How I got around restrictive IT Agency Contract Clauses

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  • Author Gerry Mclaughlin
  • Published November 13, 2009
  • Word count 492

Restrictive Clauses

Just been reading through a few of your articles and something in this one caught my eye -- specifically, what you said about Restrictive Clauses in agency contracts.

I almost fell foul off this in October 2000, when Sun Microsystems tried to re-hire me via a different agency to the one I originally worked through. The previous agency managed to piss the Sun management off, through its use of some 'shady' practices, so they were replaced by Computer People (CP) as the preferred supplier.

I was told by CP that I couldn't be hired (after being told I had the job) because I had previously (very recently) worked through another agency and Sun didn't want to be sued, etc, etc.

At the time I was considering trading via an umbrella company, rather than my Limited company (less stress amongst the IR35 FUD that was around at the time), and I mentioned this and asked whether it would make a difference.

It did.

Problem Gone

As I understand things, the contract between supplier and agent is specifically between the contractor (the company, not the person) and the agency.

Since I was no longer going to be working through my own limited company, but through a different Umbrella Company, the problem went away. Nice.

I think a suitable strategy for agency-referred IT contractors trying to build up their businesses is to always take the first engagement through the umbrella company. That way, the agency gets paid for carrying out the service it provided to the client and the contractor.

Then, if it looks as though a renewal might be on the cards, the contractor should mention to the client that he or she has their own limited company (or a relationship with another administration company) and that the client need not get stung for the agency's margin second time around.

Paid for Nothing

First time around, the agent gets paid for doing something. I personally think it's abhorrent that they get paid for renewals if they're doing f*ck all. I mean, they don't even provide payroll. The way I look at it is the renewals (if they appear) are given to contractors if they perform well, i.e. by their own, not their agency's efforts.

My agency had 4 contracts (not renewals but 4 separate contracts plus renewals) for me. The contracts were sourced by me through company networking yet they still clawed-back 33% margin (£40k+). The fifth contract they took 20% because I insisted that they had done nothing to get the work.

Agency Shylocks

Personally, I don't think IT contractors stand a chance while these shylocks are around, that is unless they start getting sneakier. The clients are a bit daft, too, for allowing the agencies to get away with it.

I note with some glee that when I worked for BT, my line manager had the restricted covenant deleted from the agency's contract before I signed it. Wish more would do it.


IT Contractor has Umbrella Companies, Personal Service Company and IT Accountants directories as well as a Limited Company Set-up facility, IR35.

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