First contract question

[kevinlam]

Hi all,

At last... after searching for 2 months. I have secured my first contract in an IB. I have a few questions which I need help with...

1) I have received a "framework agreement" from the agent which I believe means the usual agreement template, the agent told me that "The framework agreement is valid for 12 months"??? What does that mean? But my contract is a fixed term 6 months project.

2) He mentioned that the reciprocal notice period is 30 days, so both parties have to give a month notice? Is that a bit long?

3) I am going for umbrella as this is my first contract and I am not sure how this will work out. But I am hoping to setup my own LTD if I had a second contract after this. What is the best way to have it done? Would there be alot of hassle trying to negotiate terms with the agent rather than have the umbrella to overlook the process?

4) I am a bit confused about invoicing even after looking at several sites related to contracting. In my case, parasol provides me with a online timesheet system, is that the only thing that I need to do and the brolly will do the rest i.e. getting it signed by the company? Is there a different timesheet at the company which I need to fill in as well?

Thanks.

[TykeMerc]

1) Without seeing it, it's impossible to tell. It could well be a standard (if there is such a thing) one, the 12 months could be an error/typo, ask the agent would be my first reaction.

2) No pretty ordinary, although it's common these days for the contractor not to be able to give notice.

3) There are heaps of company formation agents that charge under £50 to set up a new Ltd, many of the contractor favoured accountants provide that service too, you can even do it yourself with the forms from Companies House. Negotiation with agencies isn't difficult (in my opinion) but I'm a Project Manager so negotiation is bread and butter to me, to be honest it's not difficult for anyone.

4) The agency will have a timesheet which they expect to see signed before they will accept an invoice. Some (most in my experience) clients also have their own internal timesheets for internal cost tracking purposes.

Best of luck with your contracting venture, it suits some of us very well

[Wanderer]

Great answer by TykeMerc there.

1. I'm not sure what the agent is on about here. Perhaps they are trying to tie you in to using them for 12 months or perhaps it's a general statement of their terms of business which is valid for 12 months (should you still be doing business with them) rather than indefinitely. Ask the agent to clarify (in writing) what this is about.

2. Notice sounds OK, sometimes you can't give any notice and you get all sorts. At least it's not one sided (though you should have your contract IR35 reviewed before you switch to LTD).

3. If you've been offered and accepted a contract then you've already negotiated the terms! If you run a LTD company then it's not so different so don't worry. If you get to within 4 weeks of the end of this contract and you decide that you want to go LTD then consider joining the PCG. They can kick start you with a properly formed company, bank account, contract templates, insurance (currently covered by the umbrella) and an accountant who can advise you and get you setup for VAT/PAYE.

4. One of the first things to do is to ask the agency how to do all this - it will be simple but everywhere is a bit different. Most likely, the client will have a time sheet system where you enter your hours and get it approved by the manager. Depending on the system you may then forward this to the agency or umbrella. If the agency operate "self billing" then they will raise an invoice for you, otherwise you may have to send an invoice along with your time sheet.

A couple of things to look for are:

What are the payment terms?
Do you get paid weekly or monthly? (go for weekly if you can especially if the payment terms are monthly!)
Did you "opt out" of the agency regulations? If you did then make sure you withdraw the opt out before you sign any extensions to the contract.
Does the client know how much you are being paid? Tread very carefully here because so of them think it's strictly between you and the agency but others will tell you what they agreed with the agency so they know the agency isn't robbing you which is a favourite trick with the new boys and girls.

[kevinlam]

Thanks for both of your advices, they are really helpful!

The payment term is monthly as it stands, would I be able to have it negotiated as monthly?

What do you mean by opting out of the agency regulations?

I think I am being ripped off a little as this is an IB job pays only £450/day, which I think may be the agent is swallowing an extra margin of 50-100/day. But as my first contract, I think it's normal, but I am sure will ask for more as I finish my first contract

I am actually thinking of going for LTD now rather than brolly as it makes quite a bit of difference in terms of bring home...

But,

1) does that mean i need to send invoice to the agent myself? I havent a clue how to do that... I am going for the managed company route.

