IT one person Contract to Managed Service Contract

[NoviceContractor]

Hi All,

I am working for a client for last 5 years via an agency working through my LTD company on a daily rate. My current contract expired 2 weeks back. I have now moved to managed service business and have few employees in my company. I plan to engage with my last client for work which is different to what I have been doing and in a different contract. It will be managed service contract and my company will serve the client on adhoc basis - as and when needed. Since it is managed service contract so I need to sign the contract T&C directly with the client and I can not have any agency in between. I will be bidding for each work separately and the billing to the client will vary from one piece to another.

My contract that expired last week prevents me or my LTD company for working directly with my client for 6 months. How do I come out of this clause to have contract directly with client for managed services?

Really appreciate any help/ guidance I can get on the forum.

Thanks.

[northernladuk]

If the work you offer does not displace the agency or affect their revenue stream then the handcuff will not stand. To stop you working for a client when there is nothing in it for the agent would be an unfair restraint of trade. That said I'd be spending a bit of my future profits on a lawyer just to check that theory is sound.

The problems you could face is that you don't know the scope of the agents business. They may be able to argue that they would have been able to supply someone to do the work you've taken.

The other is the agent kicking up a stink with the client so they just don't want to touch you in case it does go legal (even if they are wrong).

There are things that could be on your side though. The agent may never find out or your relationship is good enough with the client to ask them if they will support you and strong arm the agent if they start moaning. I would be nervous about getting in to that with a new client though.

Does whoever you are going supply the work to know about your previous relationship with the agent? They must be aware a handcuff exists so if they are continuing to speak to you maybe they aren't worried?

[NoviceContractor]

Thanks northernladuk.

I have good terms with the Agency owner. I have managed to bring down their commission previously from 20% to 10% and in a not so recent chat he has shown willingness to go further down but not willing to let me go. I know how much the client is paying so there is complete transparency there.
The client will not engage with me directly until the Agency let me go and the client does not want to work with me in managed services contract basis if there is anyone in between as this is not how the Managed Services Contract works. There are SLAs and Financial Penalties that I will be directly liable for and no agency will be willing to take that risque.

My only concern is that how do I convince the agency to come out of it and not think that I might still be doing contracting with the client by the disguise of Managed Services Contract. I am not in a position to pay anything to agency to let me go as I do not know how much I will make with the client as it will be adhoc work. I will certainly be not making as much as I was making earlier. I will be surprised if I made even 50% of it but how the agency will be convinced that I am not trying to bypass them?

If the work you offer does not displace the agency or affect their revenue stream then the handcuff will not stand. To stop you working for a client when there is nothing in it for the agent would be an unfair restraint of trade. That said I'd be spending a bit of my future profits on a lawyer just to check that theory is sound.

The problems you could face is that you don't know the scope of the agents business. They may be able to argue that they would have been able to supply someone to so the work you've taken.

The other is the agent kicking up a stink with the client so they just don't want to touch you in case it does go legal (even if they are wrong).

There are things that could be on your side though. The agent may never find out or your relationship is good enough with the client to ask them if they will support you and strong arm the agent if they start moaning. I would be nervous about getting in to that with a new client.

Does whoever you are going supply.l work to know about your previous relationship with the agent? They must be aware a handcuff exists so if they are continuing to speak to you maybe they aren't worried?

[northernladuk]

Could you put your reply after the quote so we can read the context before your reply. It's hard to follow, particularly on a phone, other lines wise

[northernladuk]

Thanks northernladuk.

I have good terms with the Agency owner. I have managed to bring down their commission previously from 20% to 10% and in a not so recent chat he has shown willingness to go further down but not willing to let me go.

I'm not bloody surprised they won't let you go. They've pulled your pants well and truly down with the 20% and even though you know what the client is paying you are happy to let them take 10% for 5 years? They must be laughing their tits off.all the way to the champagne bar.

The client will not engage with me directly until the Agency let me go and the client does not want to work with me in managed services contract basis if there is anyone in between as this is not how the Managed Services Contract works. There are SLAs and Financial Penalties that I will be directly liable for and no agency will be willing to take that risque.

