Unsure whether to opt in or out of the Agency Conduct
Regulations? Let us help!
Main reasons to Opt In:
- You have the security of written confirmation of your
arrangements with the client
- You are guaranteed to get paid (regardless of whether or not
the client has paid the agency)
- Less restrictions - you are not prevented from contracting
directly with the client or via other agencies
Main reasons to Opt Out:
- More flexibility - you would not be subject to the collection
of information required by the regulations regarding your
qualifications/skills etc.
- IR35 - If you are providing your services via a limited
company, not opting out could potentially cause status issues with
regards to 'control'. Control is one of HMRC's main tests for
self-employment.
So, what exactly are the 'agency regs' or 'agency
conduct regs' as they are more commonly known?
The precise name for the regulations is "The Conduct of
Employment Agencies and Employment Businesses Regulations
2003".
Quite simply, these regulations were introduced with the aim to
protect the interests of people using the services of employment
agencies/businesses and to ensure the proper conduct of them.
Ok, so why are you asked to 'opt in' or 'out' of
them?
Basically, individuals running their own limited companies
(usually highly skilled professionals) wanted to remain detached
from these regulations as they became worried and concerned that
opting into the employment agency regulations may have an effect on
their overall employment status.
The regulations ultimately apply to workers who are controlled
by their client. This means that for many contractors, the
regulations should not actually apply as they would not be
controlled by their client in their capacity as a self-employed
contractor in business on their own account. If, as an
independent contractor, you confirm to opting in, you could be
shooting yourself in the foot. Control is one of the
determining factors of IR35 and therefore detrimental to your
self-employed status.
Despite the fact that the regulations may not apply, agencies
still request that an 'opt out' document be signed by each
individual as there will be (and have been) limited company
contractors that do actually want to be included
in the regulations. They wish to be 'protected'. So, it
became necessary to have the option.
If you choose to 'opt out', the necessary documentation should
be completed and signed prior to any work commencing or
introduction with a potential client, as otherwise the agency may
be in breach of the regulations.
So, do you ultimately lose out if you opt
out?
The main plus side to opting in is that agencies do have to pay
workers regardless of whether or not they have actually been paid
by the client. You wouldn't have this luxury. Also, it
is common for agencies to have two versions of their
contract. The contract relating to the 'opt out' workers will
usually restrict you from working directly with the client, or
working with other agencies. In an 'opt in' contract the
regulations limit the number of restrictions to workers, placing a
large risk on agencies - workers could simply contract directly
with the client cutting them out of the loop altogether.
Despite the fact that opting out of the regulations may provide
more flexibility with regards to supplying information, there are
more risks to this option. However as a genuinely self-employed
contractor running your own business you would be expected to take
a few risks, as that is the very nature of being in business.
In Summary
If you are a genuinely self-employed contractor running your own
limited company, it may be worth opting out of the
regulations. At the end of the day, the regulations apply to
workers who are controlled by their client. If you claim to
be 'outside' IR35 as a self-employed contractor, these regulations
should not apply to you and opting out would be recommended.
If you are providing services as a sole trader, IR35 would not
need to be considered therefore you may well wish to consider
opting in and becoming fully 'protected' by the regulations.
You may alternatively want to stay true to your self-employed
status and opt out.
Please do not allow your agency to push or rush you into opting
out as they have no legal right to do so.
If you have any further questions about "The Conduct of
Employment Agencies and Employment Businesses Regulations 2003"
then please do not hesitate to contact our friendly team of experts
at Nasa Consulting, who are always happy to help on 0117 904 7755
or at info@nasaconsulting.com.