Did you know that hiring a contractor may soon prove to have unexpected consequences?

If the UK implements the EC Agency Workers Directive (AWD) in the way currently planned, contractors using personal service (‘umbrella’) companies and who are reclassified by HMRC as deemed employees under the so-called ‘IR35 rules’ could qualify for the same employment rights as a permanent employee. Although IR35 has no tax consequences for the hirer (only for the contractor and the contractor’s service company), the AWD could require the hirer to grant the contractor holiday pay and other employment benefits available to the hirer’s actual employees.