Client won't renew fearing employment rights after 2 years

[DCL]

Hello All,

I have been contracting (via 3 or 6 month contracts) for my client for nearly 2 years. Although I'm told my skills are still needed (and it's a very pivotal point for the project I'm providing services for) their HR department is worried that I will somehow be able to claim employment rights such as redundancy pay. They also think they may be liable for taxes to the HMRC.

They said the only way it could work is if I worked elsewhere and then came back after 3 months, but this does not suit the client or myself.
They have taken legal advice on this, but I'm struggling to understand on what grounds they have come to this conclusion. I have a feeling they're confusing IR35, The Agency Workers Regulations, and the contractor 2 year rule.

Does anyone have any idea of how they may have reached this conclusion and under what regulations?

Some details that might help:
I don't work via an agency.
My contract does not name me and is company to company (I only sign as a director).
My contract states the deliverables of my services.
My contract states makes a point to note my company is outside IR35.
My contract states an expiry date to my services.

Thanks in advance,
Karen.

[TestMangler]

Unfortunately, quite a lot of places do this or have done in the past. I've tried on a couple of occasions to go through the relevant laws with client people, but it always fell in deaf ears, cause their 'legal department' told them that was how it worked.

Not very encouraging, sorry, but that's what I've found.

[TykeMerc]

Sadly that's an ill informed client, there's not a lot you can do.

I'm sure you've already pointed it out, but you're already a full time employee of YourCo Ltd, you're not a salaried temp, it's actually irrational that as an employee of one company you could claim employment rights from an unconnected one.

[vwdan]

Sadly that's an ill informed client, there's not a lot you can do.

I'm sure you've already pointed it out, but you're already a full time employee of YourCo Ltd, you're not a salaried temp, it's actually irrational that as an employee of one company you could claim employment rights from an unconnected one.

I do find these sort of stories piss irritating, and just another example of how people don't grasp how we work. I bet Capita never lost a managed service renewal because the client was scared they'd end up lumbered with all their employees!

Mind you, its not helped by the army of contractors who don't know that theyre contractors.

[centurian]

They may be in genuine fear that you could be becoming "part and parcel" of the organisation, which can definitely have an impact on employment claims and IR35, so they may be correct to highlight this as a concern.

However, it's perfectly possible for both client and provider to put in place measures to ensure this does not happen ad infinitum.

The problem with big firms (if that's what your end client is) - is that they don't trust individual "line managers" and contractors to ensure this is done correctly, so just apply a scattergun approach at 2 years.

[BlasterBates]

Fixed term employees have the right of redundancy after 2 years. This doesn't apply to anyone through an agency. What you are experiencing is a problem of going direct and one of the key reasons clients use agencies.

https://www.gov.uk/fixed-term-contra...ployees-rights

Now if you are a real business as a Ltd you don't have these rights, the problem is, it's a grey area, HMRC can deem you to be a disguised employee and contractors can use the same arguments to sue an employer, there have been cases of IT contractors sucessfully suing their clients; although it doesn't make sense if they're not paying NI.

As Centurian says HR doesn't really control whether you're a genuine business that's down to the line manager, so their problem is his style of management will determine whether you can sue or not, that's why they have a general rule, to be sure. You're only hope is for the line manager to argue his case.

[the_rangdo]

Current clientco has a similar policy and it's annoying.

Despite the fact I was still in the middle of development and they still wnted me, an extension wasn't offered due to being at the 2 year point (ignore the fact their maths was dodgy, I'd done 21 months)

New role appeared in a different department, more money, different agency (that's another story). I did get asked about IR35 at the interview but otherwise they proved if the desire is big enough there are ways around it.

[LisaContractorUmbrella]

The client is correct in their position - the OP could be liable for employment rights and not necessarily just after 2 years Tech contractor secures full employment rights :: Contractor UK and it wouldn't matter if he worked via a recruitment agency or not. However, the legal department at the company should be looking at his IR35 position before determining that they are at risk

[NotAllThere]

If you offer to go through an agency (with the clientco paying the commission), while it makes no material difference wrt employement rights, the client's lawyers will probably think it does, and everyone will be happy. In fact, if you can get some factoring included with the agency, you might get paid earlier.

(It's what I had to do in similar circumstances).

[BlasterBates]

Workers don’t count as fixed-term employees if they:

have a contract with an agency rather than the company they’re working for

Just quoting the legislating on fixed term employees, from the link I posted above.

In other words although there are other ways perhaps to get employee rights, most companies usually try to avoid to have fixed term employees, therefore going through an agency will reduce their risk, but as Lisa points out not eliminate it entirely.