Posts Tagged ‘agency workers’

After several months of consultation with industry representatives, the government finally laid before parliament the regulations to implement in the UK the EU Agency Workers Directive. The timing is to make good the government’s pledge to get the regulations on the statute books during the current session of parliament. However, they do not come into force until October 2011, which will supposedly give all those affected the time to make preparations.

The Agency Workers Directive aims to protect temporary workers, who are deemed to be ‘vulnerable’, by granting them the same rights as full-time employees after they have worked for a company for twelve weeks. The consultation period has predictably seen the trades unions push for full protection while industry representatives have been arguing for light regulations. Although the latter generally welcome the delay in implementation, they are concerned that they have been unable to comment on the final regulations, which are considered to have many inconsistencies.

In particular, those who are classed as ‘genuinely self-employed’ are to be excluded from the regulations. This applies to those with limited companies but not contractors who operate through an umbrella company. Agencies do, understandably, welcome the decision not to impose restrictions on agency fees that are thought to be unreasonable. There is also the question of who will stand the £1 billion a year estimated cost of the regulations, with the suspicion that it is the contractors themselves who will ultimately be hit.

Industry representatives now seem prepared to wait and see the detail of the regulations before coming to any firm conclusions. They also appear intent on seeking clarification of points that concern them and working with the government on the guidance documents that determine how the requirements will be interpreted. However, these things tend to be difficult to stop or divert once they’re set in motion and even a change of government may make no difference.

Contact UKContracting.net to make sure you’ve got the most suitable working arrangement and limit any harmful effect of the Directive.

IT contractors will be familiar with IR35 legislation, which sets out to distinguish between freelance and permanent employees. However, a recent case before the Court of Appeal has brought the subject of employment status to a head once again.

Autoclenz, a Derbyshire-based car valeting firm, used 20 car valeters on a self-employed basis. However, an Employment Tribunal upheld the workers’ claim that they are employees, although the Employment Appeal Tribunal overturned this ruling but granted limited employment rights. Autoclenz appealed but the Court of Appeal decided the workers were actually employees.

The decision was based on a new contract that the workers had signed in 2007. Although the document referred to the workers as ‘sub-contractors’, it was found that the company controlled the workers and integrated them into its business. Crucially, the right to send a substitute to do the work, which was incorporated into the latest contract, was unknown to many of the workers and no-one had ever exercised this right.

Contractors who want to avoid falling within IR35 legislation must ensure that any contract they sign places them under no obligation to accept work and does not make them subject to the client’s control. They also need to be sure not only that the contract they have with the agency gives them the right to send a substitute but that the contract between the agency and the client also has a substitute clause. The absence of the latter, which means the client will not be aware of this right, may result in HMRC viewing the document as a contract of employment.

If you are a client of UKContracting.net, you will receive the best advice and your status will be clear. If not a client, get in touch.

Recent figures point to an improving situation in the contractor market although the trend is neither consistent nor broad-based. A recent SSL/Computer Weekly survey showed an increase of 26% in IT contractor vacancies in the last quarter. Developers and system designers were most in demand, with vacancies up by a third in each case.

The rise contrasted with an increase in permanent vacancies of only 1%, reflecting the usual position where temporary staff are first out of the door but also the first to be taken back on. However, the level of demand for IT contractors is still down by almost two thirds against two years ago, resulting from the steepest fall for many years and more than eighteen months of continuous decline. Nevertheless, contract rates are reported to be only marginally down on 12 months ago.

The financial sector, which of course is held up as the prime culprit for the crash, does seem to be leading the upturn. Improving results in the sector have meant that projects that were put on hold are now being restarted, with staff being hired to resource them. The change has encouraged more staff to see opportunities in the sector, with the number of people expecting to get contracts in finance rising by half over a six-month period, according to a poll by Giant plc. A higher number also expected to improve their pay rates as a result of the better situation within the sector.

The apparent improvement in prospects has led to a change of attitude to obtaining work. Whereas the uncertain market had caused contractors to focus on achieving a regular income, increasing confidence means they are now concentrating on other career matters.

