Recruitment agency terms and conditions – common problems

Kate Cottrell, from employment status experts Bauer & Cottrell, takes a look at the complex subject of recruitment agency terms and conditions.

Common Problems with T&C’s

Some common issues Kate and her team have come across include:

Have you read the contract?

Many contractors (and agencies) do not read the contract or fail to read a renewal or extension which could be different from the original T’s and C’s.

Conduct Regulations

Many agencies do not understand the Conduct Regulations and do not deal with the opt-out processes correctly (the Employment Agency Inspectorate put the figure at 88% incorrect).

This refers to the Conduct of Employment Agencies and Employment Businesses Regulations 2003

Lack of IR35 knowledge

Many agencies do not understand IR35 and believe that it is all about the written contract rather than the actual working relationship with the client.

Deemed acceptance of the terms

Many contractors start the work and then deal with the contract and this is often too late as starting often means that you are deemed to have accepted the T’s + C’s in their entirety.

Payment terms

If you have NOT opted out, the agency cannot wait until they have been paid by the client before paying you.

VAT payment terms

Make sure the contract rate is stated as plus VAT if you are VAT registered.

Restrictive clauses

These are often too widely drafted so we have seen cases where you cannot work for the Clients client or for someone the client was considering doing business with unless you go through the same agent.

A restriction has to be reasonable to protect the agent’s business and a 12-month restriction may be unreasonable.

In a case where a contractor has been “gifted” to the agency, i.e. where the agency had nothing to do with securing the role, it would be reasonable to ask for all restrictions to be removed even where the agency is the only preferred supplier to the client.

Business Insurance

Contractors need to have adequate business insurance in place to cover the liabilities in the contract. Ideally, the contract should state this.

IP considerations

Care should also be taken with Intellectual Property Rights and ownership.

Make sure the paperwork is complete

Contractors should make sure they have the complete contract before reading the terms.

Often contracts consist of the agent’s terms plus client-specific terms and numerous additional appendices and other agreements e.g. confidentiality agreements.

Look out for which of these take precedence in the event of a conflict.

I have seen cases where the T’s and C’s contain a substitution right but the client-specific T’s and C’s state personal service is required and it is the client-specific terms that take precedence.

Further Advice

We concentrate on IR35 when reviewing working practices and contracts. We also point out unusual terms and always point clients to a commercial lawyer or some of the free legal helplines you get as part of some insurance policies and even credit cards.

Even contractors who have not taken out business insurance yet will often find that their home or car insurances give free access to legal advice lines.

These are just some points to look for and as with any other business sector, a whole range exists, from excellent to poor.

The excellent agencies have T’s and C’s that mirror the client contract.

They tell you what their commission is, they do not take commissions from accountancy service providers or umbrella companies. They also provide a high level of support to contractors and clients.

Where possible, consider using agencies who adhere to their trade bodies’ codes of conduct e.g. APSCo or REC or use those whose practices have been checked and approved by Professional Passport.

Partner Contractor Accountants

Last updated: 23rd January 2024