In 2004 the Conduct of Employment Agencies and Employment Business Regulations 2003 was formed, with a goal of imposing a set of minimal standards to which the UK’s private recruitment business must stick by. Both employment agencies and enterprises that serve end users / clients with temporary and/or permanent workers must adhere to these guidelines. Contractors may feel the effects of these rules even if they are primarily aimed at individuals.
How do the regulations influence contractors?
In order to avoid the regulations, a contractor who works through his or her own Limited Company may choose to do so. Before entering into any contract for your services, you must first sign an appropriate paperwork and notify your end hirer/client of your decision. Contractors do have the opportunity to reverse their ‘opt-out’ decision, but this can only be done once the original contract has been fulfilled.
The ‘opt-out’ form is typically issued with the contract by the recruitment agency the contractor uses.
Opting-in, what are the benefits?
A number of benefits are available to contractors that opt-in, including the agency’s obligation to pay contractors even if the ultimate hirer/client does not, and the elimination of contractual limits that limit contractors’ ability to work directly with clients.
What does Regulation 12 mean for contractors?
To complete payment to a contractor, an agency cannot request a signed time sheet. A signed time sheet is not required for contractors in order to be paid and cannot be used as an excuse by the agency for not paying them. However, contractors must still produce proof of completed work in order to be paid.
What does Regulation 10 mean for contractors?
Regulation 10 is in place to prevent an agency from hindering a contractor entering into a future direct contract with the ultimate hirer/client once the initial contract has been concluded. At now is usual practise for all contracts to indicate that contractors are not authorised to supply their services to the client in question for a period of up to 6 months, 12 months or longer. This is possible, but only for the longer of 14 weeks following the start of employment or 8 weeks following the end of the original contract can Regulation 10 preclude direct communication between a contractor and a client.
What are the benefits of ‘opting-out’?
One of the key reasons why Limited Company contractors may elect to ‘opt-out’ is because of their IR35 status. Workers who receive frequent protection from their employer could be seen to be covered by IR35 restrictions, which only apply to independent contractors who work directly for their employer.
Under the ‘supervision, direction and control’ portion of a contractor’s IR35 status decision, ‘opting-in’ could demonstrate the amount of control which would decide a contractor’s status as ‘inside’. Whilst this may be the case, in the same breath ‘opting-in’ might also reflect good management values for the contractor’s Limited Company business as a whole, and hence would be displaying a commercial decision in the best interest of the company.
Perceptions of “opting-out” are varied.
Opting out, many contractors believe, will provide them more freedom. The restrictions you’re subjected to by ‘opting-in’ enforce a specific number of requirements, which include:
Confirming the contractor’s terms of services in writing prior to commencing work and auditing any sub-contractors the contractor may wish to use, by checking their experience and qualifications. Both of which take time to complete, and many contractors feel it adds too much of a delay to starting the contract.
Since opting in means accepting all of the regulations’ provisions, there’s no way for you to cherry-pick which ones you want to follow.
