Dear Contractor Doctor
I am new to contracting and I have just secured a contract for six months work. I have opted into the Conduct Regulations and I am planning to sign up with an umbrella company.
But my agent told me to opt out of the regulations and is now calling me constantly insisting that I do so. I’m being told that I’ll be covered by the Agency Workers Regulations (AWR), whatever they are, so don’t need to opt into the Conduct Regulations. I want to make the right decision, but I don’t know whether to trust what the agent is telling me because I am new to all this.
Should I opt out of the Conduct Regulations or AWR now I have secured a contract?
Contractor Doctor says:
Contractors can become easily confused between different sets of employment regulations and when they might apply. It is possible to opt out of some regulations, if the opt out is timed correctly.
Other regulations will apply regardless of the contractor’s or agent’s views and preferences. It is also perfectly possible for more than one set of regulations to apply to a contractor simultaneously.
The Conduct Regulations and AWR are different, but both could apply
The Conduct Regulations, or to give the legislation its full title, The Conduct of Employment Agencies and Employment Businesses Regulations 2003, provide workers and hirers with minimum standards they should expect from private sector recruitment agencies and employment businesses.
The Agency Workers Regulations (AWR) are designed to provide temporary agency workers with equal treatment over pay and benefits as their permanent counterparts. As the name suggests, they only apply to contractors working via agencies.
Both the Conduct Regulations and AWR can apply to contractors. In fact, they can both apply at the same time. AWR only affects agency umbrella company and agency payroll contractors. The Conduct Regulations could potentially apply to all contractors using recruiters.
Opting out of the Conduct Regulations
All contractors are considered to be within the scope of the Conduct Regulations unless they have expressly opted out, and that decision is the contractor’s, not the agent’s. However, the regulations only apply when the worker is ‘controlled’, so most contractors who consider that they are in business on their own account choose to opt out.
Agencies are usually very keen for contractors to opt out because that places restrictions on the contractor, usually meaning that the contractor cannot subsequently work direct for the client once their initial term has expired.
Agencies are usually very keen for contractors to opt out because that places restrictions on the contractor
However, timing is essential and a contractor must expressly opt out before they are introduced to the client, otherwise the regulations will apply regardless of the contractor’s or agent’s wishes.
Because the agency must ask the contractor about opting out before introducing them to the client it is therefore not actually possible for a contractor to win a contract and then decide to opt out. And no amount of phone calls from the agent can change this legal position.
Opting out of AWR
A contractor’s position with regards to AWR may be similarly complicated. As the name suggests, the rules only apply to workers supplied by recruitment agencies, so contractors – whether limited or umbrella – who go direct cannot be affected.
Limited company contractors using an agency are outside the scope of AWR, but all umbrella company and agency payroll contractors using an agency are considered to be agency workers and are therefore inside the scope.
But there is effectively an AWR opt out, known as the Swedish Derogation that enables umbrella companies who provide a certain minimum amount of pay between assignments to avoid the provisions of the legislation. Not all umbrella companies operate this model, and not all contractors want to use it.
In conclusion, unless the contractor opted out of the Conduct Regulations before they were introduced to the client, it is not possible to do so subsequently. And unless the contractor’s umbrella company offers a Swedish Derogation solution, it is not possible to opt out of AWR.