Top end IT contractors can achieve even higher rates by opting out of the recently implemented Conduct of Employment Agencies and Employment Business Regulations, according to Barry Roback, Chief Executive of the JSA Group of Companies, the UK’s number one specialist accountants for IT contractors. JSA recently carried out research among its clients and found that a significant majority either had or were proposing to contract out when a suitable assignment was offered.
Under the new regulations, agencies have lost their automatic right to charge additional fees to end-users who wish to offer permanent jobs to contractors or to re-engage them through other agencies. However, since 6 July 2004, it has become possible for "Limited Company" contractors to opt out of the new legislation and thus exempt agencies from the newly imposed "Temp to Perm" and "Temp to Temp" fee restrictions and the heavy burden of extra administration. In return for opting out, agencies are likely to reward contractors with higher hourly rates.
However, in order to "opt-out", a contractor must agree with their umbrella or personal services company to jointly opt out and give written notice to the agency of their intentions. Furthermore, contractors cannot actually opt out of existing contracts as at 6 July 2004.
Roback advises that, given the Revenue’s increasingly stringent views on IR 35, opting out is probably a wise decision anyway, in order for contractors to help protect their IR35-exempt status. "IT contractors should resist the temptation to work under contracts that protect their ’employment’ rights, even if it does give them an added sense of security. Contractors are increasingly having to justify their status to the Inland Revenue and they should use every device - including opting out of the agency regulations - to shore up their defences."
He concludes: "Obviously this is a shifting scenario and one which will largely depend on market conditions. When there are few good contracts on offer, employers will clearly have the whip hand, regardless of whether a contractor has opted out.. When there are shortages of well skilled contractors, agencies will find themselves in the driving seat. At present, market forces are moving in the agencies’ and contractors direction, but it would be unwise to think that these conditions will prevail for the foreseeable future."
Source: onrec.com