Opt Out - Gun to the head

**tim123** · 13 July 2004, 16:13

some points.

1) I think that it is unlikely that an agency have been advised by someone like 'lawspeed' that by being opted in the agency will become liable for holiday/sick etc as none of the other specialists are suggeszting this is possible. Perhaps James will read this and reply himself. Thy could have been advised this by a non-specalist lawyer/accountant who you have never heard of though.

2) There ARE serious extra costs/risks associated with placing opted-in contractors and if I were an agent (I am a contractor) I would charge a differential margin for opted in contractors to the extent of doubling my margin.

3) The arguement about signing the opt-out now is pointless. The regs say that an opt-out applies "provided that such notice is given before the introduction or supply of the work-seeker or the person who would be supplied by the work-seeker to do the work, to the hirer", but you are past this point in time now so a signed opt-out will be a piece of scrap paper.

So, where are you now:

You:

1) could agree to signing the opt-out knowing that doing so does not in fact bind you to it (though my advice here is worth what you paid for it, so you should seek proper advice).

or 2) accept that the agency do have extra costs of you being opted in, and negotiate on an amount acceptable to all.

tim

**EuroContractor** · 13 July 2004, 16:31

Thanks for your thoughts Tim. The agency were very specific that the reason they need an opt-out is because of the risks/liabilities it exposes them to and that this was direct legal advice from their lawyers who are Lawspeed. Presuming you're right on point 1 and the agency aren't liable, then what exactly (point 2) are the associated serious extra costs/risks? True enough that I may be too far enough down the road to change now, but surely we're going to get an enormous number of contractors facing the same now it's July and the reg's have kicked in.

**mailman** · 14 July 2004, 10:02

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You can opt out initially to get your foot in the door...and then once the contract has been offered to you you can opt back in. It then becomes illegal for them to say the contract is no longer yours.

:rollin

Mailman

**tim123** · 14 July 2004, 10:45

Re: Opting back in

Sorry mailman, doesn't seem to work. Opting back in is ineffective wrt to the current position, it only takes effect once the 'work-seeker' has completed the current 'position' and seeks a new one. 'Position' is undefined and for an exact definition to be decided someone will have to go to court, but my guess is that a renewall at the same client will count as the same 'position' (as this is how the courts usually see continiously renewed contracts).

As to EC's question about the extra costs then there are two things.
(1) the extra compliant costs of handling an opted-in work-seeker, I would guess that this could increase the agency's costs by 5% so would add 1% to the margin.
(2) But the main one is simply the risk that you might ditch the ageny and go direct. Whatever you think of agencies, they are a business and if you wish them to work for you, you have to pay them (allbeit indirectly). There are costs of sale that have to be covered by the margin and they are quite substantial. As they can't collect these fees up front they have to be averaged over the life of the contract. Let's assume that an average contract length is 12 months and the costs amount to 5% of billing for that period (I've no idea if these are valid figures but they're in the right area). If you want to be able to ditch the agent after 3 months you have to pay the full 5% over those 3 months which increases it to 20% for the period. You could, of course, explain all this to the agent, accept that you have to suffer an increased margin over the first three months and negotiate an increased rate for a renewall period. Though don't accept a promise of an increase, only a signed contract with the increased rate.

Tim

**EuroContractor** · 14 July 2004, 12:24

Re: Opting back in

Not sure of the legality of this but they agency insist on their version of a optout letter which includes the following paragraph:-

5.&nbsp &nbsp &nbsp &nbsp In consideration of the Benefit the Supplier, and the Worker, each separately and distinctly agree, with effect from the Notice Date, to indemnify you [agency] and keep you indemnified against any loss suffered by you as a result of either or both [me+my Umbrella] of us seeking to enforce any term against you under the Regulations or based on upon an alleged breach of the Regulations by you.

which as far as I understand means they're trying to cover themselves against any costs if I do decide to opt back in at a later date, effectively signing away your benefits of opting back in.

Are the compliance costs really so great for an agency handling an opted-in work-seeker? What exactly do they need to do other than check your identity? I had this out with the agent who was complaining 'oh there's so much paper work for you to fill in, and it'll delay the contract and upset the client'. I asked 'what do you need?'. He said 'passport, driving license, qualifications etc' - proof of qualifications are mentioned in the reg's only where they're required for the job - in my case experience is everything and no qualifications are required, so we can lose that bit of paper. Driving license - I asked 'what if I don't have one?', and surely the passport if the ultimate form of id? So lose the d..l too. So he really only wants a copy of the passport. 'yes but that'll take time and the client can't wait'. That was at the stage were we'd gone through all the steps through interview up to issuing contracts, which I believe means I'm opt'd in as the paper chase should have been done before presenting my details to the client. I told the agent I'd personally bring my passport to his office that afternoon, resulting in no delays at all. No so much in the way of handling costs there then.

