Go Direct

The new EU Agency Workers Directive now allows contractors to go direct to the client after the contract ends.

This applies provided the contractor doesnt opt out of the regulations

The Professional Contractors Group, in conjunction with Agencies representatives, has lobbied for and got an ‘opt out’ from this legislation from the Government and agencies have used this to try and force contractors to opt out, so that they can hold them indentured even after their contracts run out.

However, should agencies, by rights, receive anything for the contractors after the initial contract has run out? Are they entitled to it?

This has caused much debate on our General Forum.

There are two views on this. I’ll argue one of them.

No More Commission

Agencies should no longer get commission:-

1) Because the contract is over.

It is restraint of trade to try to keep the contractor indentured to the agency after the contract is over, but that is what they were doing in the past. Now the law has changed and they can no longer do it.

2) Because the agency adds very little value after the initial matchmaking.

Very few businesses get money when they add no value – unless they use some kind of monopolistic devices to do so or some legal ruse.

To my mind all the value is added at the beginning as far as the agencies are concerned so that is when they should receive their income.

The model suits best a one-off fee, as happens with permies, for a placement.

Contractors dont work for agencies. They use them as matchmakers.

No Help

Agencies are not able to help contractors do their job. They are able to find them a job and that is all.

They are not capable of helping them further and are not skilled to manage them at a clients site or to do anything else useful except to process invoices and timesheets.

Therefore it is only the probably false use of a restrictive practice clause in their previous contracts that enable them to obtain fees for the contractors work long after they have added any value.

Core Competencies

Probably the most suitable thing they could do is to obtain an initial fee for matchmaking a contractor and a client (as they do with permies) and then be on their way to add value in the way that they do best, i.e. matchmaking other clients and contractors.

At a stretch you could say that by taking fees for every hour or day worked by a contractor on a contract they are simply spreading the finders fee over a period of time.

However, by no stretch of the imagination could they justify taking fees in perpetuity (or however long that the contractor stays at the client).

They add no extra value beyond a new contract negotiation. It is not justifiable by the work they do or the value they add.

They were only able to obtain the money before by using a legal threat.

The threat is no longer legal except for those contractors who use the PCG opt out.

Nor Moral Justification

Agencies, therefore, have no moral means of justifying additional fees after the contract ends.

Its just a shame that they were given a hole to escape through by this opt out clause – and escape through it they have in their legions.

I realise that this is seen from the contractor viewpoint and agencies may have different opinions.

IT Contractor- Umbrella Company is a one-stop shop for IT contractors with news and advice e.g. on IR35 and the IT Contracts market. We have Umbrella Companies IT Accountant, IT Contractor Mortgages, Pensions and Insurance and a Limited Company Set-up facility.