Reflex Computer Recruitment Ltd operates under The Conduct of Employment Agencies and Employment Businesses Regulations (known as the EAA Regulations).
Full details of The Employment Agency Act can be found at: http://www.legislation.hmso.gov.uk/si/si2003/20033319.htm
If you would like further information on how this may affect you, BIS – Department for Business Innovation & Skills have also published a general advice / guidance document.
Although designed with good intention, the EAA regulations appear to focus on PAYE & payroll contractors, rather than the usual Limited Company Contractor business format. Click here for the REC specific guidance leaflet for candidates. As a result, contractors registering with an agency, who do not opt-out of the regulation, may now go through a much longer registration process. This will include:
- We need confirmation from contractors’ as to the full type & nature of work they are seeking.
- Before we submit contractors’ details to any client we have to fully check a contractors’ ID. The REC advises that we require sight of a photo ID together with any visas, where appropriate.
- We have to provide a typical “model contract” to each contractor, which will be replaced by a tailored contract in the event an assignment is agreed.
- Contractors’ experience and training for each role need to be verified. This may involve in-depth referencing prior to contractor details being submitted for a contract.
Currently the most practical advice can be found from the recruitment Industry standards and regulation body; ‘The Recruitment and Employment Confederation (The REC) website, http://www.rec.uk.com. Reflex Computer Recruitment are leading members of the REC and abide by its strict code of conduct. The REC has produced some specific guidance leaflets, links for which can be found further down this page.
HELP IS TO HAND: Fortunately the Government, have recognised the IT sector as a special case and that the IT contract sector is geared to contractors using either their own limited companies or umbrella companies. As a result, contractors operating specifically via limited companies can opt-out of the Agency Regulations – see below. Click here for REC information for limited company contractors regarding opting out of the regulations.
Effects of opting out of the Agency Regulations?
A contractor operating as a limited company contractor will not be required to comply with certain procedural requirements of the Agency Regulations e.g. identity confirmation. There will also no longer be any procedural requirement on the recruitment agency to obtain certain information from the client before placement of the limited company contractor. Also, certain contractual amendments need not be applied to the contract documentation, but this will need to be agreed with both the limited company contractor and the client.
Why should a limited company contractor consider opting out of the Agency Regulations?
Some limited company contractors are taking the view that opting-in to the Agency Regulations may place them at a disadvantage in securing a contract assignment with a particular client. In particular the additional procedural requirements imposed on the employment business and the client may delay the evaluation of that limited company contractor, relative to a contractor who has opted-out of the Agency Regulations.
Also, some clients appear to be concerned about the additional employment risk of limited company contractors seeking to opt in to the Agency Regulations, and becoming treated in law as permanent staff. There have been a number of recent court cases where contractors have taken clients to court, when assignments have ended to obtain redundancy payments etc. Consequently, some clients fearing that a limited company contractor could be considered more akin to a temporary employee rather than an independent contractor, may select only those contractors who have opted out of the Agency Regulations.
Certain recruitment agencies are also suggesting that they will have to pass on additional administration costs directly to clients, where there are additional administrative requirements for managing contractors who have opted in to the Agency Regulations. This would be handled in the form of a general increase in fees with a discount for those contractors who have opted out. As a result some clients may avoid the additional costs and have a preference to those limited company contractors who have opted out of the EAA Regulations. Click here for REC information for limited company contractors regarding opting out of the regulations
The Professional Contractors Group http://www.pcg.org.uk together with some other contracting groups have suggested that those limited company contractors seeking to legitimately challenge the application of IR35 to their services, could be more likely to be assessed within IR35 if the limited company contractor is subject to the Agency Regulations.
This is because some view the Agency Regulations as principally applying to protect the supply of individual workers who are similar to temporary employees, which would undermine any arguments of a limited company contractor seeking to challenge IR35. The Professional Contractors Group has published a Guide to Agency Regulations, so if you are a member or just wish to investigate further, view http://www.pcg.org.uk.
With further changes to IR35 set to come into effect in April 2020, we are undertaking preparation work for the legislative changes which have been described by some as head-scratchingly complicated! Draft IR35 legislation was published to HMRC on the 11th July 2019 – see https://www.gov.uk/government/publications/rules-for-off-payroll-working-from-april-2020 This will extend the public sector off-payroll rules to the private sector from 6th April 2020.
The rules will change such that End Clients, will be solely responsible for deciding if the IR35 rules apply in each and every contract. This will also apply to all contracts or extensions which start before 6th April 2020 and are in operation after 6th April 2020. As a result, The Client would have to make that determination, which if referred to an HMRC Inspector would determine this by applying an employment test. We should stress it is important to obtain independent and qualified accountancy/ taxation advice before entering into any agreement.
What is Reflex’s view on to either opt in or opt out of the Agency Regulations?
At Reflex, we offer all our limited company contractors the choice of opting in or out of the Regulations. At the time this document was produced, it appears that various contractor organisations and groups are suggesting to limited company contractors that they opt out of the Agency Regulations however, as a Recruitment Agency, we are not able to give direct advice on the matter other than to recommend contractors seek professional advice with those qualified, including an Accountant.
How should a limited company contractor opt out of the Agency Regulations?
Limited company contractors who wish to exercise their choice to opt out of the Agency Regulations, must notify Reflex in writing prior to their contract assignment or the renewal of their current contract assignment. Please write to your contact at Reflex or email us at regs.optout@reflexgroup.co.uk stating your agreement to opt out. Alternatively, Reflex Computer Recruitment has an approved consent form for those contractors who wish to take advantage of this which can be downloaded here. If you wish to opt in, then Reflex will be quite happy to accommodate your choice. In which event, you will need to notify Reflex at regs.optin@reflexgroup.co.uk and we will then send you a revised contract and advise you of the additional procedures which will need to be applied.
For Employers
Employment agencies are now obliged to check health and safety risks on behalf of candidates and contractors, and will request this information from employers. If you would like to know more about these regulations please click here for REC information for clients.