not be viewed as a “get out clause”.

Kevin Green, the chief executive of the REC, said that AWR has encouraged employment agencies to design innovative recruitment methods. Some have hired their temps on a permanent basis, which is obviously good news for the temporary workers who will benefit from added job security.

With the Swedish Derogation Model, the recruitment agency becomes the temps’ employer and must pay its workers when they are in-between assignments. It’s not a way round AWR, rather it’s a great way of making sure the UK still has a flexible workforce, said Green.

The main issue surrounding the Swedish Derogation Model is one of commercial viability because it exposes agencies to increased risk and obligations. In order to make it work, there needs to be strong collaboration between recruiters and their clients.

He went on to explain that in the majority of cases, new supply models are not necessary. In the majority of sectors, temporary workers’ pay is on a par with, if not higher than, their permanent counterparts. Furthermore, around 50% of all temporary assignments are for less than 12 weeks and are therefore not bound by AWR.

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Umbrella contractors might be interested to learn that the REC’s legal helpline has been swamped with calls from members querying the implementation of the Agency Workers Regulations, which come into force today (Saturday, October 1^st).

Steve Othen, the head of inbound calls at the REC, said that both legal and contact centre teams have been working flat out to answer as many queries as possible. The month on month volume of calls increased by around 500 in August and a similar increase is expected when September’s data has been collated.

He went on to say that the REC welcomed the fact that members are making the most of their membership and asking questions about implementation. He also explained that the REC has added a further two members to the helpline team to make sure calls are answered in a timely manner.

However, Othen did urge people to be patient and said the Confederation was doing everything it could to satisfy the demands of its members.

Tom Hadley, the director of policy and professional services at the REC, said that AWR would create complexities in certain sectors but we must not adopt a doomsday scenario. The latest Report on Jobs shows that employers will still be making use of agency staff after AWR comes into being.

The Interim Management Association has also been taking AWR implementation very seriously. The chair of the IMA, Jason Atkinson, said some client organisations have recently raised concerns over the possible impact of AWR, but members have been able to reassure them that the regulations will be unlikely to have much impact because the majority of interim managers are self-employed.

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The Daily Telegraph recently published a story suggesting that the Agency Workers Regulations may be watered down or even dropped.

The newspaper claims that lawyers for the Prime Minister have informed him that he could amend or scrap the new rules completely. When the present government took office, it explained that it would be too expensive to oppose the EU over AWR and so the regulations would be implemented. But as implementation draws closer, the picture has changed.

Trade associations have welcomed the news but said consideration must be given to any costs incurred in making changes at such a late stage.

Solicitor Nicola Tager questioned whether David Cameron had left it too late to seek legal advice. The AWR come into effect on the first of October and the Agency Workers directive must be implemented by December 5th or the government will face hefty fines from the EU.

Kevin Green, the chief executive of the REC, said he welcomed the fact the Cameron was taking an interest in the impact of AWR as the Confederation has been tirelessly highlighting some of its complexities. However, there would have legitimate cause to question why it has taken so long to pursue this option after agencies have devoted a lot of time and money into preparation for implementation.

He went on to say that the impact will be minimal in a lot of sectors and recruiters have already started working with clients to ensure equal treatment works. A realistic way forward would be if the coalition agreed to review the Regulations as soon as possible after the first year.

Ann Swain, the chief executive of APSCo, said she welcomed signs that a review will be undertaken into how the AWD excludes limited company contractors and pointed out that APSCo has given the government a methodology to clarify the issue and hopes this will be adopted.

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Umbrella contractors may be interested to learn that Flex Plus recruitment consultancy has warned that the Agency Workers Regulations could drive up supply chain costs.

Adrian Hobbs, the MD of Flex Plus, said the implementation of AWR in October could lead to an increase in the cost of agency labour at a time when UK companies need less employment regulations and more flexibility.

He went on to say that complying with the regulations could have a tremendous impact on the bottom line of organisations that use a lot of temporary workers. The risks associated with non-compliance are high, especially if recruiters misinterpret the AWR or come up with a cheapskate solution without considering the long term impact.

Hobbs believes there is potential for the logistics sector to redesign the way it works with flexible labour and refocus on managed services, outsourcing, productivity and warehouse labour within functional areas.

Furthermore, he suggested that the days of cheap agency labour are numbered and in its place we will see a productive flexible labour force with permanent contracts and professional employment organisations taking over from traditional agencies.

Meanwhile, amendments made to the AWR regulations last week may lead to recruiters and employers having to take another look at contracts and other documents they have already drafted, warns Bridget Wood from Blake Lapthorn.

The head of the recruitment sector group at the law firm explained that the government has now published amended regulations that correct errors in the original drafting.

