What does the agency workers directive mean to contractors

Not long ago, a beginner asked us if it was even worth starting out as a contractor in the UK now that the Agency Worker legislation is likely to come in and make us all into employees?

Contracting Is Here To Stay

We're happy to report that we are confident that contracting is here to stay. The Agency Workers Directive, which is very likely to be passed in the coming year in one form or another, will not destroy the contracting industry in the UK. Certainly, it will make being a contractor more difficult. It will make hiring contractors more expensive.

But, as the Minister for Labour, Business, and Enterprise Pat McFadden pointed out in the debate over the measure in Parliament on February 22, "UK industry relies on contractors and so a means must be found to maintain their role even under the EU legislation".

How Will We Work Under The Law?

It is fairly certain that the EU legislation will be enacted in some form by the European Council of Ministers under the French presidency which begins in June. But the form of the law is anything but determined.

Much can still be done, as McFadden pointed out, to broaden the terms of the directive so that UK companies have more latitude. Costs will almost certainly go up for companies, but the qualifying period after which contractors are obliged to become employees could be made quite long, so that few contractors are actually affected. Further, contractors might be provided with some means of opting out as they are now from other employment legislation.

What About Limited Companies?

Contractors who work through limited companies of their own are probably going to be caught by the legislation. We don't yet know how this will work, but the spirit of the law is clearly to oblige anyone who performs the same role as an employee to become one.

As Andrew Miller, the Labour MP who is behind the UK bill for Agency Workers, put it in the debate: ''It is wrong for one worker who performs the same function as another to be treated differently. Each should have the same salaries and the same rights.'' If the law is drafted with that intention in mind, contractors who have limited companies will be caught by it too.

Will There Be Less Work?

It will become effectively difficult to avoid giving employment rights to contractors. But while employment rights are expensive, they aren't prohibitively so if the term of the contract is relatively short. Most of our contracts aren't for very long periods. So we may have to resign ourselves to a small reduction in pay to help cover these costs. Contractors who work for umbrellas often pay such amounts already, so this may not amount to a great change.

What Will Change For Agencies?

The role of agencies will be perhaps the most affected aspect of contracting. ''Agencies will probably take on an introductory role and relinquish the management role if the legislation is passed,'' says Tom Hadley, director of External Relations at the London-based Recruitment and Employment Confederation.

This means that agencies will be more involved in bringing contractors and clients together, and less involved in paying and handling contractors. A different pay structure will probably evolve as a result.

Indeed, the Agency Workers Directive will mean evolution and not revolution for us contractors. Certainly, the industry would have been happier without it. But we're too tough for it to make us fade away.