Substitution advice

[sheik yerbouti]

Hi,

Wondered if anyone could give advice.

My limited company is currently in a Business to business contract with an agency to supply IT services to a company. My company has an "IR35 friendly" contract, so to speak, which includes a clause to enable me to supply a substitute. I have been in this contract position for the last 3 years, and have just been granted a further years extention.

I am looking to move on and place a substitute in my place of similar or higher qualifications.

As I said, my contract has the right of substitution, and I have seen a copy of the contract extension between the agency and the end client - this does not name an individual, only "An individual to supply IT services". My name is not mentioned anywhere.

Now, I can imagine that the company would not approve of me putting a substitute in place and may try to block it. From the information I have given, do you think I may have a legal standpoint to fight this if they kick up a fuss? Would there be a "repudiatry breach of contract" if they disallowed it?

Wondered if anyone had seen this crop up before.

Thanks

[The Wikir Man]

Depends on the exact wording of your contract. Some may way, for example, that you can provide a substitute with the agreement of the client. Some might add "which will not reasonably be refused", some might not. Without knowing what the contract actually says, it's hard to know whether you even have a right of substitution or not.

Assuming that you have that right, and you have a suitable replacement available, then you need to manage that situation with the client. You need to be able to prove that you aren't just foisting someone on them - you have found someone who is more than capable of doing the work, etc. etc. You might need to offer a couple of days free time to ensure that (s)he is doing it right; you might need to offer to be at the end of the phone if they need help.

If the client does not accept the situation, then you need to decide what you want to do. Firstly, they have made an IR35 defence significantly harder to mount successfully. Secondly, they may be in breach of contract - remember that your contract is with the agency. Unless you know the details of the client to agency contract (which I bet you don't), you don't know if the client is in breach of contract or not. At this stage, you need to start getting the agency involved - that is who you have the contract with, so they are the ones that you need to get to accept the substitute, not the client.

[derekM]

In my humble opinion, a substitution clause is next to useless in the world of IT contracting, and I imagine in other arenas as well.

The contract could be absolutely watertight in the wording to allow you to do that, but all the client needs to say is "fine, but either you stay, or you are on your X weeks notice" which they are perfectly entitled to do.

It happens all the time with "real companies". Customer threatens consultancy company to keep consultant on site and accepting no replacement.

I'm sure they exist, but I still haven't any contractor who has done this.

[ChimpMaster]

You're going to leave anyway, right? So the client is going to need to find someone new - they're going to have to go through a recruitment process, which is costly and time consuming.

You're offering the client a pre-vetted, experienced individual, who you will train up so that he* will be able to hit the ground running. With you having supplied the replacement contractor, the client will have an advantage in that you will always be available to answer questions, or to assist whenever he is stuck.

So client can either:-
1. Lose you completely, along with your 3 years experience. Go through an expensive, messy recruitment process. Hire somebody with no knowledge of client systems, and no vetting at your technical level.
2. Accept your substitute, having been pre-trained by you in client environment. Retain you as a backup resource, available by telephone if your sub needs to ask you any questions. Avoid the hassle/risk of hiring another contractor.

I think it's all in how you sell the idea to them. There are far more advantages to the client than one might realise.



* I would say he/she but what are the chances. I mean really.

[xchaotic]

However finding someone of your or higher qualifications, willing to work for less than you, can be sometimes a problem.
What I have found hard in general is people who are "smart AND get the job done"
it's easy to find some with just one of those.

[The Wikir Man]

I'm sure they exist, but I still haven't any contractor who has done this.

[northernladuk]

In my humble opinion, a substitution clause is next to useless in the world of IT contracting, and I imagine in other arenas as well.

The contract could be absolutely watertight in the wording to allow you to do that, but all the client needs to say is "fine, but either you stay, or you are on your X weeks notice" which they are perfectly entitled to do.

It happens all the time with "real companies". Customer threatens consultancy company to keep consultant on site and accepting no replacement.

I'm sure they exist, but I still haven't any contractor who has done this.

I am sure there are exceptions to the rule but I would go along with this. Although we have them in the contracts for IR35 I would be suprised if a large majority of clients would be very unflexible when it came to invoking it. I always assumed it was just window dressing to be honest.

[pmeswani]

* I would say he/she but what are the chances. I mean really.

50/50. Also in UK law, he can also mean she except when explicitly stated as a he.

[Sally BFCA]

Is the ROS clause a third party right? In as much as the worker does not have to be supplied by your limited company and you can sub-contract it to a third party (another limited company contractor)

If not, will you have to employ the worker? This could increase your costs (employers NICs on salary, holiday and sick pay) and also you would have the PI liability, not the worker.

Just a thought to consider.

[The Wikir Man]

Is the ROS clause a third party right? In as much as the worker does not have to be supplied by your limited company and you can sub-contract it to a third party (another limited company contractor)

If not, will you have to employ the worker? This could increase your costs (employers NICs on salary, holiday and sick pay) and also you would have the PI liability, not the worker.

Just a thought to consider.

Plus, if it's a long term thing, it might provide too much turnover to put you out of the fixed rate scheme.