End Client Education Question

[jammer]

Ahhhhck

So I'm not currently in a contract. My last one ended in December and I started looking for my next one a couple of days ago.

Cue recruiter insanity and ushering in my new role as my own receptionist ...

So I get a call about a seriously interesting opportunity but its a permie role. Having said that, the company has been really struggling to find someone. They've been looking since November 2019 believe it or not. I have a few ideas why they have struggled. Nothing onerous about the job or company, just the tech they use and their geography. Basically, there is one very large company in their city that I know more or less hoovers up all the available resources.

Anyway, I convinced the recruiter that he should have a conversation with his client about using my services and we started the initial steps in that process. I already know the end client are really interested in me and I know they are struggling to find someone. The recruiter has told me that they are concerned about IR35 and since they don't and haven't used contractors it's really not something they've done much self-education on. Which is a fair situation for them I think.

So I ran over some high level IR35 stuff with the recruiter. He really isn't aware of any of it or what it means etc - basically the usual poorly educated recruitment consultant. To be fair to the chap, he's pretty young and has only just started doing IT recruitment. I'll cut him some slack for that.

I guess my question here is about the tact I can take to educate the end client and elliviate some of their concerns. There is a great oppotunity for me here and I'd like to hit all the main points about how we can arrange it to be outside IR35 and help us both out.

What would you guys suggest?

To my mind the obvious place to start is with the exemptions around the Companies Act 2006 categorisation of their business. They may well be exempt without even knowing it. They just need to be mindful of this categorisation over previous years and forecasts for next year not changing this status during any engagement. They aren't part of any larger business either so I think some of the concerns around this categorisation (such as Assets before liabilities figures etc on the balance sheet assests rule) shouldn't be too over-complicated to decide on.

I guess the real complication here is the fact that the "size of a business" is also a retrospective thing in accounting terms whereas our reality during an engagement is essentially "in the future". For instance they are nowhere near 50 people or assets of £5.1m but they are nudging towards the £10.2m turnover according to filed accounts. Basically, as far as I can tell from the cursory research I've done they are exempt based on all three of the rules historically but may soon breach the turnover rule. But they only need to hit two of those rules.

Going beyond that, if it turns out they are caught by the legislation I'd like to hit all the right points as succinctly as possible so we can arrange things to be outside IR35.

Any advice from the more experienced here would be really appreciated.

This is quite a unique situation for me I've not been in before.

TIA,

J

[CosmicWave]

Ahhhhck

So I'm not currently in a contract. My last one ended in December and I started looking for my next one a couple of days ago.

Cue recruiter insanity and ushering in my new role as my own receptionist ...

So I get a call about a seriously interesting opportunity but its a permie role. Having said that, the company has been really struggling to find someone. They've been looking since November 2019 believe it or not. I have a few ideas why they have struggled. Nothing onerous about the job or company, just the tech they use and their geography. Basically, there is one very large company in their city that I know more or less hoovers up all the available resources.

Anyway, I convinced the recruiter that he should have a conversation with his client about using my services and we started the initial steps in that process. I already know the end client are really interested in me and I know they are struggling to find someone. The recruiter has told me that they are concerned about IR35 and since they don't and haven't used contractors it's really not something they've done much self-education on. Which is a fair situation for them I think.

So I ran over some high level IR35 stuff with the recruiter. He really isn't aware of any of it or what it means etc - basically the usual poorly educated recruitment consultant. To be fair to the chap, he's pretty young and has only just started doing IT recruitment. I'll cut him some slack for that.

I guess my question here is about the tact I can take to educate the end client and elliviate some of their concerns. There is a great oppotunity for me here and I'd like to hit all the main points about how we can arrange it to be outside IR35 and help us both out.

What would you guys suggest?

To my mind the obvious place to start is with the exemptions around the Companies Act 2006 categorisation of their business. They may well be exempt without even knowing it. They just need to be mindful of this categorisation over previous years and forecasts for next year not changing this status during any engagement. They aren't part of any larger business either so I think some of the concerns around this categorisation (such as Assets before liabilities figures etc on the balance sheet assests rule) shouldn't be too over-complicated to decide on.

I guess the real complication here is the fact that the "size of a business" is also a retrospective thing in accounting terms whereas our reality during an engagement is essentially "in the future". For instance they are nowhere near 50 people or assets of £5.1m but they are nudging towards the £10.2m turnover according to filed accounts. Basically, as far as I can tell from the cursory research I've done they are exempt based on all three of the rules historically but may soon breach the turnover rule. But they only need to hit two of those rules.

