Urgent: Help required on Contract and Subcontract

[VipinServices]

Hi experts,

I need your help urgently to make a contract structure. I am consulting/contracting from last 4 years from my Limited company (e.g. ABC Limited). I got a client who want to associate with my Limited company for a milestone based delivery model. It is going to be a big peace of work, for which I required 3-5 more persons. How should I structure the contracts:

1. Client -> ABC Limited (my Limited Company) -> Contractor Limited Company (XYZ Limited) -> Contractor to Client
2. A. Client -> ABC Limited (my Limited Company) -> Recruitment Agency
B. Recruitment Agency -> Contractor Limited Company (XYZ Limited) -> Contractor to Client

Which structure, I should choose either of one mentioned above or recommend some other? Is it Sub-contracting? If I will go with Option 1, is there anything ABC Limited (my Limited Company) insurance and specially regulation I need to take care about?

[northernladuk]

I'm a little concerned you seem to be out of your depth you are here.

Two options mention recruitment agent and one doesnt. Surely you must know what your relationship with all these groups are. You can't progress if you don't, as you can see.

If you are confused about which players are in the chain I can't see how we are going to help.

[ladymuck]

Your options do seem a bit confused.

Are you currently working directly with the client or via an agency?

If the latter then it's very likely the agency contract will have a clause about introducing people to the client without them taking a cut. Check your contract.

If you are direct then you can:
1. Take on employees and supply them to the client
2. Take on contractors and supply them to the client
3. Find the contractors for the client but each has a direct contract with the client
4. Find an agency to supply the contractors and handle the paperwork

1 and 2 leave you at risk as you'll be required to have funds to pay your staff/contractors according to the terms you agree with them and you'll be responsible for their work and managing the overarching contract. Watch out for scope creep (happening in my current gig on a massive scale).

3 is unlikely to be taken on by the majority of clients but if they did then you could charge a one-off finders fee and then leave the details to the client and contractor to thrash out

4 is a safe option that could earn you a finders fee but keeps you free of cashflow and contractual issues.

I'm sure others will have different opinions.

[malvolio]

The quick answer is to take on the extra staff either as payroll or as sub-contractors. Payroll is difficult for all the reasons people use contractors, not least being a shedload of legal obligations and what happens when the work dries up (as it will...).

So use subcontractors, where you can safely offload all the legals to their companies (or their umbrellas).

But you absolutely must nail down payment terms from the client so you are not left exposed, and with the subbies so they don't sue for breach if the client stuffs up (which they will). 5 subbies on average rates will mean you paying out around £8-10k a week and that has to come from somewhere.

Finding the subbies is up to you - but I would try your network before going to an agency unless you know one that will do you a favour.

And make sure you get the costing right before you sign anything.

[Paddy]

Hi experts,

I need your help urgently to make a contract structure. I am consulting/contracting from last 4 years from my Limited company (e.g. ABC Limited). I got a client who want to associate with my Limited company for a milestone based delivery model. It is going to be a big peace of work, for which I required 3-5 more persons. How should I structure the contracts:

1. Client -> ABC Limited (my Limited Company) -> Contractor Limited Company (XYZ Limited) -> Contractor to Client
2. A. Client -> ABC Limited (my Limited Company) -> Recruitment Agency
B. Recruitment Agency -> Contractor Limited Company (XYZ Limited) -> Contractor to Client

Which structure, I should choose either of one mentioned above or recommend some other? Is it Sub-contracting? If I will go with Option 1, is there anything ABC Limited (my Limited Company) insurance and specially regulation I need to take care about?

Presumably you are being paid substantially for this work then go to either a solicitor or public access barrister who specialises in drawing up contracts. £1,000 or £2,000 now may save you much more in the long run.

Barrister Directory – Direct Access Barristers Online

[VipinServices]

Helpful.

I am directly engage with the client. And I can go with Option 2 (Take on Contractors and supply them to the client) or Option 4 (Find an agency to supply the contractors and handle the paperwork).

How much headache will be if I will go with Option 2? Is there any regulation I need to take care?

How much the agency with (option 3) will cost me? I know some of the persons, so I can save on finding fee. The agency need to handle the legislation part. Any known agency?

Thanks.

Your options do seem a bit confused.

Are you currently working directly with the client or via an agency?

If the latter then it's very likely the agency contract will have a clause about introducing people to the client without them taking a cut. Check your contract.

If you are direct then you can:
1. Take on employees and supply them to the client
2. Take on contractors and supply them to the client
3. Find the contractors for the client but each has a direct contract with the client
4. Find an agency to supply the contractors and handle the paperwork

1 and 2 leave you at risk as you'll be required to have funds to pay your staff/contractors according to the terms you agree with them and you'll be responsible for their work and managing the overarching contract. Watch out for scope creep (happening in my current gig on a massive scale).

3 is unlikely to be taken on by the majority of clients but if they did then you could charge a one-off finders fee and then leave the details to the client and contractor to thrash out

4 is a safe option that could earn you a finders fee but keeps you free of cashflow and contractual issues.

I'm sure others will have different opinions.

[VipinServices]

Thanks, I am also planning for Sub-contractors. Shall I hire contractors from my Limited Company or Agency? Which one you prefer?

The quick answer is to take on the extra staff either as payroll or as sub-contractors. Payroll is difficult for all the reasons people use contractors, not least being a shedload of legal obligations and what happens when the work dries up (as it will...).

So use subcontractors, where you can safely offload all the legals to their companies (or their umbrellas).

But you absolutely must nail down payment terms from the client so you are not left exposed, and with the subbies so they don't sue for breach if the client stuffs up (which they will). 5 subbies on average rates will mean you paying out around £8-10k a week and that has to come from somewhere.

Finding the subbies is up to you - but I would try your network before going to an agency unless you know one that will do you a favour.

And make sure you get the costing right before you sign anything.

[malvolio]

Thanks, I am also planning for Sub-contractors. Shall I hire contractors from my Limited Company or Agency? Which one you prefer?

Not sure I understand. They will be working for your company. The agency is merely a middleman to help (cough...) with the finding and hiring. They will want a contract in place between you and them and another contract (which may or may not align to the one you have with them) for each contractor. And they will charge 10-30% of the day rate for the privilege for the duration.

If you can find people yourself and take them on under something like the IPSE standard contract, it will be a little easier. There are plenty of people out there looking for work after all.

[VipinServices]

Thanks. Where can find a well written template for Sub-Contract? If I want to issue myself in place of going via agency.

I looked at QDOS Consulting
IR35 Contract Templates - IR35 Resources - Qdos Contractor

They have only direct with client or from recruitment agency. In my case, contractor will work for client on behalf of consulting company. Any recommendations?

Not sure I understand. They will be working for your company. The agency is merely a middleman to help (cough...) with the finding and hiring. They will want a contract in place between you and them and another contract (which may or may not align to the one you have with them) for each contractor. And they will charge 10-30% of the day rate for the privilege for the duration.

If you can find people yourself and take them on under something like the IPSE standard contract, it will be a little easier. There are plenty of people out there looking for work after all.

[malvolio]

You could start from here...