As many Employment Agencies (“EA”) and Employment Business (“EB”) are aware, individuals operating through a company can “opt out” of the Conduct of Employment Agencies and Employment Businesses Regulations 2003 (“Regulations”) by signing a suitable notice. This has various positives for the agency, not the least that the limitations in the Regulations on transfer fee charges no longer apply.
However, despite the fact that the opt out arrangement has been in place for nigh on a decade, it appears that some recruitment agencies are still not getting it right. Fail to follow the rules and the opt out will be invalid, leading to a range of possible unwelcome consequences.
A recruitment business set up an assignment for a company candidate. The agreement contains a provision to state that the contractor may not work directly for the client. An opt out has been obtained but the agency forgets to inform the client before the assignment starts. The Assignment then ends and the candidate goes to work for the client direct. The agency, thinking it is dealing with an opted out contractor, has failed to send out client terms that comply with the Regulations to be able to claim a transfer fee.
Result – the Regulations apply and the agency is not entitled to a transfer fee nor is the clause restricting the candidate enforceable. The fee and the candidate are lost.
Fees lost in these circumstances can be substantial, indicating that spending some time on setting up suitable processes to avoid this would be worthwhile.
For an opt out to be valid both the individual working through the limited company AND the limited company must opt out, AND the agency must inform the hirer before the assignment commences, keeping careful evidence of the notification. Unfortunately the last bit re notification is where most agencies fall over.
If you need help in this area, or require company contractor terms that are IR35 friendly and/or allow for streamlined processes, call Lawspeed on 01273 236236 or email email@example.com.