sub-contracting out to other contractors

[ResistanceFighter]

Apologies if something like this has already been asked - had a quick search and couldn't find anything & to be honest I wasn't sure what to search for as i've not come across this before

Client - small start up - is currently working with me and another contractor and we both invoice separately (or they are doing something else - I dont actually know what setup the other guy has as they are in Europe)

The client is asking if we could switch to me invoiceing them for both of us, and then the other contractor invoice me - their investors dont like that they are using contractors - potential red flag there.

My first reaction is to say No, as thats extra overhead & risk for me to deal with. I'm not against the idea of subcontracting work out, but would rather it be to folk I have interviewed myself & i'm not sure on the implications on them working from another country, currency etc.

Havent discuseed details further, but this could be worth it if a markup was added? - but even then, it still feels like there are too many red flags unless I am missing something.

From an IR35 perspective I guess it further adds to an outside determination.

Am I right to be sceptical?

[northernladuk]

My very first question would be 'What would they do if you say no?'. Personally I wouldn't touch this with a 10 foot barge pole. I'm not usually interested in supplying contractors at the best of times let alone when a client is forcing me to do it to fudge their engagement model. You should be in control of the situation and you aren't here. You are just being used for very little benefit so on that alone it's a flat no for me. Some others might love the idea they can make a few 10's of quid out of it but personally I'm just not interested.

Other things to consider. This is just one contractor. What happens when they need another one? Some might say you've got a chance to be their main source of contractors and there could be an opportunity to capitalise on that but again, personally, I'm not interested in that so might be giving you completely the wrong steer.

You say it adds to the outside determination but if you've no choice wouldn't this be direction and control? They will be telling you what to do when and you have zero control over the situation. Just being devils advocate here. On the whole it wouldn't be a bad flag but something just seems off here so need to think carefully.

I've also no idea how SDS's would work in this situation and where the responsibility lies. Even if it appears not to be you we aren't sure if the responsibility can be passed down the line yet so needs to be investigated and considered.

Absolutely agree on the point about subcontracting people you know.

The only way I'd be getting involved with this is if they were to change their way of thinking and give me a clear requirement that I was then free to fill. If they said we need a full service delivering with different skills and more than one head, left me to deliver it for a fixed price and I was in control of everything then I'd possibly consider it. That would be the proper way to do business and become a managed service supplier. Just shovelling a random contractor through my books? No thanks.

[ladymuck]

What terms would the client pay you on, what terms would you pay the sub-contractors on? What risk are you taking there?

Would you become responsible for the quality of the sub-contractors' work? Does your PII cover this scenario, how much extra would it cost you to uplift your insurance?

I'm with NLUK, I wouldn't touch this with his barge pole.

[ResistanceFighter]

Thanks - I was thinking the the exact same things but just wanted a sanity check - and youve actually raised some things I didnt even think about like the PII insurance

They have asked the question and I haven't responsed yet, there isnt any "you must do this" or any form of control - just feels like they are trying it on for a quick fix to a problem that has cropped up.

[courtg9000]

The risk is very high here. Also, you risk becoming an agency by the back door. Having owned one of those trust me, you don't want that. Whole different ball game, a whole different business model. Could YourCo take any expensive costs in an additional income stream? Not just paying the contractors, but tech costs, finance costs etc.

The investors won't like contractors being involved because of the headline costs involved. Investors tend to ignore the value brought to the project if the costs look to high for them they won't like it and will raise that objection to the management - usually vociferously! I think they probably need to sort out some investor relations exercises. A good lunch or two and a few snazzy graphs should sort that issue out. You and your colleague might want to take 30 mins to sharpen your cv's in case you are asked for them, this could help you with any investor issues.

[TheDude]

Also, you risk becoming an agency by the back door.

Shiny suit, no socks, LinkedIn profile that looks like a Love island audition - job done.