EAA (Employment Agencies Act) Regulations


It’s important you read through the following and if you have any questions contact your consultant.


As a recruitment business there are various things we are obliged to ask and notify you of to make sure we are operating as a compliant company, as member of the Recruitment and Employment Confederation (REC) this is something we take seriously.

Firstly as you are potentially looking for tempoary/contract/freelance opportunities, we are in this instance operating as a “Employment Business”. If we find you work those contracts will be conducted as either a Limited Company Contractor (LCC) or as an employee of an umbrella company, because of this we must determine if you would like to OPT OUT of the EAA (Employment Agencies Act) Regulations before we introduce you to any potential clients.

The regulations govern how we act and the content of our contracts. We give you the option to OPT OUT because this works better for some freelancers and different contracts are used to cover an OPT OUT placement. Below I have detailed a brief summary of the EAA Regulations that concern you as an agency worker and we are already governed by unless you choose to OPT OUT:

  • An employment agency or employment business is prohibited from taking any detrimental action or including restrictive terms in work-seekers’ contracts which prevents them from (a) terminating their contract with the agency or business, (b) from working for others e.g. directly with a client or via another employment business, or (c) which require the work-seeker to notify them, or any person connected with them, of the identity of any future employer.
  • Under Regulation 21, the employment business must pass certain information to an LCC/Umbrella before the start of an assignment including:
    • the identity of the hirer and the nature of their business; (mustard do this regardless of opt in/out)
    • the assignment start date; (mustard do this regardless of opt in/out)
    • the duration, or likely duration, of the assignment; (mustard do this regardless of opt in/out)
    • type of work, (mustard do this regardless of opt in/out)
    • location and hours of work; (mustard do this regardless of opt in/out)
    • any risks to health and safety as well as any steps the client has taken to prevent or control such risks, the experience, training, qualifications and any authorisations that the client considers are necessary to perform the role; (mustard do this regardless of opt in/out)
    • any expenses applicable; (mustard do this regardless of opt in/out)
    • and the actual rate of remuneration to be paid; (mustard do this regardless of opt in/out)

 

  • If an LCC/Umbrella carries out work on an assignment, but is unable to obtain a signed timesheet, the employment business is still obliged to pay for the hours worked. However please note that the employment business is permitted to delay payment for a reasonable period to check whether the LCC/Umbrella worked the hours claimed.
  • As an LCC/Umbrella is a ‘work-seeker’ within the definition specified in the Conduct Regulations, they must not be subjected to a detriment or penalty as a result of the LCC/Umbrella or the employment business

You can find a full copy of the Conduct Regulations 2003 online.

Opting Out

LCC/Umbrella typically choose to opt out because they wish to demonstrate to HMRC that they are genuinely self-employed. An individual’s self-employment status is determined by whether they are inside or outside of the IR35 tax legislation, opting out of the Conduct Regulations will therefore have little impact on whether an individual is genuinely self-employed under IR35. However, it has been suggested that opting out shows you are not under control which helps IR35.  There are a number of other factors which are assessed in order to determine whether an LCC is genuinely self-employed. These factors include an assessment of:

  • the contractual relationship between parties; (affected by the contracts mustard issues i.e OPT OUT or standard)
  • the level of control a client maintains over the LCC/Umbrella during the assignment;
  • whether there is any financial risk taken by the LCC/Umbrella in providing its services (for example whether the LCC pays for their own professional indemnity insurance);
  • whether there is a right of substitution in the contract that can actually be invoked; and
  • whether the LCC/Umbrella provides their own tools or uses tools provided by the client

Ultimately whether an LCC/Umbrella decides to opt out of the Conduct Regulations is entirely a decision for them to make, LCC’s may wish to get their own tax and legal advice before making this decision.


If you wish to opt out please make your consultant aware as soon as possible.


Attached the following documents:

Opt out 1 – Draft terms for standard contracts – DRAFT Ltd company contract OPT IN

Opt out 2 – Draft terms for OPT OUT contracts – DRAFT Ltd company contract OPT OUT


As the recruitment business operating the potential contract we are not able to advise or force you to go either way and we will always suggest you seek professional advice when deciding if opting out is the better option for you.