As a contractor, it’s vital you understand how employment legislation can impact your career. Chloe Stevenson, a member of our Legal & Compliance team, has highlighted the key aspects of this legislation you need to be aware of, including IR35 and AWR.
Whether you operate through a limited or umbrella company, understanding how employment legislation impacts you is crucial to your success as a contractor. To assist Grovelands associates in navigating through the mass of information available on this legislation, we have summarised the key aspects which you need to be aware of.
Created in 1999 with the objective of eliminating tax avoidance schemes, IR35 ensures that limited company contractors who do not meet HMRC’s definition of self-employment are subject to similar tax rates as permanent employees. HMRC recognise the risk that is attached to self-employment; resulting in the genuinely self-employed paying less in tax and national insurance contributions.
Questions such as, “Does your contract allow you to provide a replacement consultant or use your own equipment to carry out the services?”, should be considered when determining your status. Those who cannot answer yes to these questions would be categorized as caught within the scope of IR35 as they would not be able to satisfy the test for self-employment and consequently would have to pay the equivalent tax and NI as permanent employees, ultimately reducing their take home pay by up to 25%.
Be aware that penalties for wrongly opting out of IR35 can be harsh; if you are unsure of your status please seek advice from your accountant or solicitor.
Agency workers regulations
Based on an EU directive, the Agency Workers Regulations entitle those who are classed as temporary agency workers (TAW) to the same basic working and employment conditions which are offered to a client’s permanent employees.
From day one of employment, these regulations entitle TAW access to collective facilities and amenities and information on internal vacancies. Once a TAW has worked on the same assignment for the qualifying period of 12 weeks, they are entitled to rights such as the equivalent pay that a permanent employee performing the same role with the same experience and qualifications receives. These regulations apply only to temporary agency workers, therefore excludes suppliers working on a contract for services and those who deem themselves self-employed.
Conduct of employment businesses regulations
The purpose of this legislation is to provide workers and hirers with minimum standards they could expect from private sector recruitment agencies and businesses. These regulations only apply to those who are controlled by the client. Therefore those who deem themselves outside of IR35, in “business on their own accord” and generally not controlled by the client, will not require the protection that this legislation offers.
Upon commencing a new contract with Grovelands, contractors will be asked within the schedule of their contract whether they wish to opt in or out of these regulations. The opt-out must be signed and received by Grovelands prior to your contract commencement date; failure to do so will lead to inclusion in the legislation for the entirety of your contract with Grovelands.
Similar to IR35, Grovelands cannot make the decision whether you should opt in or out for you; thus should you require any assistance with this choice, please seek expert advice.