Should you opt-in or opt-out of The Agency Conduct Regulations?

The Conduct of Employment Agencies and Employment Business Regulations 2003 were created in 2004, with the aim to enforce a group of minimum standards which the UK’s private recruitment industry must adhere to. These standards are applicable to both employment agencies and businesses that provide temporary and/or permanent staff to end hirers / clients. Whilst these regulations are mostly aimed at individuals, in some circumstances they can have an effect on contractors also.

What’s the effect on contractors?

As a contractor working through your own Limited Company, you have the choice to either ‘opt-in’ or ‘opt-out’ from being covered by the regulations. You’re required to sign a relevant form, and your end hirer / client must be informed of your final decision before you enter into any contract that agrees on you providing your services.

Most commonly the ‘opt-out’ form is provided along with the contract that comes from the recruitment agency the contractor is using.

If you ‘opt-in’ what are the benefits?

Gaining access to additional rights are the main benefits of choosing to ‘opt-in’. Benefits such as being paid by the agency even if the client doesn’t pay, and the removal of contractual restrictions which will allow you to make direct contact with the end hirer / client for future work.

Regulation 12 – what does it mean?

An agency is not permitted to request a signed time sheet from the contractor in order to pay them. Whilst as a contractor you’ll still need to be able to provide proof that you’ve completed the works in order to get paid, you won’t have to do so in the form of a signed timesheet.

Regulation 10 – what does it mean?

It prevents the agency from impeding a contractor from entering into a direct contract in the future with the end hirer/client. Currently it’s quite common for contracts to state that contractors are not allowed to provide their services to a previous client for a period of 6 months, 12 months or even longer. Whilst this is the case, under Regulation 10 a client and contractor can only withhold any communication either 14 weeks after the first working day, or 8 weeks after the last working day of the original contract (whichever is longer).

If you ‘opt-out’ what are the benefits?

A contractor’s IR35 status is one of the main reasons why a contractor may decide to ‘opt-out’. If a contractor is receiving regular protection, it might be considered as receiving a benefit, demonstrating that the contractor is under the control of the end hirer/client and therefore would be considered ‘inside’ IR35.

When a contractor’s IR35 status is determined, one element that’s taken into consideration is the level of supervision, direction and control that resides over both the contractor’s contract and working practices. As ‘opting-in’ demonstrates a level on control over the contractor, it may appear that the contractor is working ‘inside’ IR35. Whilst this may be the case, ‘opting-in’ could also demonstrate good management values for the contractor’s Limited Company as a whole.

What are the perceptions of ‘opting-out’?

‘Opting-out’ for some means gaining greater flexibility, as by ‘opting-in’ you’re subjecting yourself to enforcing the following obligations:

• Before starting the contract, the terms or services must be confirmed in writing
• Any subcontractors the contractor may wish to use must be audited, by having their references and qualifications checked and approved

Both exercises take time to complete, and some contractors feel these processes can take too long and add too much of a delay to the start of the contract.

Sadly you’re not able to pick and choose which parts of the regulations you wish to adopt, as it’s an all or nothing scenario.

SG Accounting’s final thoughts

Before making any decision that will have an effect on your contract, we advise speaking to your specialist contractor accountant, to ensure you’ve considered all your options and you’re making the right decision for you. Only you can make the final choice, but we can help give you the confidence to know it’s the right one for you.

Get in touch today to find out more about our expert specialist contractor accounting services, and how we can help you today.