The Umbrella Companies Blog Archive: February 2009
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Contract negotiation is tricky, and since the crunch it's become more difficult for contractors than for their agents or the end clients. Previously there were options that have since just dried up, no longer can you safely act uncommitted about renewing a contract, and stalling brings with it more danger than it once did.

Probably the best thing you can do in this situation is to ask yourself what the best negotiator you know would do in your situation. This may actually be the person you're negotiating with, as say what you want about agents, they are good negotiators.

The first step in all this is information gathering, and you need to do this without tipping your hand. Your agent will have already asked the end client if they want you back on site, they will also already have a good idea of what the market average rate is for a person in your field, and he will also have a good idea about how quickly he can fill the position.

The first two you can copy, you can easily ask the person that signs off your timesheet if they would want you back, and some basic internet research will give you a good idea about market rates, but the last is tough for you to judge, but this is where you use your relationship with your agent and the client.

In all cases the best approach is always transparency. Build an open and honest relationship with your agency and end client. If you keep the dialogue going you will know what is going on, how well you are doing (and therefore how indispensible you are), the real value of the contract (to both the client and the agency, how long it is going on and what costs and hassle would be involved in replacing you. Of course, implicit in all this is doing a good job. That will always be your best bargaining chip.

Hugo
27/02/2009

Last year I had every intention of writing a little on contract negotiation, as a way of improving your situation, but then the world's economy folded like a particularly cheap garden chair and suddenly it was all about struggling to keep your job rather than getting more money from it.

Despite this shift in focus from more money to extending or renewing your contract the core idea is the same, you're still negotiating a contract just from a weaker position and with a different priority.

In this post I will be covering the factors affecting the strength of your position.

So what's in your favour?

• If the job's still needed, and you've done okay work it's probably cheaper for your agent and to the client to keep you in the position.

• Hopefully your history with your agent and the client is good, whether it's just good work or a mix of good work, reliability, and personal skills.

• The fact that despite the....recession....there are still jobs out there, and depending on the rarity in your field maybe still a relatively high demand.

Now that's not the list it once was, but it's still a reasonable amount to work with.

Unfortunately the things that weaken your position have grown:

• The supply of jobs has decreased.

• The supply of applicants has increased.

• The budget of the client is much tighter.

• The agent's commission or margin will be under pressure and may have shrunk.

• The perception that there are fewer jobs available will affect you and the agent and client.

• Time is no longer on your side, jobs are not staying open as long as they were, because the demand for them is so much higher.

That might seem to be a lot to go against, but as long as you are aware of each factor, you are in a better position to get what you want, even despite the new pressures. It's still no reason to sell yourself short though, you have some leverage, and I will be covering details of how to use it next week.

I've also been asked to make an apology, as at lunch today our main number was offline for around 10 minutes, we are trying to figure out which of our suppliers caused the problem to ensure that it doesn't happen again.

Hugo
20/02/2009

With the last weeks temporary recruitment figures being so spectacularly bad (yet amazingly not as bad as projected) I feel it would be somewhat crass to continue with the optimistic tone of the last couple of weeks given that some of you are having trouble finding consistent work.

Resorting to realism then, we've had a few calls from umbrella company members taking holiday pay to cover a couple of weeks between contracts. It's an excellent idea right now simply because all holiday pay has to be taken before the end of March (I know I harp on about it, but if you don't take it, it's gone, and right now I'd say every penny counts). If you are between jobs it will probably mean you aren't using your tax free allowance so we can apply it to the holiday payment as well.

I realise it's no consolation for actually working but it's a positive step you can take at short notice, and it may stop you having to dip into the savings I know a lot of you put aside. If you are stuck we would like to hear from you, it might seem like a long shot but we might be able to help.

As I've mentioned in a previous post, this year's tax bands have already been set, which is extremely helpful, but the budget itself has been delayed until the 22nd of April. It may slow things down, but after that budgets should be nailed down and contracts should be more consistent.

That sounded dangerously like optimism again, I'm not sure what came over me.

Hugo
18/02/2009

Like many offices Gabem has a dress down Friday policy, which after a week of dressing neatly I still secretly look forward to. But not today, today we are even smarter than normal, and I am actually wearing a tie.

The reason for all this is that we have photographers in taking pictures for an upcoming set of articles for Recruitment International. They took a number of shots in and around the office and as many of you have said to us that it would be nice to see the people you are speaking to will include them at the end of this post for you all to see.

A question that has come up frequently from the self employed guys using Solo and CIS is whether we can recommend any accountants who would be able to look after their taxes and business expenses. It's a good questions because although we've started adding an estimate of the tax that self employed contractors should be setting aside to their remittance, it is just an estimate and unlike the umbrella company employee payslips, a snap shot of that week and there are many other considerations to be taken into account on the year end tax return for self-employed contractors.

