Sub-Contractor Variable Fee (Company)

This Variable Fee Sub-Contractor (Company) Agreement is designed for use where a subcontractor wishes to be taken on by a main contractor to work for a variable fee.

This document is designed for use where an individual (“Principal Consultant”) works on a sub-contractor basis through a personal service or other intermediary company. That intermediary company enters into this form of Agreement as the Sub-Contractor rather than the main contractor contracting with, or employing, the individual direct.

Under this template, unlike an employee, the intermediary company is free as an independent contractor to provide any suitably qualified person (a “Consultant”) rather than only the original individual (“Principal Consultant”) named in the sub-contract having to do some or all of the work if the Principal Consultant had been engaged direct as an employee. The Subcontractor intermediary company is free under this template to determine when, where and how work is completed (subject of course to the main contractor’s and its client’s requirements), and it is free to work for other clients or main contractors.

In this form of agreement, faulty work must be put right at the Sub-Contractor’s own expense, equipment must be provided by it, and payment is to be made to it on completion of work.

This template includes a data protection clause but if the Sub-Contractor will be carrying out any data processing for the main contractor, you might wish to add the standard data processing clause which you can find here.

The accompanying template, the Variable Fee Sub-Contractor Agreement , is to be used instead when the sub-contractor entering into the Agreement with the main contractor is a sole trader (working as a self-employed individual) rather than an intermediary company.

This Variable Fee Sub-Contractor (Company) Agreement document aims to reduce the risk (both to the individual and the personal service or other intermediary company) that, under employment law and any other applicable law, the individual is regarded as an employee. Nevertheless, he might still be treated by HMRC, an employment tribunal, or any other body, as an employee, and legislation (such as IR35 or other rules) might still apply in a way which adversely impacts the individual’s or his company’s legal, tax or NIC position. Whether that is so will depend not just on what is contained in the sub-contract but also on all other circumstances. Those circumstances may include the way in which the sub-contract is implemented, and all arrangements between the main contractor, the personal service or other intermediary company, and the individual.

HMRC provides some guidance on its website about employment, self-employment, and IR35. Its decisions on these points are often based on a “balancing exercise” in which it gives weightings to various factors. However, neither the HMRC guidance nor case law are sufficiently precise to enable anyone to predict how in any particular case the “balancing exercise” would be carried out or what HMRC’s conclusion would be about that particular case. For that reason we recommend that before you decide to use or adapt this form of agreement, you take professional advice in relation to your particular circumstances as to any impact on the company, the individual and the main contractor, of employment law, IR35, tax, and NIC rules.

Further guidance on tax and employment status of an individual who works (as a subcontractor or contractor) through an intermediary company can be found in the Guidance Note relating to Self-employment and IR35, but we still recommend that you take professional legal and tax advice before using this form of document.

Nevertheless, a carefully worded sub-contract ensuring the independence of the personal service company sub-contractor is still a key starting point.

This form of agreement is written from the perspective of a company as the main contractor. The contractor does not have to be a company and any references to this can be changed without altering the meaning or purpose of the document.

This Variable Fee Sub-Contractor (Company) Agreement contains the following clauses:

1. Engagement of the Sub-Contractor

2. Indemnity and Liability

3. Provision of Equipment and Protective Clothing

4. Status of the Sub-Contractor

5. Consideration

6. Non-Competition and Non-Solicitation

7. Termination

8. Data Protection

9. Confidentiality

10. Force Majeure

11. Definitions

12. Miscellaneous

13. Governing Law and Jurisdiction

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