Opting Out of the Conduct Regulations as a contractor

When you work through a recruitment agency, you’ll be asked to decide to opt in or opt out of the Conduct Regulations. But what do these regulations mean and how does your choice impact your contracting journey? Here we’ll explain a bit about the Conduct Regs and shed some light on the significance of opting in or out. 

What are the Conduct Regulations?

The Conduct of Employment Agencies and Employment Business Regulations 2003, known as the Conduct Regs in industry shorthand, is a framework of fundamental standards for recruitment businesses. They were established to ensure that end clients and candidates are fairly treated within the labour supply chain.

It doesn’t matter how you are paid as a contractor – Umbrella, CIS, Self-employed or Limited Company, the regulations apply where you are supplied through a recruitment agency.  

The main points the Conduct Regs cover are:

• Information provided to the client by the contractor and vice versa
• What contractual documentation needs to be in place
• When contractors must be paid
• When transfer fees can be charged to the client

Non-compliance with these regulations can be reported to the Employment Agency Standards Inspectorate (EAS) which will investigate any claims. Companies found in violation of these regulations may face prosecution or prohibition proceedings. 

The Opt-Out Provision

The Conduct Regs carry an opt-out provision which allows those who work through a limited company (including an umbrella company) to Opt Out.  

When you register with an agency or apply for a new role you will be asked if you wish to opt out; it’s important to note that this is entirely your decision. 

Contractors operating their own limited company (PSC) on outside-IR35 contracts are typically encouraged to opt out, as it supports their IR35 status. 

Your agency will give you an EAA form to indicate your choice. This must be signed and returned to the agency before client introduction to ensure the opt-out remains valid, preventing the agency from breaching the regulations.

Implications of Opting Out

These are the main implications of opting out which you may wish to consider:

• Loss of protection regarding payment if the client fails to pay the agency for your completed work. However, in our experience it is very rare for a reputable agency to not pay a worker where there are signed timesheets in place.
• Where a worker has opted out, the agency can use restrictive covenants to restrict the worker from going to a competitor agency or client.
• There are points relating to temporary-to-permanent fees, which can negatively impact the client if they decide to hire you as an employee or direct contractor.
• Before being introduced to a potential client you must agree on terms with the agency.  

Benefits of Opting Out

Although opting out of the Conduct Regs comes with some loss of protections, there are also advantages of doing so. 

• Opting out allows you to take control of your work situation. By negotiating terms that suit your needs, customising working hours for example, you can pave the way for a more satisfying assignment.
• Opting out may open doors for constructive negotiations with your agency. You may be able to advocate for better pay rates, preferred work shifts and additional benefits.
• It is a valid point that the Conduct Regs cause additional administrative for agencies, which may delay the start of an assignment, so opting out expedites this. 

In summary…

Although the regulations state that opting out can’t be given as a condition for a contractor when accepting any form of agreement, a decision will need to be made before client introduction is made. Ultimately, the decision is yours alone and should be made on an informed basis.