Employment agency regulations
The Conduct of Employment Agencies and Employment Business Regulations
New regulations came into effect in 2004 and one of the principle changes was the ability of a candidate working through a limited company to opt out of the regulations.
The regulations seek to protect temporary staff, whilst changing the way that agencies can charge their client, should the client retain the temporary worker in permanent employment.
With effect from 6 July 2004, temporary staff (including interim managers working through their own service company) are deemed to be ‘agency’ workers. However, it is possible for those interim managers to opt out of the regulations (unless providing services to young, aged or ill people).
The opt out must be signed by both the Limited Company and by the individual carrying out the services and, when signed, covers current and future assignments. So what are the pros and cons of opting out?
- Many businesses will prefer to take on service companies that have opted out of the regulations, as the potential for confusion over the taxation of payments to the contractor may increase if they are treated as a normal ‘agency worker’
- Interim service providers have stated that they will regard those who opt out as career interim managers (and therefore give them preferential treatment?) as against those who are ‘temping’ between permanent work. Providers have also stated that if interim managers have a chosen career path working from assignment to assignment, they will be judged always by their last assignment and are therefore likely to be focused on a quality solution for the client
- If opting in, the interim provider must pay the interim’s fees even if the client has not paid the provider (unless due to defective work)
- If opting in, the interim provider must satisfy itself as to the contractor’s identity, background and suitability, together with a check on qualifications and previous assignments for each and every assignment
- For those working outside IR35, opting out may strengthen their case because they are taking the business risks. Furthermore, in the regulations, there is an assumption that by opting in, the client will retain full control and supervision of the interim manager and this also has implications for IR35
- Providers may offer an increased rate to a contractor who opts out, in lieu of reduced administration imposed by other parts of this legislation
In making a decision, your candidate may well consider that the more favourable treatment received from you and your client if opting out, outweighs the slight risk of a client going bankrupt. The candidate may also feel that a provider is more likely to give continuity of assignments to those who opt out.