A new European law about using contract workers comes into effect in the UK on 1 October 2011. If your project relies on temporary staff, freelance workers, or contractors, you may find that your project costs go up.
What is the new law about?
The Agency Workers Regulations entitles freelancers, consultants and other ‘agency’ staff to equal access to benefits and equal working conditions to those of permanent staff. That impacts everything from maternity pay to annual appraisals and the right to attend the Christmas party.
Employing a temporary worker on your project means that they will be entitled to information about job opportunities in the company, access to the canteen and to use the childcare facilities if these are provided by the company: basically, they are ‘equal’ to permanent employees. It is likely to take some time to establish how far this goes: will they be entitled to a car parking space, for example? Or luncheon vouchers? (Although I’m not sure if companies still give out luncheon vouchers!)
These benefits apply from the first day that the person takes a role with the company. There’s another level of benefit for contractors, though. This level kicks in after the person has been in post for 12 weeks. At this point they become entitled to the same basic working and employment conditions as a permanent staff member.
That means that contractors become entitled to the same working hours, rest breaks, equal pay, overtime payments and bonuses. They also become entitled to annual leave, with parity to what is on offer to the permanent staff. One quirk of the new law is that they can choose to take the time off or receive additional pay in lieu of the holiday time – not all companies offer permanent employees the opportunity to do this, instead opting for a ‘use it or lose it’ policy.
What is the impact on your project team?
Contractor rates are typically higher than permanent staff rates because contractors are currently not entitled to holiday pay, sickness absence pay or other benefits. With the introduction of the new law, you could have the opportunity to negotiate a reduction in contractor rates to take into effect the additional payments required for holiday entitlement.
Overall, costs for contractor staff could be higher, and you would be advised to review the provisions of the law and plan this into your budgets, especially if your project needs contractors on the team for over 12 weeks. You may even find it harder to get approval for temporary team members, because the terms of the new law make it less attractive to employee short term contractors.
Don’t forget the impact of all this on the permanent staff in your project team. Contractors are generally on high day rates – and now they are getting holiday pay? Managing the morale of your permanent team members when faced with high earning contractors could be tricky, so think about what you can do to address the balance. What else can you offer in terms of reward and recognition to support the permanent team members?
You may also find that permanent team members who have been thinking about contracting decide that this is the push they need to leave employment and set up on their own as a project management contractor.
First, find out if the rules apply to your company. Talk to your Human Resources department. This is the result of EU regulations, but even if you are working in a non-EU country, it could have an implication for your project if you have a European division. Normally, the rules of engagement in the hiring country apply so even if you are working elsewhere, team members based in the EU could be affected.
Second, find out if the rules apply to your contractors. In my company, The Otobos Group, I have a number of part-time staff – including an accountant and a virtual assistant. The Agency Workers Regulations do not apply to these people because I buy services from their companies, I do not have the individuals under my direct supervision on a day-to-day basis. There might be contractors or freelances to whom this applies, but given the cost, time and reputational damage that going to court incurs, it is best to be careful. This article is not meant to provide specific legal advice for your situation, so the best thing to do is to check now about how the new regulations will affect your project team!