Company want me to invoice them through an Umbrella company, and not directly- how can I ensure I get paid?

Question

I am an IT professional/ software developer, and have been self-employed since October last year.

When I first went self-employed, I only had the one client, and was working for them full time. After delivering the project to them, I had a bit of 'down' time while looking for my next client/ project. I have now secured my next project, and recently started working for that client.

However, between finishing working for my first client, and starting working for this one, I did a few days work (just decommissioning old servers & setting up new ones) that I got through a recruitment agency.

Basically, one of the recruiters at the agency had been in touch regarding a couple of roles he was recruiting for, and while those discussions were on going, he mentioned that he had a few days work available decommissioning & setting up these servers at the local court. He asked if I would be willing to assist with this work, and I said I'd be happy to.

This work took place over three separate days, and after the first day (there were a couple of weeks between each work day), I sent the recruitment agency an invoice for the work I had done, at the agreed rate, and was paid on receipt of that invoice.

However, following the next two days' work, I invoiced the agency in the same way as I had previously, and they then got back to me to say that I would have to invoice them through an umbrella company... But they had not mentioned that I would have to do this at all before I agreed to do the work, and they now appear to be refusing to pay unless I send them the invoice this way (I have had no response to emails sent a couple of weeks ago).

Since going self-employed, I have managed invoicing my clients myself, and would rather keep doing this, than pay an umbrella company a fee to do it for me...

How can I ensure that this agency pay me the agreed amount for the two days' work that I've done for them, which is outstanding?

Answer 1

A viable contract between you and a client should at least contain:

• The exact work you're responsible for and the definition of done.
• The agreed rate and who is responsible for taxes.
• The way and timing of invoicing.
• The date or period the work is taking place.

There is a lot more, but these entries are applicable to your situation. If you work self-employed, you need to make sure you cover things professionally​ and they are your responsibility.

If you have a contract that mentiones these things, then you are covered and they will have to pay. Preferably in good understanding, if not through legal channels, but it probably won't come to that when the contract is sound. If not, then you learned a valuable and expensive lesson.

It happened to me too when I just started out. Didn't want to "bother" the client with a contract for small jobs, because it somehow didn't feel comfortable to do so.

I am now more then 10 years in and never have these kinds of problems anymore, because I always formally kickoff with a contract. This doesn't have to be a large document. Just a declaration with a few bullet point with the specifics accompanied by and referenced to (and this is important) general terms you work under. (Can be downloaded for free if you look or just copy it from somewhere. There are specific ones for software btw). I use templates that I had drafted up by a legal firm. Costs you some, but worth the ease of mind.

Formalisation is to avoid problems like this, which almost always leads to the loss of a customer and relation, regardless if you get paid in the end, a lost customer is always bad.

And don't forget, if you work without (a legally checked) contract and general terms, you can even be held liable to lawsuits when your software is e.a. hacked or bugged. Not something to be taken lightly.

Answer 2

First off, check your contract with the agency. If the contract is with you, then they should be paying you. Failure to do so is a breach and you can start the process of threatening court (although this would kill your business).

However, and here's where it gets sticky, as a self employed contractor, the agency is required to cover a number of potential liabilities. Most insist on either a Ltd or an umbrella (essentially an Ltd) so that any liabilities can be shifted onto you. As a rule of thumb, earning over £45k should be done through an Ltd, anything less is umbrella territory. Bear in mind, as an Ltd you will need an accountant and your own insurances (liability and indemnity).

It's an absolute minefield, but have a chat with an accountant and see what they recommend, most will dispense free advise on the hopes of signing you up.