Contractors' Questions: Is their cut to my rate a breach of contract?

Contractor’s Question: I received a new contract via an agency, working for Network Rail, and the daily rate was agreed. But two weeks into the contract, I was told “an amendment had been put in” to reduce it, and my payslip confirms this.

The reason given was that Network Rail have cut all extra charges -- holidays, NIC, pensions for example. All these are now for me to pay, reducing my rate by 20% before tax. I received no written notification, or new contract from the agency, but a phone call. Is this a breach of contract? All I want is to be relieved from NIC because they’re my employer; I’m not ‘Ltd.’ Please help.

Expert’s Answer: The starting point for this needs to be to look carefully at the terms of the contract itself, and at any written communications from the agency.

On the face of it, a contract cannot be changed unilaterally by one party -- they have no greater right to unilaterally reduce the rate than you yourself have to unilaterally increase it.  It’s all very well for them to say ‘an amendment has been put in’, but if that proposed amendment has not been agreed by you, it’s no more than a piece of paper (and, what’s more, a piece of paper that you have not even seen!). And so the contract as originally agreed between you will stand.  

If one or other party decides they don’t like the terms of the contract, that party’s only remedy may be to take steps to terminate the contract. But so long as the contract stands, both parties will remain bound by its terms. Any failure to honour its terms may well amount to a breach of contract. And (unless you chose to opt out of the Conduct Regulations) a failure to pay you at the contract rate will also be a breach of regulation 12.

You might also bear in mind that section 3A of the Social Security Contributions and Benefits Act 1992 makes it unlawful (save in specific exceptional circumstances -- which would not apply here) for an engager to require a worker to pay or reimburse the employer’s NIC.

I would suggest your first step should be to write to the agency and offer them the opportunity to explain in writing why they have failed to make payments in accordance with the contract terms; and meanwhile, look further into your options!

The expert was IT contracts lawyer Roger Sinclair, legal consultant at egos.

Editor’s Note: Related --

Contractors’ Questions: What if the rate I was extended on is reneged?

When your rate gets cut: an IT contractor’s guide

Contractors’ Questions: Can my signed contract rate be reduced?

Thursday 15th Jun 2017
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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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