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Key legislation for contractors

Key legislation for contractors

Anyone working as a contractor could be affected by two key pieces of legislation. Both are outlined below and how they affect you will depend on your status:


This is a piece of legislation that affects all contractors working through their own limited company. Its purpose is to eliminate the avoidance of tax and National Insurance Contributions. If caught by IR35 a contractor will have a higher tax and NI liability. Therefore, it is in most Contractors’ interest to be considered ‘self-employed’.

The Inland Revenue essentially determine IR35 status of a Contractor; they decided whether you are ‘employed’ or ‘self-employed’. To be considered ‘self-employed’ the contractor needs to show that they are in business on their own account and bear the responsibility for the success or failure of that business.

Agency Workers Regulations (AWR)

AWR is a piece of European Legislation. It gives agency workers the right to the same basic working and employment conditions they would receive if employed directly by the hirer, limited to pay and working conditions.

All contractors are entitled to Day One rights as soon as they start work which includes:

  • To be informed by the hirer of internal job opportunities
  • Access to collective facilities and amenities such as work childcare, canteen facilities, parking and transport services

If a worker is on the same assignment for 12 weeks without breaks they are entitled to the same employment terms and conditions as comparable employees working within the same organisation including:

  • Equal pay
  • Working hours
  • Annual holiday & statutory sick pay
  • Any bonus schemes
  • Rest break entitlements
  • Any other benefits that comparable employees receive

AWR applies to both full and part-time workers; please seek advice on whether you are considered in or out of scope.

Conduct Regs Opting Out

By submitting the Opt-Out statement before you start your new assignment, you may give the Agency notice to Opt Out of the Regulations, by which acknowledging that you have fully read and understood the Conduct of Employment Agencies and Employment Businesses Regulations 2003. 

What actually are the Regulations?
The Regulations came into force on 6th April 2004 and govern the conduct of the private recruitment industry and establish a framework of minimum standards that clients, work-seekers and hirers are entitled to expect. 
They control how recruitment companies such as ourselves conduct their business and how we operate with “temps” and contractors.

After some “push-back” from various interest groups, the Government adopted the view that limited company contractors are able to “opt out” of these Regulations. 

What does “Opting Out” mean to me?
If you opt out, then the Regulations will not apply to the dealings between you and us.

As we cannot possibly explain all of the regulations to you, if you are interested here is a link to the full document. In the meantime, we thought it would be helpful to cover some pros and cons so you know what you’re agreeing to:

Pros – The Advantages of Opting Out
No increase in administration or forms to complete which could result in increased margins/costs to you
Avoid potential delays in starting your assignments
Less statutory restriction on your ability to substitute or sub-contract
Avoid any implication that you are under the client’s control at all times (although you may agree to be)
It will assist in demonstrating that you operate outside IR35
Easier to show you are in business on your own account
It increases your marketability to clients and recruiters looking to reduce administration and place candidates quickly
Only one negotiation of contract terms in each case (rather than at the outset and at point of assignment)
Less requirements on you to provide information and confirmations
More attractive to umbrellas and limited companies as they avoid increased statutory requirements

Cons - The Disadvantages of Opting Out
No additional protection regarding potentially onerous contract terms (existing statutory protection remains)
No statutory entitlement to information regarding health and safety (although our Terms deal with this)
No minimal protection when required to work away from home
No added protection regarding confidentiality (although Data Protection Act still applies)

Other considerations

Aside from these two key pieces of legislation, you will also need to consider other rules and regulations relevant to anyone. These include VAT and relevant insurance plans.

Before venturing into the world as a contractor you should consult with a specialist in regard to all these issues.


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