The Recruitment and Employment Confederation has identified the main contours of the fallout from the Onshore Employment Intermediaries legislation, which came into force just over six weeks ago.

The early effects have not been especially propitious for the UK’s professional contracting community, according to the REC: the market distortion the legislation was ostensibly devised to redress has worsened since it came into effect. As numerous professional bodies warned during the consultation on the new law, among them APSCo and ARC in addition to the REC, the legislation has spawned new avoidance models that the REC claims “skirt moral and ethical – if not legal – boundaries.”

As a consequence, as foreseen during the consultation, fully-compliant and well-run Umbrella Companies and recruitment agencies are already starting to lose out to less-scrupulous suppliers, which cut costs for end clients by dubious methods. Self-employed workers are now “downing tools” in response to their sudden change in employment status and the reduction in their take-home pay.

In a statement, the REC said: “Schemes that rely on avoiding NMW obligations, processing inflated expenses claims or that push workers into single-person umbrella companies, leaving them powerless to take action if they are subsequently exploited, are not models that we can, in good conscience, promote to our members.”

The REC believes that an industry that becomes reliant on these models is unsustainable; good recruiters, it said, provide flexibility, not cheap labour. The organisation added: “To that end, the REC will continue to push government to create market conditions where compliance is demanded by clients, rather than non-compliance rewarded.”

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