Agency Workers to get Employment Rights

Following our newsletter of 16th May 2008 the government has announced that it has agreed a deal with unions and employers that will see agency workers receiving equal treatment as employees. Equal treatment will mean the same entitlement to pay and basic working and employment conditions. The entitlement will arise after 12 weeks “in a given job”. The employers organisation that has “agreed” this deal is the CBI which has commented “There has been a major risk of damaging legislation coming from Brussels, and the CBI has judged that the government’s proposals represent the least worst outcome available for British business. Half of agency assignments will be unaffected as they last less than 12 weeks – protecting businesses’ ability to deal with peaks and troughs in demand and shorter-term staff absences. And while pay is covered, occupational benefits that recognise the long-term relationship permanent staff have with an employer, like…

Changes to Conduct Regulations & Agency Standards Enforcement

It is worth the reminder that there were two related BERR consultations in 2007 on “… measures to protect vulnerable agency workers” and “…National Minimum Wage and Employment Agency Standards Enforcement”. Following responses to the consultations, the proposed legislation was finalised and will take effect in two stages during 2008. The Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2007. These regulations amend the Conduct of Employment Agencies and Employment Businesses Regulations 2003 (“Conduct Regulations”) and introduce new provisions that are intended to better protect agency workers with effect from 6th April this year. Key changes are: Regulation 5: Where a worker decides to take up services from an agency, for example, accommodation or transport, the worker will be given a right of withdrawal from all services subject to five working days notice, or ten working days for accommodation. Regulation 21: Amendments to procedures when passing information between the client…

Case partially clarifies agency worker employment status

For many years there has been a lack of clarity as to whether an agency could have employment rights as against a hirer. More technically minded readers will know that the ruling in Dacas (2004) first really set the cat amongst the pigeons, when the Court of Appeal implied that an agency worker could be an employee under an implied (e.g. unwritten) contract. Dacas was rapidly supported by a further Court of Appeal ruling in Cable and Wireless – v- Bushaway (2005). The result was that every Employment Tribunal thereafter felt obliged to consider in every agency worker case where unfair dismissal or redundancy was claimed whether there was an implied employment contract. Bad news for recruiters supplying workers because end users rapidly became paranoid (and rightly so). Now however in the appeal hearing of James v Greenwich the Court of Appeal has clarified its position. Agency workers will not…

Who could be an MSCP?

In April 2007 the government introduced legislation to force contractors to pay employment taxes where the contractor obtains advice from managed service company providers (MSCPs). In some circumstances, this debt could be transferred to the MSCP. For an organisation to be an MSCP all that is required is for it to be in the business of promoting or facilitating the use of companies by contractors, which could catch out some agencies. For the legislation to apply the MSCP has to be “involved” with the contractor company. Being “involved” is defined to include, amongst other things, being in receipt of ongoing payments, or promoting any scheme for making good tax losses, for example tax indemnities or insurance. A contractor company caught by these rules is known as a managed service company (MSC). The legislation as currently drafted therefore exposes any company to risk of having to pay MSC employment taxes if…

HMRC Drops MSC Audit Scheme

Following representations put forward by Lawspeed, HMRC and the Treasury has abandoned the idea of introducing an audit scheme in the foreseeable future. In recent months HMRC had announced that it was considering a scheme which may allow for certain third parties to assess whether a provider organisation is compliant with the MSC legislation. However it had held back from making a quick decision despite pressure from various quarters to do so. In announcing its decision not to proceed for now, HMRC has said that it will discuss the impact with external stakeholders. Adrian Marlowe of Lawspeed said “This is a tremendous result both for umbrella companies and recruitment agencies. So far as umbrellas are concerned there were elements of the scheme that appeared to give an advantage to various providers in an unfair, and, some would say, unnecessary way. Also there were serious questions about the legality of any…

HMRC has clarified its current position in relation to the MSC legislation, but some questions remain.

At Lawspeed’s fully attended one day conference held on 11th October 2007, Robin Wythes, of HMRC and responsible for MSC legislation, indicated that HMRC recognises the difficulties that employment businesses have in identifying whether a contractor is operating through an MSC.  In order to reduce concerns over debt transfer he said that an MSC tax and NICs debt would not be transferred to an employment business if the individual worker providing the work services through an MSC was already operating through a limited company at the time he/she first approached the employment business. This is because in those circumstances it could not be said that the employment business had either encouraged or been actively involved in the individual providing their services through the particular company. Adrian Marlowe, Managing Director of Lawspeed, said “this clarification of  HMRC policy was warmly welcomed by all attending our conference and it is an enormously helpful…

Confusion reigns over MSC approval schemes – or does it?

Accreditation scheme For some months there has been speculation that an accreditation scheme, whereby HMRC will exclude certain organisations that are accredited from the scope of the MSC legislation, is under consideration by HMRC. Whilst this may be in the interests of those organisations that operate as centralised “accountancy” service providers  to workers provided via limited companies, the idea has always been open to question. Within the legislation the government is empowered to exclude certain types of organisation by order. On the face of it, to exclude centralised service providers that otherwise would be classed as Managed Service Company Providers would appear to be out of the question as defeating the objective of the legislation. Therefore there would need to be some approval method by which such organisations would become accredited – perhaps by accepting that advice given and services offered are in line with tax legislation.   HMRC has…

MSC Legislation – Further Guidance

HMRC issues further guidance in relation to the MSC legislation As part of its ongoing monitoring of events related to the MSC legislation HMRC has identified areas where it feels additional clarification would be required, in particular to address certain misleading information. This further guidance can be found at http://www.hmrc.gov.uk/employment-status/monitoring-legislation.htm. It is important to note that HMRC emphasises that contractors genuinely in business on their own account are not intended to be subject to the MSC legislation, and therefore pose no risk to an employment business. However it is not clear what HMRC means by the words ” in business on their own account” since there are no established tests to determine this, and the use of these words is a departure from the usual test that is applied which is based upon deemed employment status within an assignment. Could this statement be creating more questions than answers? HMRC has…

MSC Legislation Update

Following the publication of the draft Finance Bill in March 07 there has been considerable speculation concerning the meaning of some of the definitions. In particular the section that excludes organisations that provide accountancy and legal advice allows interpretation that facilitates the suggestion that some service providers to contractors can continue as usual. Does it or doesn’t it? In our opinion if this definition is allowed to remain as currently drafted there is likely to be litigation between HMRC and those service providers that do not pay contractors purely by way of employment. The stakes are clearly high for both sides. If HMRC were to lose the floodgates would once again be open. If HMRC were to win the service provider and the contractors concerned would face a substantial bill. One conclusion from the above may be that HMRC will not attack any organisation that is relying upon the accountancy…

Budget Note – MSC Legislation Changes

Aside from the increases in beer, wine, cigarettes and duty on most polluting cars, the second most important issue for you will obviously be the MSC legislation update. The Government has confirmed that legislation will be introduced to achieve the objectives set out in the consultation document. But it is responding to key concerns raised during the consultation and will: strengthen the definition of a Managed Service Company (MSC) to give greater clarity and certainty; amend the debt transfer legislation to make clearer that those simply in receipt of the services of a worker operating through an MSC are not within its scope; and delay the application of the debt transfer legislation to third parties (other than MSC scheme providers, and directors, office holders or associates of the MSC) to allow more time to make the necessary changes to their operations. Despite earlier Treasury denials that there would be any…