Amongst the notable corrections are the definition of agency workers, the stipulations concerning pay between assignments and the conditions that govern liability in the case of a breach of equal treatment.

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Last week, the REC attended an Agency Work seminar run by the JSB, which provided up-to-date insights on how leading organisations are gearing up for the implementation of the Agency Workers Regulations.

Some of the UK’s larger employers have set up special project teams to help them prepare. All areas of an organisation are involved in these teams including employee relations, finance, HR, legal and payroll. Some clients have even involved internal marketing teams to get the message out to their line managers via workshops and company intranet sites.

The REC stated that many clients face a challenge over the increase in different job titles, which makes it difficult for them to compare and predict the impact AWR will have on salary costs. On a positive note, temporary work is now embedded within company resourcing models and the AWR will have no affect on the flexibility and speed of supply of agency workers. Organisations that are undergoing change, such as some public sector bodies, are likely to need more flexible staff rather than less.

Meanwhile, a new suite of AWR compliant model contracts will be available to REC members as from the 29th of July.

This first batch of contracts will comprise such documents as agency workers PAYE terms of engagement, clients’ terms for the supply of temp workers and client terms for the Swedish derogation contract.

Carol Scott, the head of corporate membership at the REC, said updating the contracts had been a Herculean task that the Confederation would have liked to have completed by the end of last month.

However, the guidance from the BIS was held-up and it was necessary to make sure the contracts were word perfect.

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The majority of employers are still not prepared for the impact the Agency Workers Regulations will have on their business, according to a new survey from the REC.

The Confederation’s latest Jobs Outlook Survey discovered that 70% of employers are aware of the regulations but only 10% have planned to make specific changes in the run up to the first of October implementation date. 42% of employers said they were currently “weighing up their options.”

The Agency Workers Regulations will provide temporary workers with some of the same rights as their permanent counterparts once they have completed 12 weeks continuous work in an assignment. However, interesting research from the CIPD and REC has found that as few as 13% of temps will have their pay and benefits increased when current pay levels and short-term assignments are taken into account.

The REC’s head of policy, Gillian Econopouly, said that with so many employers unprepared for implementation, it’s up to recruiters to discuss the matter with their clients. Some employers will use the AWR as a catalyst for a review of their usage of flexible staff and this might lead to slight reduction in the number of temporary contracts. However, on the plus side, some businesses intend to increase the amount of temps they use over the coming twelve months.

The UK legal director of Ranstad, Ian Naylor, has warned that organisations that do not embrace the spirit of AWR risk losing out on talent.

He told companies that are looking at alternative supply chain solutions that their reputation might be damaged if workers believe solutions have been implemented solely to avoid parity with the permanent workforce. Naylor went on to point out that candidates are much more likely to be attracted to companies that embrace the spirit of the regulations.

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The REC has called on the Department of Business, Innovation and Skills to provide increased clarity over the way the AWR will operate in the education sector.

The BIS recently confirmed that it would not be publishing agency workers’ regulations that were sector specific. This news prompted the REC to seek talks with the government and it has already begun consulting some of the country’s leading legal firms to find out how tribunals will view specific requirements.

Tom Hadley, the director of policy and professional services at the REC, said the AWR poses the education sector with some unique challenges and many questions remain unanswered.

For example, the current guidelines do not clarify whether the school or the local education authority is deemed to be the hirer. Neither do they effectively deal with the impact of school holidays on the qualifying period of 12 weeks.

The Confederation will provide regular updates on its talks with the coalition and external law firms to members of its Education Sector Group. Hadley pointed out that these are complex regulations and the REC will do everything it can to make sure there is no confusion for supply teacher agencies and schools.

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The current transitional jobs market could prove to be a godsend for umbrella company contractors.

There is still a great degree of uncertainty as far as the economic recovery goes, as the results of two new surveys shows.

The regular “Voice of Small Business” survey from the FSB shows that owners of small businesses are starting to feel more confident but despite this, most of them have no immediate plans to take on additional staff.

The latest “JobsOutlook” from the REC shows that only 23% of employers intend to increase their workforce in the coming quarter. On the plus side for contractors, 93% of employers say they maintain or increase the amount of temporary workers they use in the short term. 81% also said this would be their long term strategy.

However, that may be set to change in October when the Agency Workers Regulations are implemented.
Last week the REC held an AWR summit in London and delegates were warned that the regulations could lead to large scale reductions in the usage of temporary agency staff.

Nigel Toon, the HR director at Allied Milling, told the summit that he is responsible for anywhere between 200 and 700 temporary workers at once. If he maintained his current temporary workforce once the regulations are implemented, it would cost the company an additional £36,000 every week. He said Allied would be significantly reducing the number of agency workers it uses rather than face an extra £2m annual cost.

