OPTING-OUT OF EMPLOYMENT AGENCIES ACT 2003
In 2003 the government passed the Employment Agencies Act through the Houses of Parliament. The Act became effective on the 6th April 2004 and applies to ALL employment agencies and businesses.
The legislation has been introduced to help regulate our industry, introduce common practices and to ensure that temporary workers are not disadvantaged by the actions of agencies. Full details of The Employment Agency Act can be found at http://www.legislation.gov.uk.
Effects of opting out of the Agency Regulations
A contractor who operates as a limited company contractor who has opted out of the regulations will not be required to comply with procedural requirements of the Agency Regulations. There will also be no procedural requirement upon the recruitment agency to obtain certain information from the client before placement of the limited company contractor. In addition, certain contractual amendments need not be applied to the contract documentation.
Then why opt out?
The EAA has been in consultation since 1999. One of the major concerns raised by the Recruitment and Employment Confederation, our governing body, and various contractor interest groups is the EAA effect of the employment status of the Limited Company Contractors and its interaction with IR35.
Regulation 12 prohibits withholding of payment if a timesheet is not produced but the agency can independently verify hours worked. The reference in the regulation to hours worked could, in some cases, call into question the amount of financial risk that a contractor is taking.
For the purposes of establishing whether an assignment falls within the scope of IR35, financial risk is one of the key areas that is considered by the Inland Revenue. We would urge you to take professional advice to establish the best course of action for you.