Dear Contractor Doctor,
I’ve just been offered a six-month contract through an agency I’ve not dealt with before. The agency is insisting that it won’t pay me until it is paid by the client, and I’m worried this could potentially take weeks or even months.
This approach sounds totally unprofessional as I’ve been contracting for nine years and have always been paid promptly regardless of whether the agency has been paid by the client or not.
I haven’t signed a contract, so can I bypass the agency if it continues to offer these unfair terms?
Contractor Doctor says:
“One of the main reasons that contractors use agencies is so they do not become exposed to client credit issues, and can have confidence in being paid on time,” explains Roger Sinclair of contractor legal specialist Egos.
“Any ‘pay when paid’ clause would be undesirable for contractors, since it passes back to the contractor one of the risks which would generally justify the agency’s margin; arguably, an agency imposing such a term could be described as acting unprofessionally. So the contractor would be well advised to refuse to accept such a condition.”
Conduct regulations render ‘pay when paid’ clauses unlawful
According to Sinclair, if the contractor were to engage without opting out of the Conduct of Employment Agencies and Employment Businesses Regulations 2003 (the ‘employment regs’), then according to regulation 12 of the legislation a ‘pay when paid’ clause, could not lawfully be applied by the recruiter – and if such a provision was in fact there, it would be invalid.
“Depending on the degree to which the contractor operates under the control of the client, and if the contractor did not expressly opt out of the regulations prior to being introduced or supplied, then regulation 12 of the Conduct of Employment Regulations will apply, and the ‘pay when paid’ clause will not.”
However, if a contractor is sufficiently under the control of the client and has not opted out, Sinclair suggests that the contractor does not let the matter simply rest, but ensures that any ‘pay when paid’ clause is removed from the contract, to remove grounds for any later misunderstanding and dispute.
Always speak to the client when agents won’t negotiate
In a situation when a contractor is unable to agree terms with an agency, Sinclair recommends that contractors at least attempt to engage directly with the client: “Contractors would normally have a client contact as a result of the interview, and they should consider making direct contact, explaining to the client: ‘I am keen to work with you but unable to agree terms with the agency; how would you like me to approach this?’”
In his experience, Sinclair says that putting this question to the client typically results in one of three responses:
- The client’s response is negative, and tells the contractor that if they can’t agree with the agency then the deal is off
- The client responds saying, ‘let me have a word with the agent’, and does do. This dual approach to the agency from contractor and client can often be effective
- The client will respond saying that its business has relationships with a number of agencies, and may suggest another.
Assuming the contractor has negotiated in good faith to resolve the dispute, has not already signed a legally binding agreement with the agency which prohibits them from dealing direct, or signed the contract itself, then there is nothing preventing a contractor from approaching the client with a view to resolving the impasse
Roger Sinclair, Egos
“Assuming the contractor has negotiated in good faith to resolve the dispute, has not already signed a legally binding agreement with the agency which prohibits them from dealing direct, or signed the contract itself, then there is nothing preventing a contractor from approaching the client with a view to resolving the impasse.”
If the contractor has signed a legally binding agreement preventing them from dealing direct with the client, Sinclair suggests that there still may be legal avenues to pursue, and contractors should ideally seek professional legal advice at this stage to determine their options.
Good luck with your contracting!