Agency Worker vs Contractor
Last updated: February 2025
Quick Comparison
| Aspect | Agency Worker | Contractor |
|---|---|---|
| Legal framework | Agency Workers Regulations 2010 | IR35 off-payroll rules and contract law |
| Control | Hirer directs day-to-day work | Contractor controls how work is delivered |
| Equal treatment | Right to equal pay and conditions after 12 weeks | No equal treatment rights; negotiates own terms |
| Tax | PAYE through the agency | Self-assessment or PSC (subject to IR35) |
| Relationship | Tripartite: agency, worker, and hirer | Bilateral or via agency but maintains independence |
What Is a Agency Worker?
An individual supplied by a temporary work agency to work under the supervision and direction of a hiring company (hirer).
Key Features
- • Supplied by an agency under the Agency Workers Regulations 2010
- • Entitled to equal treatment on pay and conditions after 12 weeks
- • Day-to-day control exercised by the hirer
- • Paid by the agency, which handles tax under PAYE
Best For
- • Temporary cover for short-term needs
- • Quick access to workers without recruitment overhead
- • Seasonal or fluctuating demand
What Is a Contractor?
A self-employed individual or limited company engaged directly or through an agency to deliver specific outcomes, maintaining control over how work is performed.
Key Features
- • Engaged for expertise and specific deliverables
- • Controls own methods, tools, and schedule
- • Can operate through a PSC or as a sole trader
- • Not subject to Agency Workers Regulations
Best For
- • Specialist skills not available in-house
- • Defined projects with clear deliverables
- • Situations requiring senior-level expertise
When to Use a Agency Worker
Use agency workers for temporary, lower-skilled roles where you need people quickly, want the agency to handle payroll and employment, and are comfortable with equal treatment obligations after 12 weeks.
When to Use a Contractor
Engage a contractor for specialist work where you need expertise, are paying for outcomes rather than time, and the individual genuinely runs their own business.
Which Does Your Business Need?
If you need temporary hands and want minimal admin, agency workers are straightforward. If you need specific expertise and deliverables, a contractor is more appropriate. Be careful not to treat contractors like agency workers, as this can create IR35 and employment status issues.
FAQ
Do the Agency Workers Regulations apply to contractors?
No. The AWR 2010 applies to individuals supplied by agencies to work under the hirer's supervision and direction. Genuine contractors who control their own work are not covered, but misclassification can bring them within scope.
What equal treatment rights do agency workers get after 12 weeks?
After 12 continuous weeks in the same role with the same hirer, agency workers are entitled to the same basic pay, holiday entitlement, rest breaks, and working time conditions as comparable permanent employees of the hirer.
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