Agency Workers Directive may not hurt contractors

The Agency Workers Directive, which received the backing of the Prime Minister at the TUC conference last month, may not apply to limited company contractors, according to research from contractor specialist Giant.

Evidence that there is a strong possibility that the Directive will not apply to contractors, should come as welcome relief for contractors, says the specialist.

It is feared that the Directive, which proposes equalising temporary and permanent workers pay and benefits, could make contracting less attractive to workers and increase the cost to companies of using contractors.

Blair said to TUC delegates: "You know our concerns on agency workers to maintain necessary labour market flexibility.

"But whilst we must meet those concerns, we will support the EU Directive on Agency Workers."

However, the exact wording of the current draft of the Directive could offer a let out for contractors.

It states: 'This Directive applies to workers with a contract of employment or employment relationship with a temporary agency who are posted to user undertakings to work temporarily under their supervision.'

"From what the Prime Minister said it now appears certain that this Directive will become law in the UK, but there is good reason to be optimistic," says Matthew Brown, Giant's managing director.

"I think Blair's comments about the importance of maintaining labour market flexibility could mean that the UK will try to implement the Directive in a diluted form," he said.

"That hopefully means that the current wording, which potentially excludes most contractors, will be retained."

William Downing, Employment Partner at law firm Trowers & Hamlins, said the Directive would only apply where a contract of employment or employment relationship exists between a contractor and an agency.

"To help ensure that no form of employment relationship exists between the contractor and the agency it will be necessary for the contractor to give notice that he or she wishes to opt out of the Employment Agency Regulations."

A poll from Giant members shows 94 per cent of contractors had opted-out of the Employment Agency Regulations, which became law in April this year.

They said the UK's determination to maintain its flexible labour market is supported by pressure for economic reform within the EU itself.

Because of this, the specialist says it is realistic to expect limited company contractors to potentially be excluded from the Directive, as the EU hammers out the final details.

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Wednesday 6th October 2004