Contracting and cut in day rate.

Contracting and cut in day rate.

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Discussion

Sexual Chocolate

Original Poster:

1,583 posts

143 months

Thursday 17th April 2014
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Might have to take a 10% cut in my day rate and was just wondering what the legal position is on this. I have a contract clearly stating my day rate which is valid to 31st May 2014. Can I be forced to accept this cut or do they have to honour the contract?

ehasler

8,566 posts

282 months

Thursday 17th April 2014
quotequote all
Welcome to contracting... You don't have to sign it, but they will most likely just give you notice to terminate your contract if you don't agree.

Very occasionally, if the client is really, really keen that you don't leave, they won't get rid of you however this is very unusual in my experience.

IainT

10,040 posts

237 months

Thursday 17th April 2014
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So they're renegotiating your contractual terms.

The option may well come down to...

  • Accept lower rate until expiry of contract then either renew or move elsewhere.
or
  • Stick to the contracted rate and, assuming contract has unilateral break as they normally do, risk early termination.

grumbledoak

31,499 posts

232 months

Thursday 17th April 2014
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It's your call, basically. Take the new rate or quit.

Bloody customers! wink

Sexual Chocolate

Original Poster:

1,583 posts

143 months

Thursday 17th April 2014
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Time to walk I think.

bigandclever

13,750 posts

237 months

Thursday 17th April 2014
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Legally, they have no right to change the terms. Practically, if you don't accept terms then they'll look at terminating the contract. At best you'll get the notice period served ... but of course there (suddenly) may not be any work to do, so off you toddle immediately. You either have to accept the cut or look at moving on. Actually, that's not true ... you could put together a proposal for why you're not worth a rate cut linky ... but (assuming this is a blanket cut, not just yourco) the chances are you'll get nowhere. Part of contracting's rich tapestry.

Goaty Bill

1,779 posts

150 months

Friday 18th April 2014
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This wouldn't by any chance be with HAL ?
(notice the clever way I avoid mentioning real names)

It is common practice in a number of consultancies to do this.
It has basically a two fold purpose;
1) they usually get a fair proportion that accept it thus saving the collective thousands of pounds
2) it often forces managers to look seriously at their contractor head count to see if they can satisfy the management's overall requirement for lowering costs.

In my case I refused, nothing happened.

But, as others have said above, it could play out differently.

worsy

5,776 posts

174 months

Sunday 20th April 2014
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Absolutely boils my piss when companies do this. I'd never ask for a rise mid way through a contract. Only happened to me once and I walked along with the rest of the team. Started a new contract the following week 30% higher.

Kapenta

1,591 posts

195 months

Sunday 20th April 2014
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RBS have just imposed an across the board 10% cut with 5 working day notice. Quite legal, but there are those who have elected to rather walk the walk. Being discussed at large on Contractor UK forum.

HAL have imposed no such cut.

theboss

6,878 posts

218 months

Monday 21st April 2014
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I've had this twice - the first time was 3 months into my first ever contract so I didn't want to rock the boat - but still negotiated the cut from 10% to 5%... The second time the client wanted to cut 10%, they handled it aggressively with everyone receiving notice of termination and a statement that no exemptions would be made in any circumstance. I quickly secured something at 20% more than my original rate. A few days before I left an exemption was miraculously offered which of course I declined - if they wanted to reinstate the contract they had just terminated it was going to cost them +30%. It strikes me as a counter-intuitive move to enforce a rate cut across the board - you lose anyone in a buoyant 'sought after' marlet who knows the are worth the rate and is confidently prepared to walk; and conversely you keep anyone who would rather cling on the gig at a reduced rate.

Fer

7,707 posts

279 months

Monday 21st April 2014
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theboss said:
It strikes me as a counter-intuitive move to enforce a rate cut across the board - you lose anyone in a buoyant 'sought after' marlet who knows the are worth the rate and is confidently prepared to walk; and conversely you keep anyone who would rather cling on the gig at a reduced rate.
Very true, can become a true own goal.

TangerinePool

1,385 posts

189 months

Monday 21st April 2014
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When Barclays threatened this to us no-one signed up to it and they terminated us all just before Xmas (some of us were signed on until the following April). Threw a few pieces of work into turmoil but most had been delivered to be fair.

I've come to expect it as normal along with a lot of other things to be honest...

elanfan

5,516 posts

226 months

Monday 21st April 2014
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Am I missing something here - are we talking about a 10% rate cut for what is in effect the last 5 weeks or so of a contract? If my contract was up at that time I'd insist on it being paid as per the contract. If there is some suggestion that a new contract is rate -10% then that could a different story depending on the market.

bigandclever

13,750 posts

237 months

Monday 21st April 2014
quotequote all
elanfan said:
Am I missing something here - are we talking about a 10% rate cut for what is in effect the last 5 weeks or so of a contract? If my contract was up at that time I'd insist on it being paid as per the contract. If there is some suggestion that a new contract is rate -10% then that could a different story depending on the market.
But it'd be very likely you wouldn't get anywhere... you'd be served notice (probably 1 week on the client side) so lose out on the final 4 weeks of the contract. If they really wanted to, the client could say 'There's no work at all' and you'd get bugger all. Mutuality of obligation, and all that. Good for IR35 though. It's fairly typical of the banks to do a blanket change rather than fiddle about with individual contracts. In 6 months time they'll be re-hiring like mad, and trying to keep rates down which won't work because contractors will build the risk into their rates.

theboss

6,878 posts

218 months

Tuesday 22nd April 2014
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bigandclever said:
elanfan said:
Am I missing something here - are we talking about a 10% rate cut for what is in effect the last 5 weeks or so of a contract? If my contract was up at that time I'd insist on it being paid as per the contract. If there is some suggestion that a new contract is rate -10% then that could a different story depending on the market.
But it'd be very likely you wouldn't get anywhere... you'd be served notice (probably 1 week on the client side) so lose out on the final 4 weeks of the contract. If they really wanted to, the client could say 'There's no work at all' and you'd get bugger all. Mutuality of obligation, and all that. Good for IR35 though. It's fairly typical of the banks to do a blanket change rather than fiddle about with individual contracts. In 6 months time they'll be re-hiring like mad, and trying to keep rates down which won't work because contractors will build the risk into their rates.
Quite right. I generally mimimise or eliminate the client notice period in my contracts - it distinguishes it from a contract of employment and is generally offered as a concession when I'm negotiating other aspects of the contract terms. And with a Mutuality of Obligation clause as you point out, the client is quite justified in saying there is no work for you to do.

I wonder how many of the "they can't do that" brigade are operating inside IR35...

worsy

5,776 posts

174 months

Tuesday 22nd April 2014
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theboss said:
I wonder how many of the "they can't do that" brigade are operating inside IR35...
I'm not sure anyone has said that.

Sexual Chocolate

Original Poster:

1,583 posts

143 months

Wednesday 23rd April 2014
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Well I decided to walk. Just hoping the summer is going to be good one.

Fer

7,707 posts

279 months

Wednesday 23rd April 2014
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Good call, IMHO. I hope the next one is even better.

IainT

10,040 posts

237 months

Wednesday 23rd April 2014
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Sexual Chocolate said:
Well I decided to walk.
Eh? You walked rather than let them make a choice of keep you at you original rate or terminate early?

Sexual Chocolate

Original Poster:

1,583 posts

143 months

Wednesday 23rd April 2014
quotequote all
IainT said:
Eh? You walked rather than let them make a choice of keep you at you original rate or terminate early?
Original rate - 10% or leave early. Its summer, well almost, the GT2 is out of hibernation, the golf course looks awesome. No brainer smile