Kevin Green was quick to reassure delegates that 70% of agency use was with SMEs and therefore the cost implications were not the same as they were for large corporate like Allied Milling.

A straw poll was taken during the summit and 58% of attendees said they were already making plans for implementation of AWR. 34% said that had some awareness of the requirements whilst just 6% said they were totally prepared.

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Lawspeed, the recruitment law specialist firm, claims there could be a conflict of interest between HR and finance departments when the Agency Workers Regulations are enforced in October this year.

Lawspeed’s director, Ravi Murphy, said that unlike other rules relating to recruitment agencies, the new regulations contain issues that could lead to conflict.

He cited an example of HR staff finding it hard to fight the unions over the payments made to agency staff whilst finance directors will want to keep costs to a minimum wherever possible. The AWR grants temporary workers the right to the same rate of pay as their permanent counterparts once they’ve been in the same contract for 12 weeks.

The REC has recently raised concerns with the BIS over the draft AWR guidance. The Confederation says further clarification is needed on certain aspects of the AWR including the Pay between Assignments exemption. It would also like to see clearer criteria laid down for the exemption of genuine self-employed limited company contractors.

The REC met with BIS officials last month to highlight concerns and suggest ways in which the final version of the AWR guidelines can be made clearer for recruiters.

Gillian Econopouly from the REC said the organisation has been working with the BIS by holding one-on-one meetings and attending guidance workshop sessions over recent months. More recently, the two bodies met to discuss the guidelines in detail and expect some of the issues raised to be addressed in the final version of the document.

Although the guidance document can never wave a magic wand over dealing with AWR, the REC will continue to urge the coalition to make it as business-friendly as possible.

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The Agency Worker Regulations were back on everybody’s mind at the end of last week.

Following publication of the draft guidelines last Thursday, a two week consultation period is under way during which time the REC will be collecting feedback from its members and submitting a response to the BIS.

The REC has played an active part in all the consultation workshops run by the BIS and this has enabled them to flag areas of specific concern to recruiters. The REC’s legal team will analyse the draft guidance and further information will be provided to members over the next few days.

Last week, the REC met with the TUC to discuss implementation of the Agency Workers Directive as well. As well as highlighting common ground, the meeting underlined the importance of positive dialogue between the Trade Unions and the recruitment sector.

There are differing perspectives on how some of the equality measures should work but the two sides agree on other areas such as making sure employers only work with agencies that are compliant. It was also agreed that the government needs to enforce existing employment regulations effectively.

Sarah Veale, the head of equality and employment rights at the TUC, said it is in the interests of all concerned parties to work together and make the best of the AWR. Honest agencies can gain a lot by demonstrating to clients their understanding of the regulations and helping them get it right.

The director of policy and professional services at the REC, Tom Hadley, said that although there will always be differing views of some issues, progress had been made. The REC will continue to build on its relationship with the TUC and explore common ground. It will also be crucial to maintain regular dialogue with both the unions and employers as implementation draws closer.

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The next four years will see employers paying out an additional £23.87 billion due to new employment laws, according to the British Chambers of Commerce.

Reform to the existing pensions legislation will cost companies £4.5 billion a year, the Agency Workers Directive (AWD) will add another £1.5 billion and a further £174 million will be eaten up as employees take advantage of “time off for training”.

The director-general of the BCC, David Frost, pointed out that the coalition says business growth is at the top of its agenda and yet UK companies are going to be hit hard when these new regulations are enacted.

The government promised to cut the regulatory burden and it must make good on this promise.

Frost continued by saying that until the bureaucracy is reduced, the UK will carry on having high unemployment and that could lead to the possibility of the economic recovery becoming derailed.

The AWR is one of many new regulations that is still bamboozling recruitment agencies and employers. APSCo has come to the aid of agencies and their clients by producing a toolkit to help them comply with the Regulations.

This toolkit will be launched in advance of the BIS guidance documents which will be published in the middle of March. There are three sections to the kit. Section one is a short guide, written in plain English, which explains the Regulations. Section two is a risk assessment toolkit for members of APSCo. This will let members identify whether they will be affected by the AWR. The final section is a toolkit that provides the user with a full list of the implementation issues they need to take into consideration when dealing with their clients.

APSCo’s chief executive, Ann Swain, said that the Association’s members are hungry for information about the AWR. The toolkit will be able to sit on a recruiter’s desk and will help keep AWR compliance costs to a minimum.

Although APSCo is working with the BIS on the guidance notes, the Association feels a toolkit which helps recruiters and clients perform quick impact assessments was of significant value.

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