IPSE's Guide to Agency Conduct Regulations

The Conduct of Employment Agencies and Employment Business Regulations 2003 came into force in April 2004. This guide explains the implications of opting out, and provides the appropriate form of wording for those contractors who choose to do so. It also covers some of the other issues freelancers might face with regards to the Agency Conduct Regulations. Members can access the guidance here.

What are the Agency Conduct Regulations?

The “Conduct of Employment Agencies and Business Regulations” are a set of laws designed to protect vulnerable agency workers. They are usually known as the “conduct regulations”, less commonly as the “agency regulations”. The regulations offer protection from issues such as

  • “handcuff clauses” – whereby the agency prevents you from working directly with the client for a set period of time (e.g. one year)
  • “temp to perm fees” – where an agency charges you or the client if you choose to become a permanent employee of the client
  • Late payment – in cases where the agency refuses to pay because they have not yet been paid by the client.

They came into force in 2004, and all employment agencies and employment businesses are bound by them. The Government is planning to abolish the regulations and replace them with simpler legislation. This is expected to take place in 2015.

IPSE's guide covers what to do under the existing regulations, and how any future legislation is likely to take shape. Freelancers can decide to opt out of the regulations. The guide provides an overview of the benefits of both opting-out and remaining opted-in to the legislation. IPSE would like to emphasise that it is a contravention of the Act for any agency to require you to opt out of the Agency Regulations. It may also be illegal for them to pressure you to do so by threatening not to put forward your CV. In addition, the 'opt out' must take place before you are introduced to the client. In most cases, this means that it must take the form of a letter from you to the agency. It cannot form part of the contract, as you will already have been introduced to the client before any contracts are signed.

IPSE recommends contractors judge for themselves whether to opt in or out; there is no right answer and individual circumstances and preferences are always important.

Opting out could be seen as helpful from an IR35 perspective as it shows you are wanting to steer clear of protection of ’employment’ rights. IPSE’s Guide to Agency Regulations for members includes recommended wording for opting out.

Agency failure warning signs

The credit crunch now appears to be having an impact on UK businesses. According to figures released by the Insolvency Service, the number of companies in administration rose by more than 54% in the first quarter of 2008. The number of companies liquidating their business also rose, as did the number of personal insolvencies.

As a result, it is now more important than ever to be aware of the warning signs that a business or person you are contracting with is in financial difficulties, and to know how best to protect yourself from becoming a victim of the deteriorating economic climate.

Useful resources

Agency Regulations