Will freelancers be hit by EU Temp directive?

High-end contractors are unlikely to be seriously affected by the proposed EU Temporary Workers Directive, even though they may come within its remit, according to Barry Roback, Chief Executive of JSA, specialist accountants for contractors.

The EU Directive will give similar employment rights to temporary or agency workers as employees. While it is aimed at combatting abuses at the lower-end of the sector, freelancers fear that they could be swept in with the proposals giving them rights they do not want and making them less attractive to potential clients.

Barry Roback Mr Roback said: "This proposed legislation may well prove of benefit to lower paid temporary workers, but at the top end it is likely to add yet more complexity to employment law.

"Everyone involved with the contracting industry badly needs a rest from legislation but Brussels seems determined to keep the momentum going."

Currently the temporary agency workers directive is being finalised in Brussels. While this directive will create broad general principles, the precise impact will only become clear once the more detailed UK implementing measures are drafted.

Barry Roback believes that, those working under a limited company regime will probably be excluded, as it would be illogical to impose 'workers' rights' on those who do not work within someone else's organisation in the first place. However, he said that highly paid contractors who work under an umbrella scheme, may well be included with the proposed legislation, even though the majority are already paid considerably more than their permanent counterparts.

Mr Roback adds a caveat: "There is possible legislation on the horizon to limit umbrella travel expenses and all this supposes that umbrella companies remain in existence by the time the proposed legislation hits the UK statute book."

Further confusion

Richard Herring, Staff Services Director at Volt Europe, the European operating arm of Volt Information Sciences Inc which is one of the world's largest and longest established recruitment companies, suspects that the UK Government may try to include limited company contractors and umbrella companies within the legislation, but he warns that, legislators must be careful not to create yet further confusion around what is employment for tax purposes and what is employment for equal rights.

Mr Herring is reasonably confident that as highly paid contractors will already be earning more than permanent counterparts, the impact of the legislation will be reduced. Even if contractors are included, he believes it will not change their ability to secure work.

Furthermore, he does not think that any UK legislation will jeopardise the IR35 status of limited company contractors because he is confident that the Government does understand the need to recognise genuine "freelance" work.

In the proposed directive, a temp is described as 'a worker with a contract of employment or an employment relationship with a temporary agency with a view to being assigned to a user undertaking to work temporarily under its supervision and direction'.

Agencies

Anne Fairweather, Head of Public Policy at the Recruitment and Employment Confederation (REC), which is the trade body that supports and represents the recruitment industry does not anticipate problems with limited company contractors, but believes there are a number of issues relating to umbrella companies that need clarifying. For example, if a matter is considered a worker right, then an umbrella which acts as an employer, could end up with some liabilities.

While she does not think that there is any specific reason for end-users to be discouraged from using contractors, she thinks that there may well be some psychological resistance in that they may feel that any new employment rights legislation could create bureaucratic problems and potential risks. That is why REC is carrying out extensive work to ensure relevant organisations understand they have nothing to fear.

Richard Herring added that if high end professional contractors are not excluded from the legislation, then it may fall on agencies to ensure that temporary workers are receiving parity in earnings to their permanent counterparts. This will be a further administrative burden on agencies and will be very difficult to achieve as end clients will have the information available to ascertain parity and they may not disclose it to the agency. Thus the agencies will incur greater operational costs.

He stresses that ultimately market forces will determine where these increased costs are absorbed, i.e. by the agency leading to reduced profits, by the contractor leading to reduced earnings or by the end client leading to reduced profits for them.

Barry Roback concluded: "The proposed directive should not prove a serious hazard to high-end contractors but he suspects that, like all legislation, there will be unanticipated costs and consequences that could effect the profitability of agencies, the payroll costs of end-users and the take-home pay of contractors.

"This proposed legislation may well prove of benefit to lower paid temporary workers, but at the top end it is likely to add yet more complexity to employment law. Everyone involved with the contracting industry badly needs a rest from legislation but Brussels seems determined to keep the momentum going."