EU Directive could disadvantage freelancers

Reports that the Government will support a European Union Directive giving temporary workers the same pay and benefits as permanent employees from day one will make contracting less attractive and increase the cost to companies of using contractors or freelancers according to contractor specialist giant group plc.

As reported in UKTECH, the Government pledged to drop its opposition to the EU Agency Workers Directive as part of a package of employment-related measures to appease the trade unions prior to the general election.

The EU last debated the Agency Workers Directive over a year ago when disagreement among member states blocked its progress. At the time, it was thought that the measure had run aground. However, there are indications that some of the EU countries might try to revive the legislation and push it through later in the year.

The concern for freelancers arises because, although the measure is targeted at preventing the exploitation of temporary workers, its drafting could be such that it also sweeps up contractors and freelancers.

Independent business

Matthew Brown, Managing Director, of giant said: "The whole point of contracting is that you don’t want to be an employee but an independent business.

"People choose to contract because they want the freedom to decide how to manage their own affairs. They don’t want end-users being forced to provide them with the same working and employment conditions, ranging from benefits such as pensions to control over rest and holiday period, as permanent employees. This Directive will undermine that flexibility."

The arguments against including freelancers are now being repeated for the expected re-run of the Directive. There are concerns that equalising the pay of temporary and permanent workers will benefit few, if any, freelancers because they frequently receive higher hourly rates of pay than equivalent permanent members of staff.

Less attractive

It could also make using a contractor a less-attractive option for clients if end-users are obliged to offer contractors benefits comparable to those of employees.

Matthew Brown said: "If employers have to provide contractors with the same benefits as their permanent staff the cost of using contractors will rise. Employers may try to offset that cost by offering contractors lower hourly rates or simply by cutting back on the number of contractors they hire."

Trowers & Hamlins, the City law firm, also thinks that the Directive could make contractors less attractive to end-users because of the employment-related risks end-users may be exposed to as a result.

Employment Partner, Emma Burrows says: "By giving temporary workers taken on through agencies new employment rights, such as holiday and sick pay entitlements, the number of areas in which employment-related claims could be brought by temps against employers is likely to increase."

"Businesses will have to tread carefully. If they get it wrong on equal treatment for temps they could be taken to tribunal."

The CBI and agency body ATSCo are lobbying for freelancers to be excluded from the regulations.