The Conduct of Employment Agency and Employment Business Regulations 2003 are intended to control the activities of businesses who supply temporary workers and to offer some degree of employee-like protection to those workers.
As written the Regulations also embrace the more independent freelance contractor, hence the existence of the Opt Out (of which more later) for those who do not wish to be in scope.
The regulations are largely irrelevant to the average freelance, but they do provide a couple of provisions that may have a value. They limit the length of any handcuff clause that prevents you leaving the agency to go direct with your client to a maximum of 8 weeks and they require the agency to pay you for work done even if they themselves have not been paid. You also retain some protections in some more obscure areas such as Health and Safety training, hours worked and the right not to be penalised in any way for moving to another agency or client.
On the other hand, there will be conditions on the supply of substitutes that may affect your Right of Substitution clause. Also the agency will be required to perform detailed checks on your identity and residency that some may find over-intrusive. Furthermore, because the agency is required to carry out significant extra work when setting up an opted-in contract, the delay may mean you lose out in the race to secure a new contract.
As a result you can choose to opt out of the regulations in their entirety.
The main reason for opting out, though, is that you save the agency that extra effort and in return can negotiate some more favourable terms to support your IR35 status, mostly in the areas of Control and Substitution. Also, by foregoing the right to guaranteed payment you are demonstrating more financial risk than if the Regulations applied. Note, however, that whether or not you are opted out, there is no direct impact on IR35 that would affect an investigation.
To opt out of the regulations, you need to advise the agency in writing both as an individual worker and on behalf of your company (or your umbrella company if you use one) that you do not wish the regulations to apply to this particular engagement. You must do this before you are introduced to the client, which in practice means before you go for interview.
Finally, note that the Regulations only apply to engagements through an agency. If you are working directly for the client, they do not apply at all.
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