Going beyond that, if it turns out they are caught by the legislation I'd like to hit all the right points as succinctly as possible so we can arrange things to be outside IR35.

Any advice from the more experienced here would be really appreciated.

This is quite a unique situation for me I've not been in before.

TIA,

J

So, you are saying ... your potential client is making millions in revenue, and have no clue about the law of the land that is going to potentially apply to their business in a few days time

Wonderful client! I wonder if they even have any HR / legal teams in place working for them. Shameful.
I would happily stay away from these lot any day!

[cojak]

I would continue with the venture and see where it takes you. You don't have to sign anything if you don't like it.

Nothing ventured Rodders...

[jammer]

So, you are saying ... your potential client is making millions in revenue, and have no clue about the law of the land that is going to potentially apply to their business in a few days time

Wonderful client! I wonder if they even have any HR / legal teams in place working for them. Shameful.
I would happily stay away from these lot any day!

Well I think that would be throwing the baby out with the bath water personally.

I've not actually spoke to anyone in the client business, so all my comments about their understanding at the moment is pure conjecture on my part. I'm doing prep work here based on worst case scenario. They may well have a much better understanding.

And like I said, they have not and do not use contractors, at all. With all the other pressures and demands on time I don't really find it surprising that they the may not have paid much attention to a piece of legislation that their business doesn't touch.

Hell, there is enough misunderstanding of IR35 in businesses that DO USE contractors.

[jammer]

I would continue with the venture and see where it takes you. You don't have to sign anything if you don't like it.

Nothing ventured Rodders...

This is exactly my thinking. So worth exploring since I have a dialog opening up with them.

[Lance]

<snip> since they don't and haven't used contractors it's really not something they've done much self-education on. Which is a fair situation for them I think.

If they don't use contractors then the threat of a blanket determination is non-existent.

It's up to them to understand what they need to do to get you.
I'd suggest that they call QDOS/Bauer and Cottrell and ask them what's what. It might cost them but it will cost less to get a sensible outside determination than to pay the extra costs of employing you.

In the meanwhile use some of the IPSE guides to help educate the agency.

[Lance]

So, you are saying ... your potential client is making millions in revenue, and have no clue about the law of the land that is going to potentially apply to their business in a few days time

Wonderful client! I wonder if they even have any HR / legal teams in place working for them. Shameful.
I would happily stay away from these lot any day!

It's not a problem if they don't use contractors.

[CosmicWave]

It's not a problem if they don't use contractors.

I agree, that is possibly true, hence I said "Potentially".

Having said that, the OP clearly has no idea about anything of the client's... he says this:
I've not actually spoke to anyone in the client business, so all my comments about their understanding at the moment is pure conjecture on my part.

Given that, it is unreasonable to assume that he knows the client's internal HR setup etc in detail, and hence assuming that they do not employ any contractors is not going to be a fact.

I was putting my comments in the OP's general interest in a very risk-averse viewpoint, rather than seeing him one day come back to this forums and say he has been burnt by the client vis-a-vis the new IR 35 aspects, et al, and we should have hinted him on the risks etc.

Just my 2 pence of being cautious for the future , and then its up to OP to take all the risks, if he wants to go that route - which is clearly what it looks like his thinking is, based on his reply above.

[WordIsBond]

Know the rules on small business vs medium/large.

If they are small, all is cool, you take responsibility, no issues.

If they aren't small, and they are clueless, and are willing to discuss it all with you, here's what I'd do.

I'd be prepared to sit down with them with CEST, and say, "This is the terms on which our company will provide its services to your company. If you aren't prepared to accept those terms, then you need to hire an employee." Cover the substitution and SDC criteria, and say, "These are the terms under which we work." Show them how it gives an outside determination.

Then, flip the substitution answer to "no substitutes" and show how you still get an outside determination. Then, flip it back to subs and change the supervision/direction/control answers to show you still get an outside determination. So your business will engage with them on terms that are doubly outside and there really is no risk as long as they agree to those terms.

[hairymouse]

I'd imagine that if you are trying to convince a company that has never used contractors before to suddenly start using one, the biggest challenge is going to be the rate, not IR35. If they are used to underpaying permies, they are going to have a heart attack when you tell them you want £500 per day. The hiring manager is going to multiply 500 x 280 and come up with £140,000 and compare that with the £50,000 he is getting paid and laugh you out of the room.

If this company doesn't understand enough about the contract market to get IR35, they certainly don't get why daily rate does not equal salary.

Also, I would imagine the real reason that position has remained open so long is because the salary is too low. I'll accept a lot of things from potential clients, but not valuing the job enough to pay at least the market rate is a major red flag.