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-- This is an archived press item, for the latest information about the Agency Regulations please visit our EAA Regulations area --
It seems that the DTI and the Government are unwilling to remove limited company contractors from the scope of the new Agency Regulations. Whilst this has been the position put forward by the REC, ATSCo, Lawspeed, PCG and other interested parties the Government maintains that incorporated contractors are workers like any other temp and require the protection of the Regulations.
All new legislation is supposed to be properly targeted, consistent and proportionate. It can be argued that the new regulations do provide safeguards for lower paid workers against unscrupulous agencies and the government should be commended for not rushing through the implementation. However, the application of many of the regulations to the knowledge-based recruitment industry is poorly targeted. Particularly where all parties are genuine independent businesses.
The draft regulations are inconsistent with the governments stated aims of promoting small business and competition and may conflict with EU legislation. The regulations are also disproportionate in terms of protecting limited company contractors, in comparison to the problems that they are apparently seeking to address. These are issues that could be resolved inn the Courts if the Government does not reconsider their position but we hope that the matter can be resolved.
We have put forward a simple solution to the problems surrounding the inclusion of limited company contractors. As a general principle a business should be excluded from being classed as a work seeker. However, an individual limited company contractor should be allowed to choose to have the protection of the Regulations. There should be an obligation on employment agencies and businesses to obtain a declaration from the contractor as to whether or not the contractor requires the protection of the regulations in their dealings with the employment business.
If the contractor intends to retain the tax advantages of operating an independent business under IR35 it is likely to indicate that it does not wish to have the protection of the Regulations, and vice versa in the converse position. The requirement to obtain this decision could be included in the regulations setting out how this exercise is to be undertaken. At the same time there could be regulation prohibiting any employment business from requiring an individual to form a limited company as a condition of trading.
It is recognised that the reason why limited company contractors are intended to be brought within the scope of the regulations is twofold, first that limited companies complain to the DTI about agencies and the current regulations do not enable the DTI to take action, and secondly that agencies force workers to form limited companies, the solution I put forward resolves both those problems.
A contractor choosing positively not to have the benefit of the regulations will be declaring that it is in business on its own account and likely to be taking advantage of the tax status afforded. Such a contractor can hardly be entitled to complain under the Employment Agencies Act if things go wrong, but can still complain to the Office of Fair Trading and sue for breach of contract, just as any other business or person. As with any other business-to-business relationship market forces will prevail. If a limited company contractor is not happy with the service that it receives from an employment business then it will not use that employment business in the future. In order to operate a successful company the employment business must meet the needs of its customers (both limited company contractors and clients).
Removing those contractors who do not want the protection of the Regulations lets businesses get on with being businesses and enables workers to receive the protection that they desire.
-- This is an archived press item, for the latest information about the Agency Regulations please visit our EAA Regulations area --
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