Opting out of the European Regulations 2003

From April 2004, the government introduced some new European legislation to increase regulation in the recruitment industry.

As well as limited companies, the regulations seem to cover personal service companies and people working through employee management facilities, such as umbrella companies.

They are broadly designed to prevent exploitation of workers and to catch disreputable companies. For example, the regulations prevent an agency from charging fees to its candidates.

The main objections that employment agencies, including ProClinical, have with the legislation is that it creates increased bureaucracy while also exposing the agency to the risk of a client refusing to pay, following a dispute with a contractor.

The regulations require that employment agencies gather in-depth information relating to the person being placed, including data on entitlement to work, formal proof of qualifications, references and additional health and safety assessments. This significantly adds to the administrative burden and creates significant commercial risk, through increased admin and loss of fees in certain scenarios.

A contractor can, however, choose to opt out of the regulations, allowing us to work according to the pre-2004 amendments. An agency can ask you to opt out, but legally you are not obliged to do so. However, if you opt in, the agency is obliged to collect far more information about you. This inevitably delays the forwarding of your details to the client, and could result in you missing out on the opportunity or receiving a lower rate given the extra admin needed.

Agencies who ask their contractors to opt out can:

  • Work faster on behalf of their contractors and clients
  • Possibly offer higher rates because of administrative savings
  • Maintain more control and freedom over collection of references and paperwork as and when needed

A second risk to the employment agency is that if you opt in, an employment business is not allowed to withhold payment to a contractor because it has not been paid by the end client. Nor can it refuse payment because the worker has not produced an authenticated timesheet.

All this results in a significantly higher burden of risk to the agency, and could result in higher insurance premiums and other additional costs that would in turn need to be passed on to the customer.

ProClinical would commence legal proceeding against any company in the unlikely event that the client refuses to pay an invoice for which they have signed timesheets, but reserves the right to withhold payment to a contractor until payment is received.

This page represents the opinion of ProClinical. ProClinical cannot accept responsibility for decisions taken as a result of the interpretation of the information on this page, and would urge contractors to seek professional legal advice if more clarification is required.