So tell the client to contact the agency saying they want you to work for them now. If the agent wants any more business from the client they'll forget the handcuff. If the agent knows he's not losing any money anyway he'll fold faster than a pack of cards.

My only concern is that how do I convince the agency to come out of it and not think that I might still be doing contracting with the client by the disguise of Managed Services Contract. I am not in a position to pay anything to agency to let me go as I do not know how much I will make with the client as it will be adhoc work. I will certainly be not making as much as I was making earlier. I will be surprised if I made even 50% of it but how the agency will be convinced that I am not trying to bypass them?

You get the client to do it for you with any future business on the line.

When you say bypass them that would indicate to me they have a sniff at the work. You need to be super clear here as this is what it all hinges on. If the agent won't lose any money with your new setup then handcuff will not stand. If you are indeed taking money out of their pocket the handcuff is as solid as a rock.... Unless the client can strong arm then.

I'm not sure if it's just not coming over in your posts but it sounds like you don't really know or are trying to understand the full situation so are losing the upper hand.

[northernladuk]

How much do you know about IR35 by the way?

[NoviceContractor]

So tell the client to contact the agency saying they want you to work for them now. If the agent wants any more business from the client they'll forget the handcuff. If the agent knows he's not losing any money anyway he'll fold faster than a pack of cards.

The agent will not get any new business from the client in future and the client is not willing to make any false promise as the client is no longer looking to take any Contractor on board in UK. In fact, they never took anyone else in last 5 years other than me.
The client is not willing to talk to the agency. They have left it for me to sort out. If I want business from the client than I need to work out with the Agency myself. The client has many other suppliers for Managed Services so they are not really bothered much. Its me who is trying to generate some business here.

You get the client to do it for you with any future business on the line.

When you say bypass them that would indicate to me they have a sniff at the work. You need to be super clear here as this is what it all hinges on. If the agent won't lose any money with your new setup then handcuff will not stand. If you are indeed taking money out of their pocket the handcuff is as solid as a rock.... Unless the client can strong arm then.

The Agent will of course loose money as the client will pay me directly. So I do not want any arrangement without the agency agreeing to come out of it.

I'm not sure if it's just not coming over in your posts but it sounds like you don't really know or are trying to understand the full situation so are losing the upper hand.

You are right. I am trying to understand how I can deal with this situation. I have not spoken with the Agency yet but will do it today.

[NoviceContractor]

How much do you know about IR35 by the way?

What relation IR35 has here? This will be managed service contract and I will have few workers from my company supporting the client along with my self. I will be serving other clients too at the same time.

[northernladuk]

The agent will not get any new business from the client in future and the client is not willing to make any false promise as the client is no longer looking to take any Contractor on board in UK. In fact, they never took anyone else in last 5 years other than me.
The client is not willing to talk to the agency. They have left it for me to sort out. If I want business from the client than I need to work out with the Agency myself. The client has many other suppliers for Managed Services so they are not really bothered much. Its me who is trying to generate some business here.

So if the agency isn't going to make another penny then the handcuff won't stand. You are all clear as far as I can see.

The Agent will of course loose money as the client will pay me directly. So I do not want any arrangement without the agency agreeing to come out of it.

You've just said the agency won't make any more money and now you say the agency will loose [sic]. I wish you'd make your mind up or get a better understanding of your situation.

You are right. I am trying to understand how I can deal with this situation. I have not spoken with the Agency yet but will do it today.

From what you've said I wouldn't bother. I'd be speaking to a contract lawyer just to get their opinion as to whether the handcuff will stick or not first.

[northernladuk]

What relation IR35 has here? This will be managed service contract and I will have few workers from my company supporting the client along with my self. I will be serving other clients too at the same time.

Yeah but you've still got 5 years of risk hanging over your head. They say IR35 isn't directly related to time but I'd say in a large majority of cases people don't keep their eye on the ball and make it a risk.