What are the Conduct Regulations, and should you opt-in or out?

The Conduct of Employment Agencies and Employment Business Regulations 2003, or more commonly referred to as the Conduct Regulations, were introduced to provide a minimum set of standards that must be adhered to when placing a work-seeker into a role in the UK.

What are the Conduct Regulations?

According to APSCo, “The Conduct of Employment Agencies and Employment Business Regulations 2003, often referred to as the Conduct Regulations or Conduct Regs, provide a framework of minimum standards that govern the conduct of the recruitment industry in the UK.

The regulations were implemented to ensure recruitment companies treat both the candidates (“work-seekers”) and clients (“hirer”) fairly.”

All workers to whom a recruitment agency provides temporary or permanent work finding services are within the scope of the Conduct Regulations, regardless of the supply model they work through. Limited company contractors may opt-out of the regulations, but they must sign and return an opt-out agreement before starting the contract.

The Conduct Regulations cover:

• The contractual documentation which must be in place;
• When a contractor must be paid;
• Information required from/given to the client and provided by/to the contractor;
• When transfer fees can be charged to the client.

Non-compliance with the legislation can be reported and investigated by the Employment Agency Standards Inspectorate (EAS), which can lead to a Labour Market Enforcement undertaking order, a consideration of prohibition proceedings or a consideration of prosecution proceedings.

Does the legislation provide any benefits to contractors?

Contractors working outside of IR35 are advised to opt-out of the Conduct Regulations to support their deemed status. However, there are very limited, if any, benefits of opting out for contractors operating inside of IR35. It is important to note that it is entirely your decision whether you want to opt-out of the regulations, and you will be provided with a form to state your decision. If you were to opt-in, the regulations can provide some protection during an assignment and seeks to ensure that:

• You will be paid by the agency for the work you have completed, even if the client does not pay the agency;
• The agency does no withhold payment from you for an unreasonable period or in certain circumstances;
• The agency will provide you with a written set of terms detailing critical aspects of the assignment they have sourced for you, such as nature of engagement, length of the contract, and rate of pay;
• The agency does not restrict you from providing services directly for the end client upon completion of the contract;
• The agency will not charge you for their work-finding services.

What does it mean to ‘opt-out’ of the regulations?

In 2004, in recognition of the fact that contractors working through their own limited company might want to choose whether or not to be protected by the regulations, an opt-out provision was introduced within the legislation. However, contractors operating outside IR35 should not be covered by the regulations, but most agencies will request a formal opt-out agreement for their own records.

Before a contractor is introduced to the client, the recruitment agency must receive a signed EAA opt-out form. If they don’t, the opt-out could be invalid, preventing the recruitment agency from putting restrictions on the contractor that have been requested by the client and putting the agency in breach of the regulations.

If a contractor is considered to be controlled by the client and does not opt-out, the agency must work through a series of steps. These include creating paperwork about the contractor’s suitability for the role and the client’s requirements, completing a Criminal Record Bureau (CRB) check for specific roles and checking the contractor’s qualifications.

What does it mean for the contractor if they opt-out?

Unfortunately, contractors will be subjected to some disadvantages if they decide to opt-out. A recruitment agency must pay workers who are covered by the regulations even if they have not received payment from the client; contractors who have opted out lose this protection. Plus, the agency must agree to terms with the contractor before introducing them to the client; this significantly reduces contractor flexibility in what is supposed to be a flexible, highly skilled labour resource.

Furthermore, the recruitment agency can use restrictive covenants to restrict the contractor from going to a client’s competitor or using a competing agency. There are also other regulations relating to temporary-to-permanent fees, which can negatively impact the client if they want to take on the contractor as a direct contractor or employee.

Are you interested in registering with a compliant umbrella company?

Churchill Knight Umbrella is an FCSA accredited umbrella company dedicated to compliance within the temporary labour market. We have helped thousands of contractors get paid for their contract work, and our expert team are on hand to offer help whenever our employees need it.

If you are considering using an umbrella company for an upcoming contract assignment, please contact us today for a free, no-obligation take-home pay illustration. You give our consultants a call now on 01707 871622 or schedule a call for a time that suits you.