There is now some real hope that the downturn may be coming to an end. One cause of this could be that some of the largest companies involved in the software, internet, computing and electronics sectors have tried to maintain their R&D budgets during the recession. Booz & Co’s Global Innovation 1000 report showed that 80% of the biggest R&D investors in the software and internet sectors increased their spending in 2008. This was above the average for the 1000 company index, with two thirds of all respondents having increased or maintained R&D spend despite income having fallen. Forward thinking companies see this as an investment for the future, giving them a competitive advantage when conditions improve. From a contracting viewpoint, it may have prevented the situation being worse than it otherwise might have been.

Forming a limited company has often been seen as one of the best ways of operating for an IT contractor. It gives you limited liability protection as well as providing tax advantages, although the latter are somewhat reduced under current legislation.

When setting up a limited company, you have to conform to various regulations, including selecting a name that you’re allowed to use. You can’t, understandably, have one that’s in use already and there has long been a list of names that are totally banned. These include names that imply you’re associated with the government or royalty, are a bank, building society or professional association when you’re not and anything else that indicates that you’re somewhat bigger and more important than you really are. Added to this are names that you might be able to use if you get the necessary permission. In total, 70 names were on the list, which aims to prevent the public being misled or harmed.

A further 42 names have recently been added, preventing you from choosing a name that makes you sound too official without the necessary authority. If you want to use a name that includes ‘Mutual’, for example, you’ll need to get permission from the Financial Services Authority while ‘Olympic’ requires you to contact the London Organising Committee for the Olympic Games. ‘Co-operative’, ‘Data Protection’ and ‘Prince’ are also terms for which you’ll need to get the go-ahead before you use them.

These problems do, perhaps, illustrate the need to use a specialist service when setting up your limited company. However, even these service organisations are unlikely to have been able to overcome delays at Companies House recently when registering new company names. Problems caused by the installation of new software meant that a process that usually takes only a few hours was extending to two weeks and more. A helpline is available but, due to the problems, this had longer waiting times than normal.

The IR35 tax legislation has recently reached its tenth anniversary but whether this is a cause for much celebration among contractors is extremely doubtful. There is a view that the legislation has had some positive effects, if only in uniting contractors against it as well as causing the formation of a service sector that has grown to support contractors.

IR35 is mostly seen in a negative light by contractors since it forces them to take on additional expenses and administrative work to counteract it. All too often, contracts and working practices have to organised with the legislation in mind, protecting the contractor’s status rather than operating in the most effective manner. At a time of economic hardship, when the number of freelancers working has fallen by 12% in a year and turnover has dropped by a third, IR35 legislation is viewed as an unnecessary obstruction to free enterprise.

Another recent revelation is that the EU’s proposed Agency Workers Directive is likely to apply to contractors with limited company status, although this was previously thought not to be the case. Implementation has been delayed to the latest possible date of October 2001. However, when it does come in, it may have a similar scope as IR35 in terms of who is covered.

To coincide with the tenth anniversary, the Professional Contractors Group has been pressing Chancellor Alistair Darling, ahead of his Pre-Budget Report, to repeal the legislation. To substantiate its demand, it states that IR35 is the cause of huge uncertainty for freelancers since they cannot get an accurate assessment of their tax liability with any confidence. The PCG also requested that the proposed family tax, which seeks to prevent ‘income shifting’ between family members who run a business, be dropped and that agencies be allowed to pay contractors gross.

As a result of the PCG’s prompting, an Early Day Motion has been signed by 78 MPs, with 44 being Liberal Democrats, 20 Conservatives, 8 Labour and 6 others. This proposes the abolition of IR35 legislation, which causes the threat of HMRC investigation to hang over 1.4 million freelancers in the UK. To justify the proposal, the motion notes that IR35 raises little money for the Exchequer, with 1462 of 1468 reported cases resulting in no additional tax being owed. It is alleged that the legislation is an unnecessary burden and should be abolished as soon as possible, although the motion is thought to have little chance of success.

Being an IT contractor might seem like a glamorous sort of life to the outsider — lots of money, varied work where and when you want it, technical knowledge and skills, respect from your peers and managers — the list just goes on. But from the inside it doesn’t look quite so rosy and you need a special kind of temperament to make a success of it.

Anyone thinking of taking up contracting needs to consider seriously the realities of the role before making the leap. Given the current economic situation, some people are almost falling into freelancing simply because their so-called permanent job has disappeared. But often they’re doing this only until the situation gets back to normal, when they’ll return to their comfortable full-time position. However, if you’re going into contracting for the long haul, you need a totally different attitude to the job.

