Contractors' Questions: Should I 'OK' changed payment terms?

Contractor's Question: 'I've been in the current contract for about 18 months. I wasn't expecting a renewal this time, so I found something else. It was on a lower rate, but was a longer term gig. I spoke to my customer contact and told them I'd be leaving and they offered me an extension on the spot, so I said OK. They then told me that all contractors were required to take a 10% cut, so I declined, as that puts the other offer in spitting distance of this one, though the client company magically found the cash.

'I've just been contacted by my agency and told that I'm very lucky as everyone else is being forced to take a 10% cut, and they're changing the payment terms from 7 days to 37 days as they can't get financing / factoring, while the client company have extended their payment terms from 60 to 90 days. At the peak worst case scenario I'll be owed 2 months of money should the agency go pop. Should I tell them 'no thanks', as the terms and conditions have changed, and will my handcuff period also be void?'

Expert's Answer: Seven to 37 days is a BIG difference - a factor of 5 in the increased amount at risk. Add to that the fact that the agency say they 'can't get financing / factoring' - which, if true, is likely to mean either (a) the agency can't raise more finance (in which case it is probably already over-exposed), or (b) the agency's factoring company think the client is over-exposed and an unacceptable risk. Add to that the fact that the client is driving this, and so the risks of the client not paying the agency may be increased.

If you have opted out, the provisions in the agency regulations which say that an agency may not make payment to you contingent on them first being paid by the client. And even if you have not opted out, if the client did not pay the agency, the agency might not have the money to be able to pay you - one thing the regulations don't do is create money to cover the cost of complying with the obligations they impose.

The client may 'go pop'. The agency may 'go pop'. Or the client 'going pop' might trigger the agency to 'go pop'. Whichever way you look at it, your exposure is significantly greater, both in likelihood, and in amount.

This will not of itself affect a handcuff period; but if you did not opt out, then any restriction would be unlawful and unenforceable. However, if the client is rocky, similar risks will apply, whoever you go through, or if you go direct.

You might try talking to the client about this; or bluffing it out with the agency. Otherwise, you should assess this offer and its accompanying risks carefully against any other opportunities that may be open to you.

Answer by Roger Sinclair, a consultant for Egos, an IT contractor legal advisory.

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