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Section::Working Time Regs

What are the Working Time Regulations?
Simply, they are a set of rules that have been brought about as a result of the European Union’s attempts to try and provide minimum working conditions standards across the EEC.

When were they effective from?
1^st October 1998.

What do they affect?
Broadly, there are 3 areas of employment which are affected:

1. working time
2. rest periods
3. holiday entitlements

In greater detail:

1. Employees are not to average more than 48 hours per week work. In most cases, this average is to be taken over a period of 17 weeks.
2. There are rules relating to daily rest, weekly rest and rest breaks at work.
3. Workers will be entitled to 4 weeks per year holiday post 23/11/99. This holiday entitlement is to be paid leave.

Who does it affect?
In simple terms, everyone. However, there are specific exemptions. For example, the police, sea fishing and air transport.

Is it compulsory?
It is possible for employees to waive their rights to most of these entitlements by following various forms of consent permitted within the Rules. However, holiday entitlement is an exception. Whilst it is possible for an employee to work through the year with no holiday, it is not possible to refuse pay for any leave in lieu on the termination of employment. For example, if an employee works for 51 weeks in the year and resigns, he/she will always be entitled to 4 weeks holiday pay.

How does this affect contractors?
It depends on the trading method adopted.

• Those working under Employee/PAYE for Agencies are likely to see some impact upon cashflow. It is probable that the Agencies will look to hold back 4/52 of income to cover the potential liability on termination of employment. It is not clear whether this particular action would be legal. Alternatively, the rates of pay being offered may fall by a corresponding amount. 

• For Umbrella Companies, the problem is pretty similar because the Contractors are still employees of somebody else’s company and any liability still rests with the employer. The fundamental difference to PAYE is that as a separate legal entity the Umbrella Company is the employer. Hence, it is not the provider of the Umbrella who has the legal responsibilities but the Company itself. Therefore, any costs of complying with the Regulations are likely to be factored into the cost of using the Umbrella service. Record keeping must be complied with.

• For an own Limited Company, where the Contractor is both shareholder and Director, the financial problem doesn’t really exist. This is because the Contractor is effectively both employee and employer and is not likely to penalise himself! However, the responsibility for maintaining the necessary records is still there.

This information is based on SumIT (UK) Ltd’s understanding of the Working Time Regulations. 
It should be noted that as case law develops (first cases were starting 02/99), there may be areas of the Regulations open to interpretation in the courts. If you have any queries, you should seek professional legal advice.

IR35, Section 660 and Employment Status Advice