Legal advice for interim managers

Important update for Interimconnect  members: 

Blake Lapthorn

Between January and April 2013 the Government conducted a consultation on its proposed reform of the legislative framework regulating the recruitment industry.

The existing framework, consisting of the Employment Agencies Act 1973 and the Conduct of Employment Agencies and Employment Businesses Regulations 2003, is considered by many in the sector to be overly complicated and difficult to navigate.

In July 2013 the Department for Business Innovation & Skills (BIS) published the Government's response to the consultation. Its proposals include replacing the current legislation with a new framework aimed at easing the burden on businesses without removing protection for work seekers. The Government intends to clarify which types of businesses are caught by the legislation through a new definition of 'employment agency'. 

In a welcome development the Government has indicated that it will retain the opt out for individuals who operate as limited company contractors. This is obviously good news for interims.

We will update you as soon as any draft legislation is published

Likely impact of the Agency Workers Regulations on interim managers - update

The Agency Workers Regulations 2010 (AWR) came into force on 1 October 2011. The AWR gave agency workers the right to the same "basic working and employment conditions", such as pay and working time, as comparable direct hires after 12 weeks in the same role with the same end user client.

A temporary work agency (TWA) supplies individuals to work temporarily for and under the supervision and direction of hirers, or pays for, or receives or forwards payment for, the services of such individuals. Note that a TWA is not necessarily only a recruitment company; other intermediaries such as an umbrella company may also be a TWA. A TWA will be responsible for providing the same basic working and employment conditions and will have the bulk of the compliance burden under the AWR. However, the AWR will also have implications for the business of the end user client, including obligations to provide access to facilities and information on permanent job vacancies from day one of an agency worker's assignment.

Guidance on the AWR published on 27 May 2011 by the Department for Business Innovation and Skills has helped clarify who does and who does not fall within the scope of the AWR. Under the AWR, an "agency worker" is someone who is supplied by a TWA to work temporarily for and under the supervision and direction of the end user client.

Are interim managers within the scope of the AWR?

Limited companies

The definition of an agency worker excludes those who are in business on their own account where the end user client is a client or customer of a profession or business undertaking carried on by the individual via a limited company. The AWR state that an individual is not prevented from being an agency worker because the TWA supplies the individual through one or more intermediaries. Therefore, an interim manager working via a limited company is not automatically excluded, but may fall outside of scope where he or she can satisfy the test of being in business on their own account. In order to fall outside the scope of the AWR, there must be a genuine business to business relationship between the interim manager providing services via a limited company and the end user client.

Due to the nature of the business relationships and level of skills of interim managers providing services through their own limited companies via TWAs, it is likely that the AWR will not apply. Of particular significance will be whether, as an interim manager, you work under the supervision and direction of the end user client or whether the assignment involves a substantial amount of autonomy. These factors will help to clarify whether the test for being in business on your own account has been satisfied. Although the AWR do not affect tax law and tax status, the tests used to assess whether an individual is genuinely self-employed (to which there is a link in the draft guidance) are similar. It is likely, therefore, that interim managers working within IR35 will be agency workers and that those working under arrangements which fall outside IR35 will not.

Umbrella workers

Umbrella companies fall within the definition of a TWA. Individuals engaged or employed by umbrella companies may be agency workers for the purposes of the AWR. If they do not work under the supervision and direction of the end user client, they will not be agency workers. As mentioned above, both the umbrella company and the recruitment company will be classified as a TWA, and will therefore both have obligations to ensure the individual's equal treatment whilst on assignment if the individual is an agency worker.

Interim managers working through umbrella companies should assess whether or not they are agency workers. An interim manager working through an umbrella company will not be an agency worker within the scope of the AWR if he or she does not work under the supervision and direction of the end user client. Those that do, and who consequently will be agency workers, will usually be receiving a good rate of remuneration which is likely to be the same as, if not better than, a comparable direct hire of the end user client. Often there will be no comparator, due to the senior positions that interim managers tend to be engaged to fill, and so it may be difficult to ascertain what would constitute equal treatment without looking at what applies generally in the relevant end user client's workplace and in the market place at large. The end user client must provide interim managers who are agency workers with access to onsite facilities, such as parking, childcare facilities and staff canteen, from day one and make them aware of any permanent job vacancies that arise during the assignment.

Bridget Wood, Blake Lapthorn.

Legal Advice for Interim Managers by Blake Lapthorn



                  Bridget Wood Blake Partner Blake Lapthorn


  Bridget Wood - Partner - Blake Lapthorn