Agency Regulations unlikely to give rise to two-tier contract market

Suggestions that a two-tier contractor market will be created as agencies offer contractors higher rates if they decide to opt-out of the new agency regulations, are exaggerated says contractor specialist giant group plc.

The Employment Agencies Act came into force on April 6, but limited company contractors only came under the scope of the regulations from July 6. The regulations increase agency administration and limit the fees agencies can charge end-users - for example, where end-users want to offer contractors permanent work.

According to giant, agencies are entitled to offer a pay incentive to persuade contractors to opt-out of the regulations, but this situation is unlikely to arise.

Comments Matthew Brown, Managing Director of giant group plc: Pay differentials, if they do arise, probably wonít be significant.

Agencies may have less incentive to really push the CVs of contractors that choose not to opt-out, but refusing outright to put someoneís CV forward because they have not opted-out of the regulations is unlikely to happen, and may in any event, constitute a breach of the rules.

According to giant, an advantage to contractors of opting-out of the regulations is that it will reduce the upfront administrative burden on agencies, allowing agencies to be more responsive to end user requirements. The effect of this will be that-opted out contractors may enter the recruitment cycle earlier than opted-in contractors and therefore have a better opportunity of securing a contract.

The regulations are intended to protect temporary workers, many of whom are on low incomes, says giant, but they provide highly paid, highly skilled IT contractors with few real benefits.

The regulations treat contractors more like temps than independent businesses and contractors may find the protection these regulations provide wholly inappropriate to their situation, says Matthew Brown. Most contractors will opt-out because itís suits their business, not because anyone tells them to.