2) The managed company 's accountant ask me to set an income for myself, what do you usually say? isnt is best to have most things in dividen?

[cojak]

Please do your research before using a MSC

Managed Service Company legislation - an overview of Managed Service Companies :: Contractor UK

I suspect you'll be back to us crying if you don't...

[NotAllThere]

...

1) does that mean i need to send invoice to the agent myself? I havent a clue how to do that.....

In the hope of encouraging someone to go ltd... it's really easy. You get a word processing package like word, you create a document, you put the appropriate legally required information - VAT number, the word "Invoice", things like that, plus other things you might think are necessary, and things your agency require (like, project reference numbers or suchlike). Print it off,pop it in the post and wait for it to be paid.

To help you in these things, find a contractor friendly accountant.

I started contracting in 1995. Before t'internet really got going. Somehow I managed to do it all! And I still get confused between what's a debit and what's a credit.

[kevinlam]

Please do your research before using a MSC

Managed Service Company legislation - an overview of Managed Service Companies :: Contractor UK

I suspect you'll be back to us crying if you don't...

Sorry, I think I didn't mean what I said. By "Managed company", I meant having the account managed by clearsky.

Regards,
Kevin

[TykeMerc]

As NAT said generating invoices is ludicrously easy, I do mine in Excel. I can even send you an invoice blank (as could most of the Ltd contractors on CUK) to get you going.

[Wanderer]

The payment term is monthly as it stands, would I be able to have it negotiated as monthly?

Negotiate what ever you can! Tell them your payment terms are 7 days and you will invoice them weekly. They may refuse to meet these terms in which case you have to negotiate, compromise or walk away from the deal if you don't like it. In business these things are all negotiable.

What do you mean by opting out of the agency regulations?

The agency will send you a form to sign saying that you wish to "opt out" of the "conduct of employment agencies and business regulations 2003". You are not obliged to sign it and I recommend that you don't (just say "no thanks" to the agency). Have a read of this article which presents an opinion that I agree with Opt-in, opt-out?Legal specialist Egos comments :: Contractor UK. Others may disagree, it's been discussed on this forum a bit.

I think I am being ripped off a little as this is an IB job pays only £450/day, which I think may be the agent is swallowing an extra margin of 50-100/day. But as my first contract, I think it's normal, but I am sure will ask for more as I finish my first contract

"only £450". I don't know your skill set or experience but that's reasonably good money.

I am actually thinking of going for LTD now rather than brolly as it makes quite a bit of difference in terms of bring home...

1) does that mean i need to send invoice to the agent myself? I havent a clue how to do that... I am going for the managed company route.
2) The managed company 's accountant ask me to set an income for myself, what do you usually say? isnt is best to have most things in dividen?

1) Invoices are simple enough. I'm sure you've seen plenty of invoices in your time, you just have to make up one of your own. Ask your accountant to give you a template, if they are worth their salt then they will have one you can use. Failing that, you can knock one out in Excel or give us a shout and someone will give you a pointer. You then email it or print it and post it to the agency along with your timesheet. Simples.

2) Tell the accountant you want to take a minimum wage (about £7,475 for this year I think, they will understand what you are doing and advise the correct amount) and the rest as a dividend. If you have a spouse or partner who doesn't work then you may be able to give them shares in the company and split your income to avoid paying higher rate tax. Ask your accountant about that if it's applicable.

If you are going LTD then understand IR35, get your contract reviewed and ask your accountant about registering for VAT and what the Flat Rate Scheme is. If they are any good they will tell you about this without being prompted anyway.

[The Agents View]

I think I am being ripped off a little as this is an IB job pays only £450/day, which I think may be the agent is swallowing an extra margin of 50-100/day. But as my first contract, I think it's normal, but I am sure will ask for more as I finish my first contract

Even at £100 margin per day, you're not being ripped off. My best guess, would be that the agent is charging £525 p/d - which is about 15% margin - below average in IB in my experience - If you're going through one of the big boys (Randstad, Capita, SThree etc) they're probably charging far less.

Good luck with the move.