We were sent this, about restrictive contract clauses in the agency contract, by one of our contractor readers.
Restrictive Contract Clauses
Just been reading through a few of your articles and something in this one caught my eye. It’s specifically, what you said about Restrictive Contract Clauses in agency contracts.
I almost fell foul off this in once. That’s when Sun Microsystems tried to re-hire me via a different agency to the one I originally worked through.
The previous agency managed to piss the Sun management off, through its use of some ‘shady’ practices. So they were replaced by Computer People (CP) as the preferred supplier.
CP told me that they couldn’t hire me. That’s after they told me I had the job. It’s because I previously worked through another agency and Sun didn’t want suing, etc, etc.
At the time I was considering trading via an umbrella company, rather than my Limited company. It was less stress amongst the IR35 FUD that was around at the time. I mentioned this and asked whether it would make a difference.
As I understand things, the contract between supplier and agent is specifically between the contractor (the company, not the person) and the agency.
Since I was no longer going to be working through my own limited company, but through a different umbrella company, the problem went away. Nice.
I think a suitable strategy for agency-referred Contractors trying to build up their businesses is to always take the first engagement through the umbrella company. That way, the agency gets money for carrying out the service it provides to the client and the contractor.
Then, if it looks as though a renewal might be on the cards, the contractor should mention to the client that he or she has their own limited company (or a relationship with another administration company) and that the client need not get stung for the agency’s margin second time around.
Paid for Nothing
First time around, the agent gets money for doing something. I personally think it’s abhorrent that they get money for renewals if they’re doing nothing. I mean, they don’t even provide payroll.
The way I look at it is contractors who get the renewals (if they appear) if they perform well, i.e. by their own, not their agency’s efforts. It’s the restrictive contract clauses which are the problem.
My agency had 4 contracts (not renewals but 4 separate contracts plus renewals) for me.
I sourced the contracts through company networking, yet they still clawed-back 33% margin (£40k+).
The fifth contract they took 20% because I insisted that they had done nothing to get the work.
Restrictive Contract Clauses – Agency Shylocks
Personally, I don’t think IT contractors stand a chance while these shylocks are around, that is unless they start getting sneakier. The clients are a bit daft, too, for allowing the agencies to get away with it.
I note with some glee that when I worked for BT, my line manager had the restrictive contract clauses deleted from the agency’s contract before I signed it. I wish more would do it.