Contractors' Questions: Should I opt in or out of Agency Conduct Regs?

Contractor’s Question: Opting-in to the ‘Agency Conduct Regs’ appeals because firstly I’d get paid regardless of whether the agency has been paid by the client and secondly; I could, if required, work direct for the client after the original contract has ended.

But a disadvantage of opting-in is that there would be an administrative burden on myself and the agency to provide the necessary documentation to the client such as qualifications and identity validation, even before my CV can be submitted.

I’m being influenced to opt-out -- agents have as good as told me “you stand less of a chance of getting the contract” if you don’t opt-out and, “the opt-out contract pays more.” This cajoling by them is having the opposite effect; I’m favouring opting-in despite the burden I refer to. Please advise.

Expert’s Answer: I agree that, where a contractor does not opt out, the effect of regulation 12 appears to be that that the agency cannot lawfully not pay for time the contractor has actually worked.

And I agree that the effect of regulation 6 appears to be that the agency cannot lawfully impose or enforce any restriction on what the contractor does after finishing that contract (and so cannot impose enforceable restrictions against subsequent direct dealings with the client).

For both of the above reasons, agencies will generally prefer you to opt out, and indeed many will encourage you to do so. Often they will try to suggest (and indeed the prevailing ‘wisdom’ is) that opting-out is better for a contractor’s IR35 status

I disagree, and do not see any rational basis for this point of view. Whether a contractor chooses to opt out or not cannot (in my view) reasonably be taken to influence the answer to the IR35 question -- which is, in effect: if the relationship between client and individual were a direct contractual relationship, would the nature of that contract be categorised as employment?

There is a third reason why agencies like contractors to opt out: there is (in theory) less paperwork for them to be required to complete and retain – there are indeed regulations relating to qualifications, identity etc. However, with higher level contractors, most clients will require agencies to jump through these hoops in any event. So, in our own real-world, this third reason has minor impact.

One other consideration is that the regulations expressly provide that an agency may not make provisions of its work-finding services conditional on a work-seeker agreeing to contract out -- there must be free choice. So if an agency tries to pressure you, remind them of regulation 32(13).

There are still agencies out there who try and pressurise contractors into opting-out, often by actively trying to mislead them as to the effects of doing so. I came across one relatively big-name agency only a few weeks ago, trying to suggest that it was the contractor himself who (having said he did not want to opt out) wanted to be governed by the regulations. Whatever next!? The contractor simply wanted the comfort of knowing that the agency’s own behaviour would be governed by them.

The expert was Roger Sinclair, legal consultant at egos, an IT contract law specialist.

Wednesday 10th Aug 2016
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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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