AWR Solutions for Agencies

This is a brief summary of the pros and cons of the main contractor payment options under the Agency Workers Regulations. For a comprehensive financial analysis of how our services can assist your agency, request a free no-obligation business to business consultation today.

When the AWR comes into force on October 1st, no single solution will work best across all placements. Unless an agency deals exclusively with a very specific type of contractor (with a narrow range of pay rates and contract length), they should adopt a range of payment solutions. However, doing so internally will increase costs. Also, it may be a step too far for busy recruitment consultants to understand the legal complexities and financial ramifications of a range of options. planIT have invested heavily in the expertise of our staff and operate a consultation process where we both confer with recruitment consultants and help advise contractors. Our solutions alleviate agency risk, both financial and compliance.

The Swedish Derogation umbrella model does not provide the one-size-fits-all solution once hoped, but remains an excellent option for mid-level contractors with medium to long term contracts. The acid test will be if workers buy into the solution, which requires they opt out of the right to equal treatment on pay after 12 weeks.  The provision for 4 weeks' pay between assignments at 50% of their rate will help encourage them to do so. However, many providers will either hold back part of their pay to cover this additional cost or will require that the agency (or hirer) effectively pays for it; neither of which is desirable for the agency. At planIT, we remove this problem by absorbing the full cost of pay between assignments. 

With enough contractors with significant travel and related expenses, agencies should consider operating their own Swedish Derogation payroll enabling them to offset the pay between assignments costs with reduced employer's NI costs on contractors' allowable expense claims - also increasing the contractors' net income. planIT, with the requisite systems and experience provide this back office service as a paymaster company.

The Match Permanent Pay model will not change the way planIT and most recruitment agencies currently pay contractors, but with systems adapted to ensure that the workers' treatment complies with the AWR, including equal treatment on pay after 12 weeks. This will be a logical option where contractors have short term contracts or are already being paid as much or more than their directly-hired counterparts. However, there is an on-going administrative cost - with the need to match bonuses and pay rises causing particular concern. planIT will work closely with agencies to help monitor compliance. Given a choice, contractors will obviously favour this model as it includes the headline rights promised by the regulations.

Placing high-level contractors operating through their own personal service companies should not carry additional administrative or financial cost. The problem for agencies will be to determine when both the contract and working practice are in the nature of employment (in scope) or are a genuine business to business relationship (out of scope). This is where planIT, as a specialist firm of Chartered Accountants, has an advantage over pure umbrella companies, with the expertise to help recruitment consultants navigate this legal minefield and provide the AWR and IR35 guidance plus all supporting accounting services that such contractors require. Furthermore, planIT can properly set up willing contractors with their own personal service company so that even when they are caught by IR35 (deemed employed) they will still remove AWR obligations from agencies and end hirers.

An obvious gap in the options listed above is a workable solution under the AWR for contractors currently at or close to National Minimum Wage. planIT can provide unique bespoke solutions  which ensure agencies avoid any additional employment costs resulting from the AWR and help such contractors maximise their income by allowing travel and subsistence claims.

Using the right solution for each assignment can make a dramatic difference to an agency's bottom line. In the post AWR market, recruitment agencies require service providers with higher levels of expertise to understand and advise consultants and contractors on the full range of payment options and to provide bespoke solutions as required. They would be well advised to abandon large PSLs in favour of fewer close (or exclusive) relationships with carefully selected service providers such as planIT.

For more information, financial analysis and bespoke solutions request a free no-obligation business to business consultation today.