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Consultancy witholding 20% of each invoice in new contracts

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  • LondonManc
    replied
    Originally posted by perplexed View Post
    I'm happy to be proven wrong, but not sure it's something that would help one iota.

    Smacks to me more of incentivisation to prevent contractors leaving contracts than anything else.
    Excellent point and far more cunning than a no-notice clause. As soon as the first contractor does not get their 20% for no valid reason, the noise and avoidance of the client would be too much.

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  • BigDataPro
    replied
    I recently accepted extension with similar conditions. Consultancy & Govt Client. Retained 20% will be paid based on deliverables. I was perfectly comfortable accepting it, rather than being 'inside' or 'jobless'

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  • perplexed
    replied
    I'm happy to be proven wrong, but not sure it's something that would help one iota.

    Smacks to me more of incentivisation to prevent contractors leaving contracts than anything else.

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  • perplexed
    replied
    Originally posted by eek View Post

    See the CEST criteria for a contract being outside IR35 - one of the criteria is financial risk.
    Every invoice you submit carries financial risk, ie agency going into liquidation.

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  • MonkeysUncle
    replied
    I have spent the last 4 years bouncing around public sector (NHS Trusts and Council) and never come across this.
    I did have something similar in my second contract which was for a large rail/transport company.
    It wasnt based on performance but rather 10% was kept provided I stayed till the contract end and didnt leave early.
    As someone who was starting out in the contracting world I was happy to get that second contract so quickly that I took it.
    Stayed till the end of the project and got the 10% 'bonus' at the end.

    Looking back now, with more experience and knowledge under my belt, I wouldnt go for it again.

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  • SussexSeagull
    replied
    If it is an attempt to make contractors act more like external suppliers with a view to helping towards IR35 then well worth exploring. However being a tester I have been involved in too many projects that are already late before you have the chance to start test execution (and have seen developers either twiddling their thumbs waiting for requirements to be signed off or having to make changes after someone changes their mind).

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  • LondonManc
    replied
    OK, so budget taking the 80% and would you still accept the contract? If you're after 600 per day, quote 750 as your day rate. Moving goalposts still gets you your original figure and you can set precedents arguing the toss.

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  • simes
    replied
    Might take contractors closer to being consultancies that are always subject to penalty clauses etc. If it's enough to move the IR35 dial, I'd be fine with it.

    But, it would have to be deliverable based and not some arbitrary clock watching scheme.

    Might work.

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  • Andy Hallett
    replied
    I've seen this before as a completion fee. If you don't finish the project within the given criteria you won't get it etc.

    Has been quite rare though I suspect may become more common as agencies search for silver bullets.

    Personally educating clients and contractors around substitution, MOO and PandP should yield a more consistent result.

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  • CalmEddie
    replied
    Originally posted by eek View Post

    See the CEST criteria for a contract being outside IR35 - one of the criteria is financial risk.
    Might be a stronger point if you couldn't invoice 20% until the end, but otherwise it's just payment terms. Genuine financial risk has unknowns, like whether capital expenditure and training etc will result in increased revenue. The terms of a contract are predictable on the basis that everything is written down and your exposure to the investment of your time is limited to 20%.

    As to what this is, it's reminiscent of snagging in the construction industry. Burden of proof would be with the consultancy to evidence that work was not to standard, rather than contractor has to prove it was, unless the contract wording stated otherwise. One for a legal professional probably.





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