Can I be a contractor and also like an agency Can I be a contractor and also like an agency
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  1. #1

    Default Can I be a contractor and also like an agency

    I have worked on and off for my corporate client for over 5 years as an IT Contractor via a limited company. I am routinely involved in assisting in recruitment (filtering CVs, interviews etc) but have over the years also brought in contractors based on my personal network. I have sought to capitalise on this in the past by either getting a finders fee or via putting them through my books. However, the client has a single preferred supplier who will not pay finders-fees for contractors (only employees) or sub-contract via other contractors. To me this is grossly unfair as the wheels of the IT industry, and business in general, are greased by middle men. Part of my worth is my network.

    The plan is to capitalise on my network with a small cut of the day rate and may be even improve my IR35 position - although this latter point is not critical.

    Anyway I am interested to hear anyone's opinions about this.

    Am I going about this the right way - is sub-contracting a former-colleague the same as representing the friend as an agent ?
    I suspect the answer to the above is 'no'. In which case would you presume that the clients' supplier would still object if I represented a friend like an agency to them, i.e. the chain is client->agency1->my ltd company (as agency2)->former-colleague's ltd company?

    If this is feasible what would I need to do just sign the contract with the agency and another one with my former-colleague (grab a decent template IR35-friendly one from QDOS etc.). And then I just submit an invoice to the agency and pay my former-colleague. Is that it? Obviously I need to ensure I have sufficient funds cleared to pay the former-colleague and take on the risk of the client not paying me - but I am fine about that.

    If anyone can help me clarify my contract/legal terminology as well that would be helpful.

    I suspect the agency might be amenable to this idea because when I protested about their contract wording and said I would not sign it - they did indicate that if I wanted to go through an intermediary agency then that would be fine.

  2. #2

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    I would bet every contractor has thought about this at some point but I will also bet most just couldn't be bothered with it.

    Firstly IR35 is on a contract by contract basis so won't affect the status of the contract you are working on. It could however help your business entity tests reducing the risk of investigation

    I do think it a little odd to think that not getting a cut is grossly unfair. A bit strong that. I don't think part of your worth to either the client or the agent is your network. It might be to you but not to them and if you are going to do business you have to understand the needs of your client surely.

    Your plan sounds great as the idea we have all had. In reality it starts to fall apart. Will agents/clients want to get stuck in a 3 tier contract when the market is quiet and every gig gets plenty of replies? Most agents don't understand their own contracts and won't have them changed as it will require checking legally so the concept of getting in to a subcontract arrangement will scare them tulipless. They will be open to risk they cannot control and very few are flexible enough to bother with that. Many are now just glorfied telephone salespeople now so the concept of subcontracting will just not work for them.

    As mentioned have you considered the risk here and will a bit of the daily rate really cover everything that could go wrong?

    Hope you get further than I did when I had this idea though.
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    I have certainly never met a contractor who likes an agency.
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  4. #4

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    Quote Originally Posted by northernladuk View Post

    I do think it a little odd to think that not getting a cut is grossly unfair. A bit strong that. I don't think part of your worth to either the client or the agent is your network. It might be to you but not to them and if you are going to do business you have to understand the needs of your client surely.
    Thanks for your reply. I do agree that many agencies, and especially this one I am dealing with, can be inflexible to anything out of the norm.

    I do disagree about my network having any worth to the client though. When they burn hours and hours interviewing mediocre candidates and I then put forward an old work friend whom I know to be an excellent candidate who then goes on to give them 12 months excellent service - I would say that definitely has worth to the client.

    Most businesses operate on a sub contractual or agency cut style mode of operation. But it seems when it comes to IT there is a conspiracy to stop you ever capitalising on your network and almost a hogging, to the point of bullying, by agencies to keep the monopoly on any cuts.

    I am prepared for the risk due to my knowledge of the company, its revenues and the market etc. and if it scaled to a few people working through me then it could result in a fairly decent income in its own right. I dont think we should feel ashamed or awkward about this. Agents dont.
    Last edited by danieledwards; 1st November 2012 at 08:25.

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    Quote Originally Posted by danieledwards View Post
    Thanks for your reply. I do agree that many agencies, and especially this one I am dealing with, can be inflexible to anything out of the norm.

    I do disagree about my network having any worth to the client though. When they burn hours and hours interviewing mediocre candidates and I then put forward an old work friend whom I know to be an excellent candidate who then goes on to give them 12 months excellent service - I would say that definitely has worth to the client.

    Most businesses operate on a sub contractual or agency cut style mode of operation. But it seems when it comes to IT there is a conspiracy to stop you ever capitalising on your network and almost a hogging, to the point of bullying, by agencies to keep the monopoly on any cuts.

    I am prepared for the risk due to my knowledge of the company, its revenues and the market etc. and if it scaled to a few people working through me then it could result in a fairly decent income in its own right. I dont think we should feel ashamed or awkward about this. Agents dont.
    I have looked into this and been on both end of it, however I can tell you its not worth the hassle unless you make a real business out of it.

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    I found the problem....

    Quote Originally Posted by danieledwards View Post
    To me this is grossly unfair as the wheels of the IT industry, and business in general, are greased by middle men.
    It's called business, tulip happens.

    Unfair doesn't really come into it. The agency in this case sees you as a potential threat to their position on the PSL.

    While they might still get their cut this time, they don't want some competing agency (you) getting in the way of their cosy little relationship.

    It's up to you to knock the agency off the PSL or have the client instruct them to let you have a colleague sub-contract through your ltd.

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    Quote Originally Posted by danieledwards View Post
    But it seems when it comes to IT there is a conspiracy to stop you ever capitalising on your network and almost a hogging, to the point of bullying, by agencies to keep the monopoly on any cuts.
    The word in bold indicates your problem.

    If the client was happy to have multiple suppliers or just use you as a supplier then there would be no issue on subcontracting.

    As they refuse to and obviously have some "process" for having a preferred supplier there is nothing you can do if this preferred supplier refuses to play ball.

    Personally I would stop offering people from your network to this particular client as it's clear they don't appreciate it yet. Let the client waste lots of time interviewing and removing poor candidates presented to them by the agency.

    If and when one of these candidates does a big screw up which also threats the agency relationship with your client then offer someone from your network directly to the client.
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    This sounds like a good plan. Having read up on IR35 court cases this would help you expecially as you will be placing contractors at the same client where you are working. Any commissioner looking at the specific case would view your role in placing contractors very positively and I would expect this would reflect favourably towards you having a business relationship with the client.

    Court cases show that the commissioner will take into account related factors beyond the specifics of an indvidual contract to judge whether a contract is in or outside IR35, e.g. that the contractor does have other customers.
    Last edited by BlasterBates; 1st November 2012 at 07:26.
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    Quote Originally Posted by dynamicsaxcontractor View Post
    I have looked into this and been on both end of it, however I can tell you its not worth the hassle unless you make a real business out of it.
    WHS, set it up as a seperate company and run as a seperate business, i know a fella who owns a sandwichmaking business and also an agency, when he requires staff for busy periods for sandwich making he brings them in through his own agency

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    I agree that it's unfair for you not to get a referral fee for introducing other contractors to your client / their preferred supplier. However, my solution to this problem would be to not refer any more of my contacts.

    As for putting another contractor through your books for an entirely separate piece of work (as opposed to as a sub-contract of your existing agreement), to be honest it'd need to be really worth my time to go to the hassle of doing that. I'd need to be taking at least 15% of the contractor involved's fees as profits to make it worth my while to pay for the accountancy and extra time and hassle that having another contractor on my books would involve.

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