What to do if a hirer appoints a predatory vendor

The new IR35 rules are stirring things up and, amongst other things, are encouraging hirers to review how they engage their contractors and whether cost can be reduced. This is an opportunity that some predatory vendors are viewing with relish. Matching an IR35 review with the promise of greater efficiency and lower cost is appealing to hirers right now leading to opportunistic vendors gearing up.

So what can an agency do when an email arrives one day from a hirer stating that it wants you to transfer the contractors you supply away to such a vendor, so losing the business?

The starting point is to review the contracts that are in place. If they allow a charge on transfer, or the supply contract is for a fixed period which still has time to run, then appraise the hirer immediately of the cost consequences. Don’t be fearful of doing this because the appointment of the vendor means that the hirer is already persuaded that someone other than you will be better at servicing the hirer’s needs. Your task will be to persuade the hirer that perhaps a switch to the vendor may not be helpful in the long run.

Bear in mind that the hirer’s main requirement is to have the benefit of the worker’s services at the best possible cost, so a transfer charge should act as either a deterrent, or a bonus early payment for you.  However, if the client contract you are signed up to does not allow for a transfer charge, and your own terms, which should include comprehensive transfer fees provisions, definitely cannot apply, what else can you do?

If you have the right form of contract with the contractor you may find that you can charge your contractor a fee. This may sound anomalous to an agency which normally cannot charge fees for finding work, but the right provisions agreed with a company contractor who has opted out of the agency conduct regulations should be effective. Remember that whilst the hirer may want such a contractor to switch to supply through another business, the contractor has to agree the move. Contractors generally will follow the work, but if they have to pay a transfer charge as a consequence they will undoubtedly think twice. They may also be reluctant if your contract offers better benefits for example rates or payment terms. The agreement to transfer may then result in a transfer fee being paid after all, or the retention of the business.

Whilst some vendors may demand that all new contact with the hirer must be through them, agencies that insist on speaking direct to the hirer will always have an advantage. Applying leverage is the name of the game!

The moral of the story is to check your contract terms and, one way or another, include clauses that deter transfer where it’s fair to do so. The agency regulations, which prohibit deterrence clauses and put in place rafts of essential protections, exist to protect agency workers but dealing with company contractors demands a different approach if business is to be secured in this dog eat dog world.

For more information about contract reviews and terms call Lawspeed on 01273 236236.

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