Agency Conduct Regulations: Should umbrella contractors opt in or opt out?

When beginning a new contract through an umbrella company, you may be asked by your recruitment agency whether you’d like to opt in or opt out of the Conduct of Employment Agencies and Employment Businesses Regulations 2003.

For most contractors, it’s just another form to fill out during the onboarding process. It’s important to understand what it is and what you’re agreeing to, as this can make a huge difference to the protections you’ll receive during the completion of your assignment.

While opting out was historically common among contractors who ran their own limited companies, the landscape has changed significantly. Today, for contractors who use an umbrella company, remaining opted in is generally considered the most beneficial option.

In this blog we explore more deeply what the Conduct Regulations are, what each option means, and how to decide which choice is right for you depending on your personal circumstances.

• The Conduct Regulations provide legal protections for contractors and agency workers.
• Umbrella company workers can usually choose whether they wish to opt in or opt out (unless working with children or vulnerable adults).
• Remaining opted in provides additional protections around payment, contracts and agency conduct.
• Most umbrella contractors now benefit more from opting in than opting out.

The Conduct of Employment Agencies and Employment Businesses Regulations 2003 set the minimum legal standards for how recruitment agencies must treat temporary workers and contractors.

The regulations cover the following areas:

• Written terms before work begins
• Payment arrangements
• Information about assignments
• Restrictions on transfer fees
• Agency responsibilities towards contractors

Their purpose is to ensure contractors receive fair treatment throughout the recruitment process.

If you work through an umbrella company, you’ll often be asked to decide whether you’d like these protections to apply.

One of the SG Umbrella team recently supported a contractor using an umbrella company for the first time, who was unsure if they should sign their agency’s opt out form.

After talking them through the process and how the regulations work, the contractor made the decision to remain opted in. During their assignment, there was a disagreement over a delay in their client approving their timesheets.

Because the agency remained subject to the Conduct Regulations, the contractor was able to resolve the issue in a shorter space of time and avoided any unnecessary delays to their payment.

Whilst every single contractor’s circumstances are different, understanding your rights before you sign any paperwork can help to prevent issues in the long run.

If you choose to remain opted in, you’ll benefit from the Regulations’ protections, which include:

• Agencies must provide you with clear written terms prior to the start of your assignment
• Agencies are not permitted to charge you a fee for finding you work
• Agencies have responsibilities around verifying assignments
• Restrictions are in place to prevent moving directly to the end client
• Agencies aren’t allowed to delay payment due to a client not completing their internal administration, so long as you’ve fulfilled your contractual obligations

These additional protections provide greater peace of mind for umbrella employees.

Opting out will mean that many of these protections are removed.

In the past, contractors that operate through their own Personal Service Company (PSC) have chosen this option as it reduces the amount of required admin and aligned with how their independent business had chosen to operate.

Today, however, many contractors that work through an umbrella company are employees of the umbrella and therefore don’t operate their own business.

As a result of this, the traditional reasons for opting out are often less relevant.

It’s important to also remember that:

• It’s voluntary to opt out
• Agencies are not allowed to force you to opt out as a condition of offering work
• The processing of formally opting out must normally be completed before you’re introduced to the client
• If you work with children or vulnerable adults, you’re not able to opt out

For most umbrella employees, it's usually the sensible choice to remain opted in. This is due to retaining the additional legal protections which the Conduct Regulations provide, without it affecting your employment rights with your umbrella company. 

There may be unique situations whereby opting out is appropriate, especially for those contractors who also operate through their own Limited Company, but these are becoming less common than they used to be. 

If you're still unsure as to which option is the right one for you, ensure to speak to one of the SG Umbrella team to help you make the right decision for you and your circumstances.  

The Agency Conduct Regulations exist to ensure contractors remain protected and ensure that recruitment agencies meet the minimum legal standards.

Once upon a time opting out for limited company contractors was a common occurrence, whereas today’s umbrella workers usually benefit more from remaining opted in, and therefore retaining those protections.

If you’re unsure which is the right option for you or just want to talk it through in more detail, the expert team at SG Umbrella are always available. Get in touch to discuss opting in or out to suit your personal needs and circumstances before the start of your next assignment.