Due to the emphasis often placed on IR35, contractors may enter into contractual agreements without fully understanding the practicality and implications of the other provisions contained within them. Here are some typical things to look out for before you sign on the dotted line.
The Assignment Schedule
Consultancy agreements between the agency and the contractor, or between the client and the contractor direct, often contain an assignment schedule detailing the specifics of the services to be carried out under the contract. However, being aware of the start and end date and the daily rate does not cover the entirety of your potential obligations under the contract.
It may be that some contracts not only cover the specific assignment to be entered into at the time, but some contracts also cover any ongoing assignments with the agency and/or client (as the case may be), meaning that once the initial assignment is complete you may remain bound by the contract. It is important to be aware of the contractual term of both the assignment and the contract, together with any termination provisions.
There are usually general termination in all contracts of this nature, allowing the agency and/or client to terminate the contract due to breach of contract and insolvency, amongst other things, however prior to entering into the contract a contractor should be fully aware of his rights to terminate the contract and how he would go about doing this.
As well as being satisfied in relation to the daily rate due in consideration of the services, a contractor should also ensure they are content with the payment procedure to be put in place. Most agencies and clients use their own payment systems (to include timesheet and expense reporting systems) and therefore it is important to be aware of the specific process to ensure no payments are delayed going forward.
The majority of contracts of this nature contain express wording setting out when exactly payments may be withheld/delayed and therefore a contractor should ensure they are fully satisfied with their contractual obligations in this regard prior to signing the contract and commencing services.
In addition to the obligations surrounding the payment procedures, there will be other contractual obligations throughout the contract, which contractors are obliged to comply with throughout the entirety of the contractual term. Failure to comply with any contractual obligation would put a contractor in breach of contract, which could potentially result in non-payment and/or termination.
Further, clauses surrounding Government legislation such as data protection and intellectual property may mean that if a contractor does not comply with the same, they could also be breaking the law.
Similar to contractual obligations which remain in force throughout the contractual term, there are also likely to be post-termination covenants which will survive termination of the contract, meaning that contractors remain bound by the same even following termination. In contracts of this nature, post-termination covenants are likely to include things such as non-competition clauses and non-solicitation clauses and, if breached, these can be enforced against you, potentially resulting in damages being sought against you or an injunction.
To assist contractors entering into contracts with agencies and/or clients and to avoid any potential uncertainties or disputes, our friends at Qdos Contractor have launched a new Commercial Contract Check service for contractors, so you can fully understand the commercial arrangements you are entering into and what they mean in practice.
- Tax-efficient life cover - via your limited company. Save up to 50%
- Tide business bank account - £40 joining bonus! - find out more
- Need a new accountant? - compare 30+ specialist firms
- Switch between umbrella and limited - flexible solution from Nixon Williams for contractors affected by the Off-Payroll changes.