First of all, it’s important to get the truth about the money situation sorted out. Yes, you get paid considerably more for a contract position than for an equivalent permanent job. But, depending on your situation, you may have to pay not only income tax and employees’ NI out of this, but employers’ NI as well. You may also be working away, so you’ll have travel and other costs. Added to this, your agent takes a cut and you’ll probably have to pay an accountant and other expenses, such as insurance, health cover and pension contributions. And, most importantly, you only get paid when you work — you don’t get paid when you’re ‘resting’ between contracts, ill or on holiday, nor for the extra administration tasks you have to do. I’m not saying you’ll be reduced to poverty but it does rather bring down the average.

Working freelance brings with it a degree of uncertainty. While working on a contract, you always need to look to the future to see where the next job’s coming from, whether it’s renewing your current contract or finding another one. When times are hard and money is tight, contractors are always the easiest ones to get rid of so you have to watch for the signs.

To ensure a continuity of work, you need to build up a reputation as a good, reliable and effective worker. Get some good projects on your CV and make sure you do what’s asked of you without complaining. If possible, try to specialise in something that’s currently in demand because, that way, you’ll get a constant stream of work at a high rate. This means that you need to gain experience and possibly get some training, which you’ll probably have to pay for yourself.

As a freelancer, you’ll generally find that you’re treated differently to the permanent staff. Some people may look upon you as a highly skilled expert while others consider you an overpaid opportunist who can’t be trusted. As a result, you may not be involved in any decision making. You may also find that the permanent employees get the best and most interesting jobs while you get all the drudgery. If so, you need to knuckle down, get it done and prove you’re capable of better things. Just accept the fact that, because you’re an outsider, you’re expected to work longer, harder ad produce better results than everyone else from day one.

Of course, it’s not all doom and gloom. Contracting is a lifestyle choice and has many advantages over permanent employment. Aside from the extra money, it offers flexibility. In the good times, you can pick the projects that appear interesting and which offer opportunities to gain experience where you want it.

If things don’t work out, you can move on to another contract. Unlike permanent employees, where frequent job changes are viewed with suspicion, you can switch employment frequently because it’s just part of the arrangement. Moving around frequently does have its advantages — new people to meet, fresh challenges to face, avoidance of office politics and no worries about company restructuring or a change of management.

Contracting does offer a lot of advantages. You just need to be aware of what you’re letting yourself in for and the possible drawbacks. If you’re flexible in your approach and adopt the right mind-set, there are plenty opportunities for those with the required skills.

With the economy in disarray and unemployment rising, it’s hardly surprising that the contractor market has been badly hit. After all, if employers need to cut costs, they’re likely to get rid of temporary workers before laying off permanent staff.

Contractors have been hit in two ways — firstly by the reduction in posts available and secondly by lower rates being offered for those jobs that do exist. Those negotiating a contract extension or a new contract have generally found that rates are significantly down on previous years. One reason for this, of course, is simply supply and demand, with employers well aware that there are plenty of candidates for every vacancy. Another is that some agencies are trying to increase their margins in an effort to bolster income that has been reduced by fewer jobs being available.

Latest figures show that, after demand for IT contractors had fallen for six successive quarters, things are starting to pick up. The decline had begun to flatten out and the latest Monster Employment Index showed demand for IT workers rising by 3 percent. Marketing and sales professionals showed a 6 percent rise but telecomms, construction and engineering have marked declines.

There were also variations between industries, with public sector demand down but the financial sector showing signs of recovery. The Experian Insolvency and Distress Index recorded 1796 business failures in September 2009, with 3.3 percent being IT firms and 14.8 percent in construction. Demand for certain skills has declined less than others, demonstrating the need for contractors to keep their skills up-to-date and relevant.

There are some indications that the worst may be over and, with confidence on the increase, demand may be starting to return. However, some economists have expressed fears of a double dip or W-shaped recession, where demand falls for a second time before the real recovery gets underway. Nevertheless, although contractors are often the first to go because they are the easiest to get rid of, they are also taken back on quickest since they have the required skills and flexibility.

A new code of practice issued to tax inspectors by HMRC in September has raised concerns that taxpayers acting legitimately are likely to be investigated. The guidelines apparently seek to clarify the situation on tax avoidance but have served only to muddy the waters. In fact, they state that there is no real definition of tax avoidance but it should be treated as a situation where less tax is paid than Parliament intended.

