Reply to: Consultancy witholding 20% of each invoice in new contracts

[LondonManc]

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.

[BigDataPro]

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'

[perplexed]

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.

[perplexed]

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.

[MonkeysUncle]

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.

[SussexSeagull]

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).

[LondonManc]

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.

[simes]

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.

[Andy Hallett]

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.

[CalmEddie]

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.

[Lance]

See the CEST criteria for a contract being outside IR35 - one of the criteria is financial risk.

I finished one contract, and had to do half a day remedial work for them. Something unforeseen. Rather than saying no, or making them engage me again, I fixed at my cost. My thinking was this was a clear demonstration of financial risk (a loss in fact).

[northernladuk]

Is this not the same as a permie getting or not getting their bounus.

No.

[jamesbrown]

I've had this in fixed price contracts but never in T&M contracts for obvious reasons - performance is day-to-day, not per deliverable. As far as IR35 goes, I doubt it moves the dial much (it's motivated by commercial reasons related to IR35 rather than the nature of the work and working practices), but it certainly gives the consultancy an opportunity to claw money back.

[mallisarealperson]

Is this not the same as a permie getting or not getting their bounus.

[eek]

Same here, last 3 gigs have been SC cleared roles within government through a consultancy. This is more to do with the consultancy in this case, however I thought that the whole point of status determinations was to clarify if a role was inside or outside IR35? If a role is outside why is it necessary to withold 20% of the contract value just incase?

See the CEST criteria for a contract being outside IR35 - one of the criteria is financial risk.