Agency refusing to pay correct rate - are terms contract lock in terms enforcable

[Wingnut724]

Hi,

I am currently working on a contract via an agency under my Limited Company and have been working for the end client for 3 months now. The contract is inside IR35.

The agency paid a lower rate than that agreed in the signed contract for the first invoice issued (they are using self billing). When I queried this I was informed that they were subtracting employers NI from this rate prior to payment as employees NI and income tax. On pointing out that this was contrary to HMRC rules they apologised and promised to amend the rate and refund the outstanding money owed. Several excuses have followed and the rate has not yet been amended or the monies reimbursed.

The latest communication has stated that I could either accept a change to my contract to say that the lower rate was actually the correct rate or I could cancel my contract.

The issue I have is that I enjoy working with the end client and we have a good relationship. The existing contract still has a further 6 months to run and the client has recently asked for extra hours, which I am happy to supply. I have other possible work opportunities but on balance would prefer to keep providing services to the existing client if possible.

The contract has a 6 month lock in so if I terminate the contract the end client will not be able to employ my company directly without penalties. Given the agency is reneging on the agreed rate and terms of the contract, is the 6 month lock in enforceable ?

I rarely work via agencies as I prefer to engage directly with the client. This experience is reminding me why

[northernladuk]

How much are we talking here? They could give you notice and offer you a contract with the new rate, take it or leave it so you are a bit on the back foot here.
If the rate is in the contract they are obliged to pay yet. You'll just have to kick s right stick up and possibly go legal to get it. You'll have to weigh up the pros and cons as you'll probably not see the contract out if you do.

[Wingnut724]

How much are we talking here? They could give you notice and offer you a contract with the new rate, take it or leave it so you are a bit on the back foot here.
If the rate is in the contract they are obliged to pay yet. You'll just have to kick s right stick up and possibly go legal to get it. You'll have to weigh up the pros and cons as you'll probably not see the contract out if you do.

Thanks for the reply

The difference amounts to just over £2000 over the term of the contract so not a huge amount but enough that it makes a difference.

If they give me notice and cancel the contract that's fine as I suspect the end client would be willing to work with me directly - they have worked directly with previous Limiteds and have only used the agency this time around to widen their advert's visibility. However they are stating the options are either accept the reduction or I have to cancel the contract. If I did cancel and then approach the client directly I am fairly sure the agency would try to invoke the lock in clause, which is why I think they do not want to cancel.

The rate was already on the low end of what I was prepared to accept so compromising on a lower rate isn't really an option. However I would like to keep a good relationship with the end client for various reasons. I haven't yet discussed the issue with the client but am close to doing so.

Is this kind of behaviour typical of agencies ?

[northernladuk]

Well I suspect the agency have made a mistake so I'd forget the amount over the whole contract. Its not going to happen so you haven't lost it.

We have seen it a few times on here where the agent has put the clients rate down on the paperwork and not the contractors one and the like so mistakes do happen. If guess a few payments on full rate as a goodwill gesture and drop back to what it should have been all along will be the best result for all.

The cliebt can't work with you direct by the way. There will be a handcuff in at least one of the contracts.

[malvolio]

Is this kind of behaviour typical of agencies ?

ER, yes. Mainly because most of them don't understand their own business, let alone ours. If the advertise the rate including ErNICs without telling you that is what they are doing, that is marginally illegal (and certainly untruthful). If you singed the contract on the understanding that the rate advertise and agreed is the one you were going to get paid, then they are in breach of the contract. so arguably the handcuff can't be enforced since the contract is void. After that it gets complicated.

Best idea is to talk to the client. Your position is untenable because of the agency's mistakes, deliberate or not (guess which I think it is) so suggest they tell the agency to honour their contract or you walk. If you're that valuable to the client, that is really the only approach that keeps you working.

[Wingnut724]

ER, yes. Mainly because most of them don't understand their own business, let alone ours. If the advertise the rate including ErNICs without telling you that is what they are doing, that is marginally illegal (and certainly untruthful). If you singed the contract on the understanding that the rate advertise and agreed is the one you were going to get paid, then they are in breach of the contract. so arguably the handcuff can't be enforced since the contract is void. After that it gets complicated.

Best idea is to talk to the client. Your position is untenable because of the agency's mistakes, deliberate or not (guess which I think it is) so suggest they tell the agency to honour their contract or you walk. If you're that valuable to the client, that is really the only approach that keeps you working.

I have evidence that they are deducting E'rs NICs (though strangely the amount doesn't actually equate to the amount the E'rs NICs should be ) and that this wasn't agreed or understood when I signed the contract. Fortunately the agency contact has been quite helpful (inadvertently) in his responses to date. Now he's involved the Financial Director their position is very clear. They are a large established agency. I have no proof whatsoever that this is regular behaviour rather than just some mistake but I do get the impression that they are expecting me to just roll over. I am a little surprised they are willing to jeopardise their income and relationship with the client over this though they are probably intending to pass the blame onto me.

Thank you for the advice - I will chat to the client and see what happens.

[NotAllThere]

I am a little surprised they are willing to jeopardise their income and relationship with the client

They're not, they're waiting to see who blinks first.

they are probably intending to pass the blame onto me.

If you have a good relationship with the client you can head that off at the pass.

[Wingnut724]

They're not, they're waiting to see who blinks first.If you have a good relationship with the client you can head that off at the pass.

Luckily I am very good at not blinking

I shall speak to the client on Monday first thing.

[SueEllen]

Luckily I am very good at not blinking

I shall speak to the client on Monday first thing.

Speak to the client and be prepared to walk out a couple of hours afterwards.

If you do walk out, send a letter by 24 hour registered post to the agency head office claiming breach of contract and enclosing an invoice for the amount of money they have taken off you giving them a legally reasonable time to pay (21-28 days) and state you will take action to recover the debt if it is not paid and they will be liable for costs plus interest.

Then contact Safe Collections, who frequently post on here, for advice. It is frequently better to send a debt collection firm after non-payers rather than take them to court as smaller agencies will go out of business rather than pay up.

[WordIsBond]

The latest communication has stated that I could either accept a change to my contract to say that the lower rate was actually the correct rate or I could cancel my contract.

Have you actually received that in writing? If not, I'd try to get it in writing before talking to the client.

Once you have that in writing, then you have proof that they are not honouring the contract that has been signed. At that point, any handcuff has to be dead, and if you want to go direct you almost certainly can. They can't hold you responsible to honour the handcuff provision if they won't honour the payment provisions. But I would NOT talk to the client until you have the above in writing from them.

Once you do, you can go to the client and say, "The agent agreed a rate with me, and we signed a contract. They are now saying I need to amend our agreement and work for a lower rate or cancel the contract. I would be quite happy to work direct and not through an agency at all, for what you agreed to pay them. Since the middle-man isn't sticking by their agreement, are you interested in cutting out the middleman?"

But you have to get in writing that they aren't going to honour the contract you've signed with them. (They won't say it quite that bluntly, but hold their feet to the fire until you get something specific in writing. They signed a written contract with you, they should give you a written demand to amend it.) If you act without that proof, you run the significant risk that they'll mess things up with the client. Their contract with the client will have a handcuff agreement. They may try to enforce that. If you can provide written evidence that they've intentionally breached your contract, that makes it much easier for the client to tell them to get lost. Without that written proof, the client is likely to say, "I don't want the hassle or to have the agency drag us through legal trouble, goodbye." They might say that anyway, but if they like you and you can prove the agent is blowing off contractual provisions, you've got a decent chance of coming out of this pretty well.