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Contractor Doctor: Am I allowed to use other agencies?

Dear Contractor Doctor,

I’m coming to the end of my first contract since starting out as an IT contractor six months ago. I would like to know what happens once this first contract that the agency found me ends, if there is no extension offered by the client.

When I first applied for my current contract, I was told by the agency that they will look for more contracts for me once the contract ends. But can they stop me from finding a new contract through another agency with a different client? Am I obliged to work only through them on roles they find for me?

Once I have completed a contract, am I allowed to use other agencies?

Thanks

Sandy

Contractor Doctor says:

Unless a contractor has signed an exclusivity deal with an agency, which would be a first for the Contractor Doctor, contractors are free to search for other contracts with other agencies, or even direct with other clients, at any time, even during a current contract.

Contractors are business to business service providers and, as such, are free to market their services to potential new customers, just like any other normal business would. First-time contractors like Sandy must adopt this contractor mindset, otherwise their contracting careers will be short, or at least far less profitable than they could be.

In fact, not only can contractors use other agencies, they must. This is because, although many recruiters tell contractors they are actively searching for new contracts on their contractors’ behalf, in reality the agency business model doesn’t work that way. Contractors should be searching for that next contract all the time.

How agencies work – a short guide for first-timers

In order of priority agencies work first for themselves, then for the end-user client who is their customer that pays the bills, and finally for contractors who are their suppliers. First-time contractors should understand that this prioritisation is not sharp practice on the part of agencies – it’s business.

From the agency perspective, most contractors, particularly in IT and engineering, are commodotised. That means, to recruiters at least, most contractors are interchangeable; one Java developer is much like another; one highways engineer is similar to the next. This is true, whatever the agent may say to the contrary!

This means agencies will seek to fill assignments according to their customers’ [clients’] needs, and not their suppliers’, with whatever supplier [contractor] is available at the time. So, if Sandy is available when a client needs her skills, the agency will place her in the role. If Sandy still has a month left to run on her contract, but the client needs an IT contractor now, then another contractor with the same skills as Sandy will get the role.

When is the right time to seek a renewal, or a new contract?

Ideally, Sandy should start preparing and negotiating a contract renewal about six weeks before the contract ends so she can avoid a late contract renewal. A contract renewal is an opportunity to secure a rate rise, even when the client says there is no budget for rises, but accepting an early contract renewal offer may not provide a rate rise opportunity.

Finding out early if a contract renewal is not an option allows contractors to find a new contract in good time

Even if the client has indicated that a contract will be renewed and they’ve just not got around to processing the paperwork, contractors should be extremely wary of continuing to work on a contract with no signed contract renewal, although contractors between signed contracts should still get paid for the period worked after their current contract expired and before the sate that the renewal contract comes into force.

Finding out early if a contract renewal is not an option allows contractors to find a new contract in good time. Once first-time contractors have learned the basic sales and marketing skills which tell them how to find a contract, they will be much more likely to stay in contract when actively seeking work.

Restrictions on contractors searching for new contracts

Although the Contractor Doctor has yet to have a contractor question about exclusivity deals with agencies, there are frequent questions from first-time, and more experienced, contractors about restrictive covenants in contracts with agencies.

Restrictive covenants are contractual clauses that prevent a contractor introduced to a client by an agency from working directly for that client, and cutting out the agent, for a period of time.

Agencies invest time and effort into marketing and compliance to match the right contractor with a client. In return for this service, they charge the client a margin on top of what the contractor is paid. The restrictive covenant is designed to ensure the agency receives their margin fairly. This is not sharp or anti-competitive practice by agencies – it is simply sound business practice.

The most common question from contractors about restrictive covenants is, ‘are they enforceable?’, and the answer, with only a couple of exceptions, is ‘yes, they are’ if the contractor has agreed and signed the contract. The exceptions are if the so-called Conduct Regs apply, or if the contract is very occasionally unenforceable under contract law due to, for example, unreasonable penalty clauses.

First-time contractors face a steep learning curve to ensure their contracting career starts and runs smoothly. The Contractor Doctor is always available to answer questions from first-time contractors, and no question is too obvious. Feel free to ask the Contractor Doctor a question.

Good luck with your contracting!

Contractor Doctor

Published: Tuesday, November 1, 2011

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