The statement has led to fears that tax inspectors will be putting themselves in a position where they are trying to interpret what Parliament meant. The result might be that taxpayers are pursued for breaking a law that does not exist or have rules applied retrospectively. If so, it seems likely that any such attempts will be challenged in court.

The row follows hard on the heels of HMRC accusing recruitment agencies of avoiding paying tax and NI by treating some payments as tax-free expenses. The allegation is that certain agencies have temporary workers employed on a series of engagements at different locations so that expenses can be claimed for travelling between the various workplaces.

One outcome of this is that contractors are often being paid below the minimum wage, with the agencies using the savings to undercut rates and gain an advantage over their rivals. The Treasury estimates that 15-20% of agencies could be using the ploy, resulting in a loss of £100 million a year in tax and NI contributions.

Whilst this situation almost certainly doesn’t affect your typical IT contractor, it does show how the other half lives.

A good CV has always been part of a contractor’s armoury. In the current economic situation, with more people chasing fewer jobs, it’s even more vital that your CV makes you stand out from the crowd.

The aim of a good CV is not to win you a contract, it’s merely intended to get you an interview. After that, it’s up to you to do the rest. You need to be aware that agencies and employers receive a huge number of CVs, particularly now, and so may not have time to read every word of each one. Consequently, you need to provide them with a document that is nicely presented, clearly laid out and properly structured, with information given in a logical sequence. Avoid gimmicks but do use bullet points and numbered lists so information stands out. Above all else, keep it short — two pages maximum — since employers may lose interest if they don’t find what they need quickly.

There are no real hard and fast rules about how a CV should be laid out. However, it’s best to start with personal details that include your name, age, contact details and work speciality. Set out your career history, including both contracting and permanent employment. Cover the most recent contracts first, describing the project and your role. The most recent projects are obviously the most topical so provide less detail for the rest and a summary only for those that are over five years ago.

List your skills, training undertaken and certifications gained. Education only needs to cover what’s relevant and recent. References are useful but not essential since a potential employer will ask for these later. Hobbies and interests should only be included if they are relevant, such as if fluent in foreign languages or extensively travelled.

Where possible, customise your CV to match the requirements of a particular job. And before you send it, make sure you spell check it, proof read it and correct all errors. A document that’s littered with spelling mistakes, grammatical errors and ‘texting language’ is unlikely to impress a prospective employer.

Lastly, don’t lie or make exaggerated claims because being found out may rule you out of several likely contracts. Surveys have shown that contractors are increasingly providing false information, leading to employers undertaking more extensive checks before hiring anyone. The chances of being found out are therefore higher than previously.

The EU Agency Workers Directive, which has been hanging over the contracting industry for some time, is to be delayed. Business Minister Pat McFadden announced on 16th October that the new law will be put off until the latest allowed date of October 2011. The action is apparently intended to help businesses as they struggle with the recession and it is hoped that conditions will be improved by the time the law finally takes effect.

As with many directives from the EU, the aims are admirable but the consequences might not always be as intended. The Agency Workers Directive sets out to protect ‘vulnerable’ temporary workers by granting them the same rights as full-time employees after they have worked for a company for twelve weeks. These rights include equal pay and holidays.

Doubts have been expressed as to whether IT contractors are vulnerable and need this level of protection, particularly since their pay rates generally exceed those of full-time employees. More importantly, there are real fears that the legislation will seriously damage job prospects, particularly if it is rushed through. If so, it is likely to hit Britain harder than most since it has more agency workers than any other European country.

The announcement of a delay is at odds with a promise given by Prime Minister Gordon Brown. He told the TUC only a month previously and reaffirmed at the Labour Party Conference that the directive would be law “in the coming few months”. In addition to the delay, changes will result in the owners of limited companies, self-employed people and managed service workers being excluded from the provisions. However, those using umbrella companies or who are considered not to be genuinely self-employed will be covered. Reactions have been predictable, with employers and contractors’ representatives generally welcoming the delay but trades unions regretting that vulnerable employees will remain open to exploitation by unscrupulous employers.

The decision followed an earlier announcement by the Conservatives at their party conference that a Tory government would delay adoption of the directive until the latest possible date. They estimate it will cost £40 billion over ten years and destroy thousands of jobs.