The Conduct of Employment Agencies and Employment Businesses Regulations 2003 - More Than Accountants

The Conduct of Employment Agencies and Employment Businesses Regulations 2003

This title is quite long, however, these Regulations are vital for Personal Service Companies or Limited Company Contractors and agency temps. It was in April 2004  when these regulations were first launched, but in Northern Ireland, it was in 2005. Updates were made in 2010 and later in 2016. These Regulations provide a structure on the minimum standards that oversee the conduct of the private recruitment industry in the UK. This acts as the supplement to the 1973 Employment Agencies Act 1973.

In 2013, the government is deliberating again on the Regulations and reveals that they will continue to protect those people who are searching for work. However, it is unlikely that the present Opt-Out of the Regulations for Contractors will be eliminated.

Basically, these Regulations aims to offer protection to the “work-seekers”, also known as the people searching either for permanent or temporary jobs. Take note that any violation of the regulations is considered as a criminal offence.

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These regulations cover Employment Businesses as well as Employment Agencies which offer either permanent or temporary employment to end-hiring companies. Nevertheless, modelling agencies and entertainment businesses have their own different rules. Also, the ones that are not covered by these Regulations include charities and services offered to people released from prisons or ex-members of HM forces, a few professional members bodies, trade unions, a few educational institutions as well as the local councils.

What Are Employment Agencies?

Employment Agencies refer to those companies who will search for permanent work for work-seekers. These work-seekers will be hired and paid directly by the employer. The end company gives them a permanent job or a fixed term PAYE contract.

What Are Employment Businesses?

Employment Businesses refer to those companies that provide temps to different organisations. Employment businesses will hire work-seekers under contract with them. These temps will then work under the supervision of the staff at a hiring organisation. The employment business will be responsible for paying these temps and not the organisation they’re supplied to.

Based On The Regulations, Employment Agencies or Employment Businesses Are Not Allowed To:

  • Ask a fee from the work-seeker to provide them with work. Although, they can charge them for those non-work finding services such as transport to employment, CV writing, and others. However, the details of these services must be placed in a separate document and must be provided to the work-seeker before these services will be offered.
  • Pressure work-seekers to use these additional services or charged services, so they can obtain jobs. For instance, work-seekers will be required to take training courses which they will pay so they can access jobs.
  • Prevent the work-seeker from getting a job elsewhere or working directly with someone else or ending their job with their agency/business or detriment the work-seeker if they choose to accept work from someone else. Although they can request you to provide a notice to stop working with them.
  • Deny payments or salaries due to temporary work-seekers. Regardless, if the end hiring company have not made any payment or do not have any timesheet approved by the hirer. Nevertheless, this is not applicable to employment agencies that are not liable in paying work-seekers after they’ve been brought to the permanent hirer.
  • Provide a temporary worker as a substitute for someone who takes part in an industrial activity at the hiring company.
  • Ask payment for a uniform even without informing the worker in advance.
  • Make illegal deductions from salaries.

Employment Businesses Must Ensure That Temporary Workers Are:

  • Receiving payment for all the works they’ve done, no matter if the end-hirer has not paid them yet or even if the temp does not have a timesheet approved by the hirer or the worker has left their employment.
  • Not obliged to work for more than 48 hours per week.
  • Receiving payment for holidays.
  • Receiving payment of at least the National Minimum Wage.
  • Obtaining protection under health and safety laws.
  • Provided with written terms of employment before they begin finding work for them.

An Employment Business is allowed to delay payment to a work-seeker while it is conducting some reasonable enquiries to check the hours the temp has worked. However, based on DTI guidance, this delay should only take a few days.

The terms and conditions of employment in print should include:

  • The type of job that they are willing to seek or find for the work-seeker.
  • Whether the work-seekers will be hired under a contract of service or employment is obtained from Employment Business or the work-seeker is classified under a contract for service, also referred as LCC or PSC’s or under an apprenticeship. Must also include the terms that will apply.
  • The minimum amount of payment that you expect to obtain for the work-seeker as well as when and how often the work-seeker will receive payment.
  • The extent of notice the work-seekers are required to provide and is allowed to get for jobs.
  • The details for the holiday pay as well as the payment of holiday. In case the work-seeker is a limited company and does not choose to opt-out of the regulations then you must provide the details when they may be qualified to, and be compensated for, time off.

Ever since 2010, Employment Agencies which are providing permanent workers are not legally required to accept the terms with a work-seeker before finding work for them or accept the terms with Clients before presenting them to the work-seeker.

The Employment Business or Employment Agency must also:

  • Implement suitability checks before starting employment. This applies to every temporary work-seeker.
  • Implement appropriateness analyses on permanent work-seekers in case the work that needs to be done involves vulnerable persons. These vulnerable persons refer to those people who are below 18 years old or those who need care because of their illness, age, and other circumstances.
  • Make sure that the advertisement for any position or vacancy includes all necessary details. It must also specify if the position is permanent or temporary.
  • Offer terms and conditions to organisations hiring temps. This details the fees they are required to pay as well as the procedures that they have created for unsatisfactory workers. When and how does the hirer inform them a worker is unsatisfactory. Additionally, what are they going to do about it, whether they will try to solve the problem, end the workers’ assignment, or provide a different worker?

