Pay on Time
It happens to many IT contractors, i.e. the IT agency does not pay on time. They always have an excuse. Here are the telltale signs and what to do.
Too many IT contractors leave it too late. They listen to IT agency excuses for non-payment. Then they just hope against hope that they are true and that they will soon get payment.
Even when the agency has broken their IT contract as regards payment, IT contractors don‘t want to suddenly dump them. That’s because it could mean that they lose a month or two‘s money. Also, they could potentially lose their contract with the client who may not want the hassle.
Therefore they tend to do nothing except worry and to phone up the IT agency. They hear the latest excuse for why they didn’t pay on time and hope it’s true.
However, they should take action immediately otherwise there could be a lot of pain afterwards.
When Chamberlain Scott International went bust they owed IT contractors as much as 48K and quite a few were owed between 20K and 30K.
Here again a series of excuses were given as to why the IT contractors weren‘t being paid and the more the contractors were owed the less likely they were to dump their agency and jump ship.
They just hoped against hope that everything was OK.
It wasn‘t. The agency went into administration leaving the contractors‘ debts with the administrator, set up a new company called CSI (UK) and bought the contract rights (the ones they wanted) from the administrator that they had appointed, for a tiny amount compared to the annual sales.
What to Do
So what should you do when your agency doesn’t pay on time?
You should take action immediately if the agency have broken their promises and contract about payment.
Many IT contractors don‘t want to upset their agencies. That’s especially if the agency owe them money. However, but you can bet your bottom dollar that the agency would be swiftly onto you if you broke your contract with them in any way.
Therefore you must be ruthless when they don’t pay on time. After all, they have let you down.
We put the question to David Greene of accountancy company Nasa Consulting, who have a legal division, as to what IT contractors should do when agencies don’t pay on time. Here is what they advise:-
1) Call the agency and ask why they didn’t pay on time. Advise that further delay will
lead you to discuss this with your client, and / or take legal action.
2) Advise your client that the agency aren’t paying you, and let them know you
cannot carry on working if this continues
3) Discuss the position with other agencies and see how they pay and if
they can take over your contract.
4) Engage a lawyer to pursue your agency
5) Pursue your agency through the www.courtservice.gov.uk/ . This
is a court service which is now electronic, simple to follow and
If your IT agency are letting you down you are within your rights to act when they don’t pay on time. They understand this as they are a business as well and they have to chase clients for payment.
Even if an agency is facing financial trouble they would still have some cash as they are still invoicing clients. So, those that push the hardest and are first in the queue will be the ones to get payment.
Those that don‘t want to annoy those guys at the agency, or who are afraid of upsetting them, will be the ones who will have to deal with the administrator (who offered 3p in the pound to Chamberlain Scott International‘s contractor debtors).
A solicitor won‘t cost too much in the beginning and will be well worth it.
There is a lot that they can do to get you to the front of the queue. For example they can take out an order to shut the agency down if they don‘t pay up.
Even in the dying days of an agency they are still fighting like hell to survive and there is a very good chance that they will pay out to the person who is causing the most trouble and trying to shut them down.
After all, the plan would be for them to go into voluntary administration with a friendly administrator, rather than a forced one, so that they can buy the contract assets cheaply in order to rise again like a phoenix from the ashes with a slightly altered name telling clients and contractors alike (at least those they want to keep) that nothing has changed.
Of course, most agency late payments are not caused by IT agencies about to go bust but often have good reasons.
However, that is their problem and, if they have broken their IT contract with you as regards payment, be ruthless with them. They would do the same with you if the boot was on the other foot.
The excuse not to fall for is the one where they say that despite what the IT contract says you will basically get paid when the agency get paid by the client.
Don‘t fall for that one – especially as the law as changed to say that the agency must pay on time even if they haven‘t been paid by the client.
With CSI one contractor told us that the excuse that they kept using was that they hadn‘t been paid yet by the client.
The IT contractors then asked the client who said that they had paid up ages ago.
That is a real alarm bell ringing there. If that ever happens to you, you need to go in guns blazing with all the legal help you can get.
The agency is having serious problems if that is the case and only those who are the most forceful will get paid
Make sure that you are one of those!
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