You should note, under these regulations a "person" can be a Ltd Company.

This raises significant questions. Take for example the term "employed", does this mean that if the contract is one of self employment (i.e. meeting IR35) then the agency regs will not apply. They also talk about under the control of the second person (client). The concept of supervision, direction and control was utilised in the first draft of the IR35 regulations and subsequently thrown out.

Regulation 5 would appear to prohibit employment businesses forcing contractors to use accountant umbrella schemes or having to set up a Ltd Company, before they are put forward for work.

A key area of concern for agencies and employment businesses was the situation with regards to "handcuff clauses"

A typical existing situation might be as follows:-

temp to perm: Contractor is offered perm job and normally agency would charge a fee of 20% if this occurred within a 6 month period

temp to temp; Contractor taken on direct. Above fee would also be charged if carried out within 6 months

temp to third party: Contractor taken on by another agency at the same client. Above fee would also be charged if carried out within 6 months.

The Government is proposing that for temp to perm the quarantine/handcuff period be reduced to 8 weeks and for the others, reduced to 4 weeks. (Ed's note: See later on this for more up to date analysis)

This is a significant blow to the recruitment industry and there is evidence that the formation of ATSCo has caused the Government to divide and rule. I note that in the official press release the CEO of REC has welcomed the proposals

We welcome the Government's announcement on temp-to-perm. It is a significant step forward from the original proposal of four weeks. It demonstrates that good working relationships have developed between
the REC and government, and that the industry's case has received
careful attention."

The regulations also require employment businesses to agree terms with the contractor, this may mean an email of the terms and the requirement to have a signed copy has been removed.

The ability of an employment business to put contractors forward "on spec" appears to have been removed.
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Neither an agency nor an employment business may introduce or supply a work-seeker
to a hirer unless it has obtained confirmation–
(a) of the identity of the work-seeker;
(b) that the work-seeker has the experience, training, qualifications and any
authorisation which the hirer considers are necessary, or which are required by
law or by any professional body to work in the position which the hirer seeks to fill
and that the work-seeker has the ability which the hirer considers is necessary to
work in the position which the hirer seeks to fill; and
(c) that the work-seeker is willing to work in the position which the hirer seeks to
fill.
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It would appear this will also stop the jobsites that mailshot out CV’s to all and sundry as well as the employment business that puts forward a contractor without their permission. It also stops the employment business from marketing their contractors to potential clients. How many clients have taken on a resource because someone was available rather than having a clearly defined job spec??

The regulations are interesting for what they do not contain

The do not contain a requirement for the employment business to provide a copy of the client contract to the contractor.

Having got involved in every nook and cranny of the commercial relationship between two incorporated businesses you would have thought that this would have been in order, especially as another Government department is ascertaining the tax liability of the "work seeker" on this contract.

The DTI and Inland Revenue were fully aware of the problem and these regulations provided the opportunity to improve on the present chaotic shambles. One explanation is that they have taken legal advice and found they could not enforce this. Thus a conclusion could be drawn from this Government action, that the only contract that matters for determining IR35 status, is that between the work seeker and the agency.

Your analysis and comments welcome

Agency regulations available here:
www.dti.gov.uk/er/agency/newregs.htm

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Andy White

Editors note added 3/Feb 2001

I note that the REC web site is carrying analysis that would indicate that the qurantine period from to move from an agent to the client. i.e temp to temp is in fact 8 weeks
(Link to REC article)