Concerning Off-Payroll clause in Contract

[mharris]

Hi there, my first post here. Long time lurker, but this is the first time I have had cause to post and ask a question.

I am just about to sign a new contract and I noticed a concerning clause that stood out as needing some attention.

No variation or alteration to this Agreement will be valid unless the details of such variation are agreed between Employment Business and Contractor and set out in writing and signed by both parties save Employment Business may vary the Off-Payroll status and accordingly vary Contractor fee during Assignment to fulfil its statutory duty.

Now to paraphrase, my initial interpretation of this is: "In a change of Off-Payroll status, we can choose a new Contractor fee for you"
Throughout the contract, "Contractor Fee" relates to my daily rate.

If my understanding is correct, then this seems wholly unreasonable that they should be able to change my daily rate without my agreement.
Also, I'm not sure I follow the logic behind such a clause.. In that a change to off-payroll status would potentially change the tax due on my daily rate, but it would not change the underlying agreed rate itself.

Am I misunderstanding something here? I'm going to attempt to negotiate the removal (or modification) of the second part of the clause, but just wanted some feedback before I do so.

The contract is private sector, outside IR35 (for now).

Cheers all.

[Cirrus]

When I read it, I took it to mean "If we decide to put you inside IR35, we will no longer give you your daily rate but instead give you your daily rate minus statutory deductions". However I agree it is unnecessarily imprecise.

[TwoWolves]

It's an April get-out clause. Either they remove it or define it.

[mharris]

Thanks both. That follows along my assessment of the clause.

My initial feeling was that it is unnecessary because the contract already states elsewhere that "..Where Off-Payroll applies, Contractor acknowledges and agrees that Employment Business shall deduct sums in respect of PAYE Income Tax and National Insurance Contributions.."

Thinking about it a bit more.. I wonder if actually they are trying to wriggle out of, or seek to offset the Employer NI contributions from their end of the fee payers chain by way of a "fee adjustment". Although looking at this other clause again, it doesn't actually specify Employee or Employer NI, so I guess they could bundle Employer NI into their calculated deductions and pass that cost on to me anyway.

[northernladuk]

Are you getting it reviewed by a specialist such as QDOS? If not, why not?

[mharris]

Are you getting it reviewed by a specialist such as QDOS? If not, why not?

Yes of course. No point in sending it off until I myself am happy with the contract though.

[CheeseSlice]

Never been in this situation, but my gut is saying it would be better to terminate this contract if the status should change, and then have an opportunity to define the terms (inc. day rate) of any future engagement under a new off-payroll status.
Would be interested to hear if others have been through this, and what happened to their existing contract..

[DolanContractorGroup]

Thanks both. That follows along my assessment of the clause.

My initial feeling was that it is unnecessary because the contract already states elsewhere that "..Where Off-Payroll applies, Contractor acknowledges and agrees that Employment Business shall deduct sums in respect of PAYE Income Tax and National Insurance Contributions.."

Thinking about it a bit more.. I wonder if actually they are trying to wriggle out of, or seek to offset the Employer NI contributions from their end of the fee payers chain by way of a "fee adjustment". Although looking at this other clause again, it doesn't actually specify Employee or Employer NI, so I guess they could bundle Employer NI into their calculated deductions and pass that cost on to me anyway.

Hi mharris,

The fee payer (either the hirer, or agency if one is in the chain) cannot deduct Employers NIC as part of the deemed employment payment (PAYE). The only way for them to cover this cost (and not eat it themselves) is to lower your daily rate.

Thanks


Zeeshan

[simes]

When is the contract up to? Pre or Post April 2020?

If the discussion/argument between mharris and agency would end up in being a deal breaker, leading to the potential loss of the gig, would there be a suggestion to create a contract without the offending clause to end 31st March? Thereby allowing the gig to progress....

And then, come March when things are clearer, and you're happily in situ, to create a contract specific to the Brave New World?

Might be a way to defer all that we don't know until closer to the time, as opposed to arguing now over the shades of opacity.

[mharris]

The contract does run post April. End of Assignment is 29th May 2020.

There aren't any deal-breakers. The agency is being incredibly accommodating in removing the offending clause. In fact, so accommodating that this actually raises its own concerns. Or rather, highlights the worth of a contract that an agency can get out of so easily should something turn out not in their favour down the line. Either that or the agency has knowledge of the client and is confident they will remain outside IR35 going forward.

Contract is now amended and no mention of changing my contractor fee in relation to a Off-Payroll decision. Thanks all.

Actually while we're at it.. Another related question. I haven't previously given much consideration to AWR clauses in contracts. Now I know that AWR and IR35 are determined separately, but a contract moving inside IR35 would seriously call into question the AWR status. Admittedly I dont know too much about AWR so could someone explain what is going on in this clause:

Where the AWR applies and following the Qualifying Period, Employment Business will use reasonable endeavours to obtain agreement from Client to increase and/or adjust, where applicable in accordance with the AWR, the fees paid by Client to Employment Business for Services of Representative. Upon such agreement and subject always to clause 7, any such adjustment to Representatives fees will be set out and issued within a revised Assignment Schedule under this Agreement.

Why would the agency endeavour to obtain a different rate from the client after the 12 week period? I'm concerned this could potentially be used to change the rate paid to me.

Thanks again.