I don't go with this 'ditch the agency and go direct' idea (though I'd love to). In years of contracting I've never found a client that can be bothered with the hassle, for some it's bad enough getting the sign off for a contractor, others don't want to take any risks of being liable to pay the agency, others are large companies that simply don't deal with independents and just deal with their preferred suppliers. I know some contactors who've been direct and had to wait months and months to get invoices paid (just like working through Spring really), though I could handle that. But the new reg's don't allow you to just dump the agency mid contract, you've got to be off the job for a minimum of 8 weeks to be clear. So the agency is getting the full term of the contract. Interestingly after negotiating with the agency they're happy to drop the 'non-solicitation' clause from my contract if I opt out - which would appear better than the 8/14 weeks deal with the opt-in?

**mailman** · 14 July 2004, 12:46

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Well as far as Im concerned there is no change. If suddenly agents are asking for proof of ID and stuff then ask them...why werent they asking for this stuff BEFORE the regs came in to force?

Mailman

**mailman** · 14 July 2004, 12:59

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Tim said "Sorry mailman, doesn't seem to work. Opting back in is ineffective wrt to the current position, it only takes effect once the 'work-seeker' has completed the current 'position' and seeks a new one."

We are talking about 2 different things.

Im saying that you can Opt Out to get your nose ahead of everyone else (ie. to get your CV sent to a client because they wont even touch you if you opt in...thanks PCG for handing power back to the agents).

Here is a quote from the PCG website too:

"If the agent is able to offer only employee-like contractual terms, which are likely to be IR35-caught, then send a letter to the agent, before commencing work, to opt back in to the Agency Regulations. Note that it would be illegal for the agent to refuse to honour the contract as a result of opting back in. "

So even if its not bound to be close to being IR35 related you could still opt back in before you start working.

Mailman

**tim123** · 14 July 2004, 15:16

Re: Opting back in

Which of course will royally stuff everyone.

If cons start to do this, agents will simply offer contracts on an opted-in basis only. And for the reasons already stated will do so on 40% margins.

and back to EC's question about all the legalese.

So they are saying "you have some legal rights, so to try and stop you using those rights please sign here to indemenify us for our losses if you do exercise them".

The chances of this being legal are about as likely as winning the lottery. But TBH I would be making the point that this type of clause is one used by the most dispicable underhand sharks possible and there is no way that I would be signing it.

tim

**oaksoft** · 14 July 2004, 22:29

Mailman

I do not believe that there is anything to prevent an Agency from refusing to work with anything other than Opted Out contractors.

That would be a business decision for the Agency not to take on that risk and the Regs won't help there.

Agencies are free to decide who they do business with.

Even if you were allowed to Opt back in you certainly would not be allowed to do so on the same contract. You would be presented with a different and probably even worse IR35-dodgy contract and a new lower rate.

Go ahead and try it. Let us know how you get on.

Remember the PCG are only offering advice.
They are not, cannot and would not claim to offer guarantees over this because it is a matter of interpretation of the law.

By the way, before you think I am pro-agency I have this advice to the agents out there.

The easy way for agencies to end all this is to offer contracts with only 2 months handcuffs. Then it largely doesn't matter whether contractors are in or out of these regs.
The few contractors I have placed (I mainly target the permanent sector) are now offered these terms.
Of course the majority of agencies are consumed with greed and so end up wasting an inordinate amount of time bulltulipting and bullying their contractors.

Contractors on the other hand are just as guilty of greed - wanting something for nothing. Opting out ends all your problems at a stroke.

Heaven forbid if both sides worked together instead of trying to screw each other for a few pence this might all vanish overnight.

Here is an alternative agency view. Why not charge the client a single fee for the contractor based on x hours at £y per hour?
The permy market operates that way, why not the contracting one?
The reason is greed and FUD. Agencies want to bill for the same contractor for years to come and they have spread FUD amongst clients that an agency is mandatory to avoid employee claims.

The net of this is that agencies greed and FUD has caused them to end up becoming largely low-value, very high risk adding invoice factorers for which they take around 20% say.

Surely it would be much more lucrative to have your skilled staff placing contractors for fixed fees of around £6000 than paying staff to turn around invoices for perhaps £200 per week per contractor?

Just my thoughts but in my opinion both agencies and contractors need their backsides kicked:rolleyes .

Opt Out - Gun to the head