Employment Relations Act

For information only

The Employment relations Bill received its second reading in Parliament in February 1999 and became law as the Employment Relations Act 1999 in July. While it is broadly speaking concerned with a wide range of new measures improving workers rights, there is a short section referring to the Employment Agencies Act 1973.

The Bill proposes (via S28(7)) to amend The Employment Agencies Act 1973 to cover 'persons' instead of 'workers' (s13(2) Employment Agencies Act 1973). This is now enacted under section 31, schedule 7 of the Act

This may seem an unimportant change, but in fact means that any person, including a corporate person (e.g. a Limited Company) is now covered by the Act. We believe that this could give Limited Company agency contractors a degree of statutory employment protection. If this is the case then the distinctly separate legal entity of an agency contract worker and his or her Limited Company becomes blurred. This in turn has very serious implications for taxation. If a Limited Company contractor can be treated as an employee by the Employment Agency Act to receive employment protection, he or she can equally be treated as an employee for tax assessment purposes. This corresponds with the Inland Revenue's stated objective to 'crack down' on Limited company contractors working via employment agencies. However recent announcements concerning this issue would suggest that this matter will be dealt with under IR 35 (see here) and the effect limited to the proposals contained therein.

Please note: This is our interpretation of the Employment Relations Act 1999. It is not a definitive legal opinion. See full text of the Employment Relations Act 1999 here..