Agency Workers Directive may not apply to limited company contractors

The Agency Workers Directive (AWD), which received the firm backing of the Prime Minister at the TUC conference (12/09/04), may not apply to limited company contractors, according to contractor specialist giant group plc.

The strong possibility that the Directive will not apply to contractors, says giant, should come as welcome relief for contractors. 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: ëYou 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.í

However, giant has examined the exact wording of the current draft of the Directive in detail. It states: ëThis 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.í

Matthew Brown, Managing Director, giant group, comments: ìFrom 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.î

ìI think Blairís comments about the importance of maintaining labour market flexibility could mean that the UK will try to implement the Directive in a diluted form. That hopefully means that the current wording, which potentially excludes most contractors, will be retained.î

William Downing, Employment Partner, City law firm Trowers & Hamlins, says: ìThe Directive will 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.î

A recent survey by giant found that 94% of contractors had opted-out of the Employment Agency Regulations, which became law in April this year.

According to giant, the UKís determination to maintain its flexible labour market is supported by pressure for economic reform within the EU itself. It is, therefore, realistic to expect that limited company contractors will potentially be excluded from the Directive as the EU hammers out the final details.