Dear Contractor Doctor
I am a financial IT contractor trading through my own limited company, and am currently working as part of a large team of contractors on a major project for a bank. At the start of the project, I agreed with the client project manager that I would book time off over the Christmas holiday to visit my family overseas.
The client project manager has since imposed new, and somewhat unrealistic, deadlines. These require the entire project team to work throughout the Christmas holiday period and all holiday has been cancelled.
Can my client refuse to allow me to take previously agreed time off?
Contractor Doctor says:
Contractors are service providers and do not ‘book’ holiday time off – that’s what employees do. Ideally, contractors should take time off for holidays between contracts to ensure that they deliver their services according to what their contract specifies.
If this is not possible, then contractors should negotiate with their client for a break in their service provision or to arrange for a substitute to cover for them, if their contract allows substitution.
Contractors who ask their client’s permission to book time off, especially those using their client’s holiday booking processes, may appear to be controlled by their client, and could find themselves falling foul of IR35.
Plan time off in advance and get dates into the contract
It is quite commonplace for contractors to take short breaks of a day or two during contracts for weekend breaks or for specific reasons, such as medical appointments or family occasions. As long as the contractor provides notice well in advance, then most clients respond positively and a day here or there that does not impact on project schedules is no problem.
Similarly, contractors who know they will be unavailable for a week or more during a contract should, as a courtesy, inform their client either during contract negotiations or right at the start of a contract.
Ideally, this time off should be included in the contract schedule, so the client knows that the contractor will not be delivering services during that period. If the period of ‘no service delivery’ is in the contract, then the contractor should be able to take that time off without fear of legal repercussions, and the client, in theory, cannot object or threaten termination.
Check what the contract says about ‘service outages’
If a contractor has not arranged specific time off before the contract is signed, then whether they can take time off, and what the client can do about it if they do, very much depends on what’s in the contract.
Contracts that include a substitution clause enable contractors to send a substitute in their place to cover periods of absence. However, the substitute must be trained up on the project, and also meet any client requirements imposed by the contract.
There may also be a termination clause that says that if the contractor fails to deliver their services as contracted, then the contract terminates immediately. In this scenario, taking time off may well result in immediate termination.
Seek professional legal assistance to identify options
If there are no clauses relating to periods of downtime or substitution, then it might be appropriate for a contractor to seek professional legal assistance to determine what options are available.
A legal adviser can also review any exchanges of emails where the client previously accepted the contractor’s request for time off to determine whether they represent an amendment, or variation, to the original contract.
If the contractor and client have separately agreed to the time off, and the contractor has evidence of the agreement in the form of, for example, an exchange of emails, then it is likely that the contractor can take the time off without fear of termination.
The client might threaten that this variation to the original contract terms is not valid, or they have changed their mind. But if the client has previously confirmed that they had no objection to the contractor taking time off and confirmed this in an email, then a court, if it got that far, would take a dim view of the client’s decision to renege on what is in effect a contract between the two parties over time off.
If a contractor has not arranged specific time off before the contract is signed, then whether they can take time off, and what the client can do about it if they do, very much depends on what's in the contract.
The cost of paying a lawyer to review the contract to identify options is likely to be considerably less than the financial and reputational cost of early termination, and will provide a contractor with grounds for negotiation.
Develop a negotiation strategy
In many circumstances, the client may simply be posturing and has no intention of following through any threats of early termination, because they know that the project will only be further delayed if key contractors leave. This is particularly true in the case of clients under internal pressure to deliver a project that their poor project management may have delayed.
Having checked his legal position, the contractor asking this question, David, might consider the following negotiation strategy:
- Highlighting that he never agreed to the deadlines
- Reinforcing that he informed his client at the start that services would not be provided over Christmas, and that the client should have made contingency plans
- Recognise that the project is important, but so is spending time with family
- Indicate appreciation for the offer of extra work, but note that on this occasion he has already made plans so will not be able to fulfil the project manager’s request to provide additional services
- But, as a sign of goodwill, say that he will be happy to take calls during the holiday period on a support basis, for which he will charge on an hourly basis.
The basis of the negotiation is to make it very clear that the situation has arisen through no fault of the contractor, but David is willing to help as far as is possible within the plans he has already made – and previously agreed – for the period.
Mitigate IR35 risk
A key skill for contractors when seeking time off is to clear it with their client as a professional courtesy, but not to give the impression that the client in any way controls the contractor. If a contractor appears to be under the control of their client, this may satisfy one of the key tests of employment – control – which in turn might put the contractor inside IR35.
Evidence of control, such as using client holiday booking forms or sending emails asking for permission would certainly attract the keen interest of an HMRC inspector, and may even lead to a full-blown IR35 review.