PAYE umbrella contractors may wish to read the recently published draft guidance from the Department of Business, Innovation and Skills (BIS) on the Agency Workers Regulations (AWR), which comes into effect this October. It’s now clear that limited companies will not be affected by AWR – but umbrella companies will be. Contractors wishing to give feedback on the guidelines may do so by emailing Lisa Moses (LisaMoses@bis.gsi.gov.uk) – but be forewarned that you only have until 15th April to get your comments in.

The guidance which will be used in the AWR to determine employment status is identical to that currently used to decide IR35 status. Contractors beyond the scope of IR35 will be unaffected but, under its definition of a “temporary work agency,” the guidance is unambiguous that umbrella companies will be included: “This could be a “high street” agency, but also an intermediary, such as an umbrella company or a master or neutral vendor if they are involved in the supply of the agency worker.” (p. 6)

One likely effect of the regulations under current guidance is that clients will be encouraged to make sure that any contractors they hire are placed outside the scope of both AWR and IR35. In the small number of cases where such a contractor claims equal pay and rights to an employee, smaller umbrella companies particularly may need to alter their business model to ensure that the equal pay aspects of the AWR do not apply.

Full details are available on the BIS website www.bis.gov.uk.

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