Writing in Shout99, contractor expert Rob Crossland suggests that well-run umbrella companies have little to fear by the new Agency Workers Rights (AWR) legislation.

With relatively short, one-off contracts with end-clients lasting up to 12 weeks, the existing umbrella model can continue to be used, Mr. Crosland advises, but adds that such arrangements are “extremely unusual” for most PAYE umbrella contractors. More typically, umbrella workers take longer contracts, he continued, and under AWR regulations this may involve agency workers becoming permanently employed by their umbrella company, which would then be responsible for providing pensions, holiday pay and pay between assignments. Umbrella companies would need to work very closely with recruitment agencies to ensure their contractors find new assignments with minimal delays.

This “full employment model” legitimately escapes the AWR rules that grant agency workers equal pay with permanent staff, an arrangement designed to assist lower paid temporary workers. Instead, contractors would be classified as permanently employed by their umbrella company, rendering the protection afforded by AWR superfluous: such contractors would already be considered protected by employment law (by, for instance, receiving pay between assignments). A permanent contract of employment with the umbrella company would, however, need to be in place, Mr Crosland warns.

Many well-run umbrella companies are already adopting this model, Mr Crosland suggests, “using robust over-arching contracts of employment with contractors to mitigate the risks faced by recruiters and their end-clients when using a contingent workforce.” He suggested that the term “umbrella company” may soon become outmoded as a consequence, becoming replaced by “outsourced employment services provider.”

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