Confusing Terms Explained
What does it all mean?
It can be confusing as a contractor starting out when you hear so many acronyms mentioned by both your agency and Umbrella Company.
You may hear things such as IR35, WTR, AWR, and SDC along with terms such as ‘Opting Out’. You will also see it on documentation that you are expected to sign, so what does it all mean?
We’ve tried to put things as simply as possible for an at-a-glance view:
ACAS – Advisory Conciliation and Arbitration Service
A government agency that gives employees and employers free impartial advice on workplace rights and rules, and assist with employment disputes. https://www.acas.org.uk/
AWR – Agency Workers Regulations 2011
These regulations are designed to provide temporary agency workers with equal treatment over pay and benefits as those who are permanent employees. As the name suggests, they only apply to contractors working via agencies. They are entitled to certain rights from day one of an assignment such as access to canteen facilities, and from week 12 of an assignment (qualifying period) the regulations also include breaks and annual leave. For further details please read our article – Agency Worker Regulations Explained
AWR Regulation 10 – The Swedish Derogation
This was a model facilitating pay between assignments used by many umbrella companies, but was abolished on 6th April 2020. It meant that after the 12 week qualifying period (in the same assignment with the same client), the client would need to pay the agency worker the same rate as direct employees.
EAA Conduct Regulations 2003
This is the Conduct of Employment Agencies and Employment Business Regulations 2003. The Employment Agencies Act is a piece of legislation created to set a minimum standard of conduct for recruitment agencies in the UK. There is much more information on this subject, but to summarise, the Conduct Regulations cover:
- Information required from/given to the client and provided by/to the contractor;
- The contractual documentation which must be in place;
- When a contractor must be paid; and
- When transfer fees can be charged to the client.
The Regulations permit individuals to opt-out of the Regulations if they are:
- Working through a limited company; and
• Not working with people under the age of 18 or vulnerable adults.
Your agency may send you a document to sign, and you will see this also on the signature page of the contract with ourselves.
EAS – Employment Agency Standards Inspectorate
The government authority responsible for the enforcement of certain agency worker rights to ensure that they are treated fairly. They are responsible for working with employment agencies and businesses to help them comply with the law, and investigate any complaints received from agency workers. The EAS is based within the BEIS – the Department for Business, Energy and Industrial Strategy, and they work closely with ACAS and a number of other organizations.
IR35 is a legislation that targets contract workers who use an intermediary such as a limited company to provide services to clients, when in reality they would be classed as an employee if there was no intermediary. This is currently all over the news and internet, but to put it as simply as possible, as an employee of our umbrella company, you are classed as INSIDE IR35. If your agency mentions a role that falls outside, then you could opt to be paid to your limited company.
KID Document – Key Information Document
This is a document that your umbrella company needs from your agency at the start of a new assignment. When you start a new role, we will ask your recruiter to send us details of your role (dates and rates), along with this document. This is a legal requirement post April 2020. The document will give you a breakdown of the deductions and expected take home pay for the assignment. Your agency must give you a copy and one to us as your umbrella company. If they don’t have one, we send them a template that they can complete. Once we have this information and you have approved the details, payment can be processed. For further details, please see our article – KI Documents Explained
PSL – Preferred Supplier List
This is a directory of suppliers/umbrella companies. Many agencies have one; a list of umbrella companies that they would like you to choose from for your payments. They may dictate that you can only choose from this list, or may have an ASL – Approved Supplier List of other companies that they have also checked and approved.
SDC – Supervision Direction and Control
This term is used when analysing a candidate’s IR35 status and also with regards to claiming travel and subsistence expenses through the umbrella company.
Supervision: this implies that there is someone overseeing, assisting or aiding the work being done to ensure that it is being done correctly.
Direction: this involves someone providing instructions guidance and advice as to how work is to be done.
Control: this is having someone dictate what work is done, how and even when.
If a person falls under even just one of the above categories, then SDC is deemed to apply, which affects a person’s IR35 status and ability to claim expenses through the umbrella. When unsure, a test can be conducted to check this.
Please see our article – Can I claim expenses through my umbrella for a more detailed explanation.
T&S – Travel and Subsistence
This refers to expenses for business travel including accommodation or food and drink purchased as part of the working day. Legislation changed in 2016 for workers using an intermediary such as an umbrella company. Please also see the article – Can I Claim Expenses Through My Umbrella?
WTR – Working Time Regulations
In short, these regulations are to protect an individual ensuring that breaks are taken and that no more than 48 hours are worked in a week (taken as an average over a 17 week period). You will see this as an option to ‘opt out’ on the signature page of your contract of employment. For further information on this, please see our article – Working Time Regulations… Know The Facts
There is much more detailed information that can be obtained from our FAQs with articles and links direct to the government website, and legislation is constantly changing. We will endeavor to keep you informed of any changes that may affect you, so please keep an eye out for emails from us.
Our compliance team are working hard behind the scenes to ensure that we keep up to date with all current and upcoming requirements for us as your employer, and ERA Services CIC has recently assessed our compliance with the Good Work Plan and other legal obligations, and this will be reviewed on an annual basis.
Please let us know if you need to understand something a little more; our contracts team will be happy to help you.