As a result we've started to look for a number of accountancy firms that we would both be happy to recommend on quality grounds and that we feel would constitute good value. The firms on the list would be recommendations, and intended mainly for those of you who are new to self-employment. The choice of course would be yours, if you already have your own accountant or someone has recommended one all the better, our main concern is that you actually have one. Our list would be made up of firms we feel understand the particular tax issues of contractors. As soon as we have a completed list I'll let you know.

I'm also looking to update our links sections, so if any of you could suggest other helpful sites or places on the net just email in by clicking on Hugo below.

Hugo
13/02/2009

As some of you may have spotted Susan has updated her Legal Bits, covering a variety of topics in an attempt to catch up on recent events. If you have any suggestions on what you would like her to cover next month get in touch as she would (as always) be very happy to hear from you.

Another thing that has changed is the format of the blog here. The function is pretty much the same, but as each post also has it's own page now it makes linking to specific articles within the blog much easier.

In my trawling of umbrella company and contractor related news items I came across an old article about abusing expense dispensations written by the guys over at egos. It speaks with regard to an HMRC crack down on dispensations awarded to umbrella companies. Whilst it's been almost a year since the article was published, I was thinking about the potential role that expense dispensations could play in HMRC's current hunt for non-compliant umbrella companies.

HMRC's current approach (which I speculated on in last Wednesday's blog post), looks like it could be pretty effective in itself for rooting out less scrupulous umbrella payroll providers, but dispensations may well give them a further angle of attack. As egos point out dispensations can be withdrawn retrospectively, leaving the company it was issued to, liable "for all the tax and NI that it would have had to deduct", not just what the umbrella company would deduct from the date the expense dispensation was actually revoked.

Now for any umbrella company that's stretching the spirit of it's expense dispensation a little thin that's a pretty frightning prospect. As seems to be the trend in increasingly incestuous umbrella company business there would be repercussions all down the line. Any non-compliant provider that was landed with such a bill would undoubtedly fold (the larger the company the larger the bill), taking any money they were holding down with them. This in turn could hit the agencies hard, as contractors are left unsatisfied and in potential financial trouble from loss of wages. The knock on effect could even impact any umbrella companies they previously competed with.

I admit now that this is all rather a moot point for those of you currently working as an employee of a Gabem umbrella company, as our expense policy being what it is requires receipts for all expenses regardless of dispensation (which we have applied for and I will keep you posted as and when I have more news).

I'm just very interested to see what HMRC will come up with and who out there has been cheating. Fingers crossed the resulting fall doesn't effect you, us or the rest of the contracting industry.

Hugo
11/02/2009

Last Saturday a friend of mine said that this was the coldest winter in years, and I, being the disagreeable sort of fellow that I am, said "that couldn't possibly be the case, where is the snow?".

Well that told me, and unfortunately the rest of the country as well it seems. One grit mine is now operating 24/7 and all of it going to the highways agency, much to the annoyance of the local authorities. All of which means there are a lot of people being sent home from work or not going in in the first place.

For contractors in general, forced time off work can make life difficult, especially so soon after Christmas. Unfortunately, for most construction sites it is unavoidable for obvious reasons not least of which is that sites become increasingly dangerous in this weather. Whatever you did this week I hope you had the chance to have a break, relax enjoy some family time (snowball fights?), and look forward to the opportunity of some healthy overtime.

From a practical point of view, those of you whose sites were closed for a number of days this week it might be a good time to use any holiday pay you have saved, as it all has to be taken within the next 7 weeks anyway.

Even if we didn't get any snow days here at Gabem, the novelty of it has been nice as has some of the scenery, further proof that I am getting old, I'll save you the photos and the projected slide show.

Have a great weekend, and drive safely.

Hugo
06/02/2009

Recruiter magazine arrived this week and inside was a great article by KPMG's John Chaplin. In it he talks about the importance of industry compliance in the face of fresh HMRC investigations and the changes that HMRC are making to the tactics and team they have investigating overarching employment contracts.

I have to say it's refreshing to hear an authority like John bring up the matter of compliance (something very close to our hearts here at Gabem), as although I know I go on about it, it seems to be something that our industry has a habit of keeping quiet about, it's our elephant in the corner so to speak.

Now more than ever there is a need to talk about it as HMRC appear to be stepping up their game. According to John, HMRC's new approach brings together "...the right personnel, greater sector knowledge, national resources in place and the support of some senior investigators...." making this "....a serious threat to those providers who are not compliant."

Now this may all point towards our industry, but the rest of the article seems to focus soley on agencies, and the indication that HMRC will be going after them as equal targets for investigation. It's a clever tactic as it puts pressure on the agencies to consider their own suppliers - Umbrella companies and self-employed payment companies - and ensure they are compliant to reduce their own risk.

Gone are the days that they can just "keep their heads down", they need to check out the companies they work with, and re-think any thoughts of commission payments or finders fees until they can be absolutely certain that the company they work with is compliant.

Hugo
04/02/2009