Contractors' Questions: Can my agency legally hike payment terms from 7 to 28 days?

Contractor’s Question: I've been a limited company contractor for 23 years but was forced to use an umbrella company in March (I picked one from a restricted list). Payment terms were weekly net 7 days as they were previously under my limited company contracts.

Yesterday, I obtained an email from the umbrella company acting as a mouthpiece for the recruitment agency, saying they are unilaterally changing my payment terms from net 7 days to net 28 days starting this first week of June 2020.

My employment contract with the umbrella clearly states “net 7 days” payment. Is there anything in practice I can do to stop this? Agent and umbrella seem to be acting as one, against my interests, and both seem uncaring that this is going to impact me financially. Please advise.

Expert’s Answer: There are two contracts before you here:

1. Between you and the umbrella

2. Between the umbrella and the agency

Each of them can only be altered (a) with the agreement of the other party, or (b) in accordance with any provisions in the contract itself governing changes.

Objecting is possible

An employment or worker contract (such as will be in place between you and the umbrella), will generally contain a provision saying that the umbrella can make reasonable changes on (let’s say) one month’s notice.

You can of course object to a proposal for change, and you might consider raising it as a formal grievance with your umbrella.

The contract between the agency and the umbrella is less likely to contain a provision allowing for changes to be made unilaterally – and, assuming it doesn’t,  this would mean that if the agency were to impose the change unilaterally, they would probably be in breach of contract. However, it is highly likely that this contract does contain a provision allowing the agency to terminate the contract, and you must accept that there is a possibility that they might do so.

Depending on your relationship with your client, it might be worth raising the issue with them, at least informally, to see whether or not the problem originates from them -- and to see whether or not they are willing and able to assist.

The unknowns (and risks) continue

Bear in mind these points, though:

• Your umbrella probably isn’t the one instigating this change. Chances are, that it is the agency that is doing that (and they in turn may be driven by a requirement from the client).
• While your umbrella might try and resist any requirement from the agency to make such a change, it is possible that they may hit a brick wall.
• A change to 4-weekly payments may result in the umbrella taking less by way of margin, if the umbrella is taking a fixed amount per payment (as opposed to a percentage), so the change might, in fact, end up costing you less.

Ultimately, it is likely that you do have the right to say ‘no’ – but you must accept that there is a real risk that, if you do so, the assignment might be ended.

The expert was Roger Sinclair, legal consultant at contracts specialist egos.