If you think your agency is charging you with inapplicable fees, then you should file a complaint to the Employment Agency Standards Inspectorate (EAS).

Starting from April 6, 2020, all agency workers must be given a “Key Information Document” before they accept the terms with the employment business, otherwise known as the temp agency. This should include some information about the relationship between the agency, the temp, as well as the hirer. In this way, temps will be aware of their pay and deductions. The document should not exceed two sides of A4 paper and be sure that they are written in a simple and clear style.

How Do These Regulations Impact Limited Company Contractors?

Personal Service Companies or Limited Company Contractors has the choice to opt-out from all of these regulations. Nevertheless, the LCC should opt-out and the end hirer should be informed about this prior to starting the assignment or else the Opt-out will not be valid anymore.

LCC’s who choose to opt-out can choose to opt-into the rules again. However, this can only be done when they are done working for the hirer that they’ve opted-out with. Nevertheless, LCC’s are not allowed to opt-out in the event that they are going to be working with vulnerable persons.

Opting-out should not be used by the Employment Businesses as a condition for giving work-finding services for the LCC.

Advantages And Disadvantages of Opting-Out

  • In case you choose to opt-out, then you could be experiencing some delays in the payment. This is because the Employment Business will have to wait for the payment of the end hirer or they might not pay you if you don’t have any authorised timesheet.
  • Regulation 10 is all about the limitation of an agency to prevent the work-seeker from making any direct arrangements for upcoming services with the end-client or hirer. Hence, if you choose to opt-out, then this is not applicable to you. Also, it is typical that there will be a six or twelve-month restriction clauses. During this time, this will stop you from working directly with the client. If you choose not to opt-out, then based on the regulations the maximum period in which a limitation can hinder direct arrangements with an end-client will be at least 14 weeks or 18 weeks.
  • You don’t have an option which parts to opt-out of. Either you choose to opt-out of all the Regulations or nothing at all.
  • Do end-hirers favour freelancers who choose to opt-out? Typically, Employment Businesses are favourable in limited company freelancers who have chosen to opt-out since they believe that it gives them less administrative strain.
  • Apparently, the regulations that are included in the Agency Workers Regulations were intended for workers who are being handled by the client or end-hirer. Take note that a significant part of contractors think that they do not need the protection which the regulations provide since they do not want to be controlled for employment status or IR35 purposes.
  • There have been a lot of discussions in several forums about whether choosing to opt-out can result in making an LCC more IR35 negative, neutral or positive. Most often, this pertains to varying opinions about making effective business choices, taking control, and so on. Hence, the choice should only be made by an LCC on a knowledgeable way and on an individual basis.

Fees For Hiring Companies

Employment Businesses, which are the ones providing temps, are allowed to charge inexpensive transfer fees to end-hirers:

  • Once they have supplied a temporary worker who was hired permanently by the hirer. The payment that will be applied is temp-to-perm fees.
  • In case the hirer decides to change his agency but decides to keep the same temporary worker, which means that the worker is required to change his agency. In this instance, temp-to-temp fees will be applied.
  • In the event that the hirer decides to introduce a temporary worker to another firm who desires to temporarily provide them with work. Temp-to-third-party fees will be used in this situation.

When do temp-to-temp fees and temp-to-perm fees be used?

These fees can be charged provided that the hirer has first had the choice to have the worker provided by the business for a specific period of hire. After this, the worker can choose to transfer without paying any fee. Take note that there is no time restriction for the lengthened period of hire. The worker must be supplied with all of the specific period for hire except if the Employment Business is restricted from doing this because the reasons are not their own fault.

These fees can only be charged provided that the transfer occurred either within 14 weeks from the beginning of the first assignment with the hirer or 8 weeks towards the completion of any assignment. However, it will depend on which is the later date applicable. Or else the end-hirer is not required to pay a transfer fee. In case the worker has been working for more than one assignment with time off of more than 42 days between jobs, the 14 week period begins again.

Other Information:

In 2015, the government deliberated on suggested changes to the Conduct of Employment Agencies and Employment Businesses Regulations. This comprises banning agencies from hiring work-seekers exclusively from other EEA countries, without revealing these appropriate vacancies in Great Britain. Starting on May 8, 2016, the legislation was changed to:

  • Prohibit agencies from hiring exclusively from overseas EEA countries. Agencies are now required to advertise these significant vacancies in English in Great Britain. Consequently, they are also advertised in the EEA or advertised in English in Great Britain in the 28 day period prior.
  • Regulation 17 is eliminated so the employment business will not be required anymore to secure agreement to terms with hirers.
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