Agency vs direct, and 2 years with the same client?

[mcskiver]

I'm just coming to the end of a contract with a client, who want to extend me for a further 12 months. I've just completed 3 x 6 month engagements with them, followed by a 1 month contract while I sort out the issue described here.

I knew the client at the start, so was hired directly, but asked to work through an intermediary who managed all of their contractors. After my first stint I asked to remove their "handcuff clause" because it was unfair given that they hadn't recruited me, which after a bit of wrangling they did.

Now after 18 months I told the client I would only re-sign on a direct basis (partly because it would make it easier for me to ask for a higher rate, but also because the way their contracts were written led me to believe they might make me IR35 caught - or suggest that I might be). The agency refused, unless the client paid them 50% of my year's day rate!!

They're still refusing, even though the client has tried to pressure them a little. I'm not sure what to do now, I really enjoy the project but 2.5 years in a series of contracts that might be hard to defend against HMRC doesn't especially appeal. Do any of you have any ideas / suggestions? Should I just get out now, or give in and consider myself IR35 caught from now on....? Does the agency have any right to demand that fee given that they didn't introduce me to the client?? Does it really make any difference either way if I stay with the agency vs going direct (I suppose that depends entirely on the contract terms)?

Any feedback or suggestions would be gratefully received...

[malvolio]

Duration has nothing to do with IR35. All you're proving is that you deliver what your client wants and he's happy to hang on to your services. What is more if you are IR35 caught (and 99.9% of contractors aren't, despite all the FUD) you would have been from day 1, so nothing has changed there.

The agency is being greedy and unreasonable in equal measure but that's really between the client and the agency. That said, since you seem to own the relationship, there's no reason not to stay with the agency, up your rate and tell them to cut their margin since they are not actually adding any value.

And if you want a reason for a rise, you're about to stop being able to claim expenses under the 24 month rule, aren't you...

[craig1]

If you're on decent payment terms and have a decent relationship with the agency then it might be best sticking with them. Going direct usually goes to monthly billing with 30 day terms (or worse), few clients I know would tolerate weekly billing as that's not what the rest of their suppliers do. Also, going direct can be a pain for the client if their finance department is pedantic around purchase orders and so on.

Also, I hope you're not claiming lots of travel expenses to site as this hits the 24 month rule!

[mcskiver]

Thanks for the replies. I was aware of the 24 month rule with regards to expenses, but the increased day rate will account for that so I'm happy on that score.

My main issue was having the same poorly-written contract for 2.5 years, which means that if I was deemed IR35 caught (and presumably I'd be a prime target for investigation) they'd have a hell of a lot of tax to reclaim!

I think my next step, if they don't back down, is to pay for a contract review, then try to get them to re-word it as required. I'll also look into the key things I can do to make it clear that I'm not an employee.

[northernladuk]

Duration has nothing to do with IR35. All you're proving is that you deliver what your client wants and he's happy to hang on to your services. What is more if you are IR35 caught (and 99.9% of contractors aren't, despite all the FUD) you would have been from day 1, so nothing has changed there.

I would argue this, not on the actual facts you put forward which are correct, more on this situation. A permie takes a contract and is there 2 years later. Do you think he is making an effort to continue to look like an independant contractor or does he have his feet back under the table and is talking about his employer, doing tasks as directed etc. Duration has nothing to do with IR35, losing your business mindset does.

You are right but I will always question people on 2+ years still having the right mind set. I can see 3 people from where I sit that have fallen in to this.

And if you want a reason for a rise, you're about to stop being able to claim expenses under the 24 month rule, aren't you...

Which is sod all to do with client or agent. How you get to your gigs and how much it costs is none of their business. You could use if you can't go in and argue your situation without something tangible but expect the client/agent to tell you to stick it on those grounds. You knew it would come to that so you deal with it.

Just playing devils advocate like....

[malvolio]

Duration is not an IR35 pointer; that's in the case law from one of the earlier appeal cases. Hanging on to a successful and lucrative contract makes a little more business sense than arbitrarilly dropping it in favour of some other one IMVHO...

And agreed the contractor's costs aren't anything to do with the agency or the client, but the rate he sets to cover them off definitely is.

[DodgyAgent]

I'm just coming to the end of a contract with a client, who want to extend me for a further 12 months. I've just completed 3 x 6 month engagements with them, followed by a 1 month contract while I sort out the issue described here.

I knew the client at the start, so was hired directly, but asked to work through an intermediary who managed all of their contractors. After my first stint I asked to remove their "handcuff clause" because it was unfair given that they hadn't recruited me, which after a bit of wrangling they did.

Now after 18 months I told the client I would only re-sign on a direct basis (partly because it would make it easier for me to ask for a higher rate, but also because the way their contracts were written led me to believe they might make me IR35 caught - or suggest that I might be). The agency refused, unless the client paid them 50% of my year's day rate!!

They're still refusing, even though the client has tried to pressure them a little. I'm not sure what to do now, I really enjoy the project but 2.5 years in a series of contracts that might be hard to defend against HMRC doesn't especially appeal. Do any of you have any ideas / suggestions? Should I just get out now, or give in and consider myself IR35 caught from now on....? Does the agency have any right to demand that fee given that they didn't introduce me to the client?? Does it really make any difference either way if I stay with the agency vs going direct (I suppose that depends entirely on the contract terms)?

Any feedback or suggestions would be gratefully received...

Call their bluff. they will not want to sue no matter what they say.

[Wanderer]

Does the agency have any right to demand that fee given that they didn't introduce me to the client??

No they can't do that. The Agency Conduct Regulations prohibit this and since you were already introduced to the client before you met the agency, there is no way you could have opted out of these regulations. There is a sticky with a long discussion of the regs.

Email the agent a copy of section 10 and tell them that they are acting unlawfully in trying to enforce this clause in their contract with the client. Make sure you are talking to someone senior at he agency, agents will say whatever nonsense they want.

Name and shame them here too.

[SimonMac]

If you managed to get them to withdraw the handcuff's clause what are they objecting too?

[jmo21]

If you managed to get them to withdraw the handcuff's clause what are they objecting too?

Just read through and was thinking exact same - if there is no handcuff clause, then what clause in your contract IS the agency using??