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The Conduct of Employment Agencies and Employment Businesses Regulations (2003) (the "Regulations"), governed by the Employment Agencies Act 1973, became law in April 2004. They regulate the way employment businesses (agencies) deal with both permanent and contingent recruitment, aiming to ensure a high level of professional conduct in the recruitment industry.
Many trade and contractor organisations successfully lobbied the government to allow limited company contractors the choice of opting out of the Regulations, because it’s widely perceived that they are not appropriate for people working via a business-to-business relationship, whereas they’re more appropriate for agency workers who have an employer-employee relationship.
Should you opt-out?
Most limited company contractors choose to opt out because:
- The Regulations require you and the agency to undertake considerable extra administration before your details can be submitted to a client. Given the speed of the contractor market, this could artificially limit your assignment possibilities.
- End clients may not want you to work for one of their competitors when your assignment ends and may demand only “opt-out” contractors to allow the inclusion of a restricted covenant in the contract.
- Opting out is an indicator of a business-to-business relationship for IR35 purposes. End clients want services to be provided under business-to-business relationships which ensure you are not classified as their employee.
When do you opt-out?
If you want to opt-out of the Regulations, you should do so before you are introduced or supplied to the end client. Osirian’s recruiters are trained to discuss this when they begin to work with you.
Can you opt back in?
An opt-out can be withdrawn at any time, but will not take effect during the term of the current assignment.
Further information
Osirian’s legal adviser, Rebecca Seeley Harris, is a leading specialist on the Regulations and IR35. She has prepared the following contractor guidance:
Further information is also available on the Department for Business, Enterprise and Regulatory Reform website:
www.berr.gov.uk/files/file24248.pdf
www.berr.gov.uk/files/file25630.pdff