'We generally find that contractors prefer to opt out because of the implications on IR35 but the decision is of course yours.'

Employment Agency Regulations, IR35 & AWR

Vector Resourcing were the first IT recruitment agency to provide IR35 friendly contracts; we also keep up to date with current issues, so we know what we’re talking about.

IR35 Regulations

IR35 was brought about by the government to ensure small companies, in particular contractors and freelancers, all operate their own limited companies in the right way and all above board, with the same risk, responsibility, liability and control for all directors of a limited company regardless of their business sector. If you have the same level of risk, responsibility and control as a permanent member of staff you could be found to be inside and caught out. This would mean you would have to pay full tax and full National Insurance (instead of the usual salary and dividends from the profit of your company) and reduced expenses...basically you would earn less money. HM Revenue & Customs believes that if you aren’t taking the same financial risks, or having the same level of control as a director of your own limited company, than you aren’t entitled to the same corporate tax structure.

Employment Agency Act 2003

This regulation affects how we deal with ‘temps’ and also covers our dealings with contractors. However, after prolonged lobbying from various interest groups, the Government adopted a proposal which enables limited company contractors, such as you, to opt out of the Regulations. If you opt out then the Regulations will not apply to dealings between you and us.

Below are some of the pros and cons of opting out:

Pros - Advantages of opting out

  1. No increase in administration or forms to complete which could result in increased margins/costs to you
  2. Avoid potential delays in starting your assignments
  3. Less statutory restriction on your ability to substitute or sub-contract
  4. Avoid any implication that you are under the client’s control at all times (although you may agree to be)
  5. Will assist in demonstrating that you operate outside IR35
  6. Easier to show you are in business on your own account
  7. Only one negotiation of contract terms in each case (rather than at the outset and at point of assignment)
  8. Less requirements on you to provide information and confirmations

Cons - Disadvantages of opting out

  1. No additional protection regarding potentially onerous contract terms (existing statutory protection remains)
  2. No statutory entitlement to information regarding health and safety (although our terms deal with this)
  3. No minimal protection when required to work away from home
  4. No added protection regarding confidentiality (although Data Protection Act still applies)

Agency Worker Regulations (AWR)

In summary the Regulations are in place to provide equal treatment to Agency Workers enabling them to receive basic rights that are equivalent to a person recruited to do the same job.  Therefore meaning the same basic working conditions should be available to the contractor, as their comparable employee in the company after a qualifying 12 week period. Relevant terms and conditions for equal treatment would include pay, working hours, breaks and holiday entitlements.

Within the Regulations

Umbrella companies will be caught under the regulations as all income is processed through the company and is treated as ‘employment income'. The contractor is an employee of the umbrella company. These arrangements are within the scope of the Regulations.

Comparator Information

For contractors who utilise an umbrella company as their Supplier, comparator information can be obtained and passed onto the umbrella company to ensure that any specified rights that a comparable employee undertaking the same role would then be applicable to the contractor after 12 weeks, to ensure compliancy by all parties.

Out of the Regulations

AWR excludes those workers operating through their own Limited company; those who are genuinely self-employed, with the ability to provide a substitute and where the Client is of a business undertaking.

A contractor operating through their own Limited Company on an assignment who opts out of the Employment Businesses Regulations 2003 is considered out of scope of AWR.