I’m a self employed contractor with my own LTD compmay. Up to now my contracts have been with multinational companies, who insist on paying contractors through an agency. I submit a timesheet on a weekly basis, and then an invoice every 4wks (I had the option to invoice weekly, but that sounded like a bit more faff). The invoice gets paid within a week. I don’t know when or how the agency gets paid, but their input is minimal so their fee is pretty small (<1%).

I guess that if I was contracted to the end client directly, then I would have to accept slightly longer payment terms – that seems normal with most contracts I have seen.

However, I have been lined up with a job for a consultancy, who would want to farm me out to an end client. For this their cut is greater (~20%). Their ‘standard contract’ states that my company would get paid 5 days after they get paid by the client. This is likely to be at least 30 days, typically 45 days, and up to 60 days.

This is new to me, but is it common?

I feel a little wary considering that me getting paid is based on the payment of a contract of which I have no viability or control. To my mind that it means that the consultant company is carrying almost zero risk from not getting paid, which is not reflected in their margin.

No…tell them they’re bang out of order and stuff it..

Err… on second thoughts.. their contract so up to them really

20% is way on the high side for that “service” but its a pretty standard way to sub-contract.

Put your rates up 20%….

30-60 days for paying contractors is not unusual. I’d like to know what happens if they are late paying though…

Yep, back-to-back payments is not unusual.

Your company supplies an invoice to whoever is paying you and you state payment terms “within NN number of days”. End of (in theory).

I’d argue the case on the contract terms. It’s their problem when the client pays them, not yours.

That said you may have no choice. I’d work out when the client typically pays and bang in the invoice around then with 15 day terms, or 15 days before and insist they pay within 30 days.

From experience, putting the payment term on the invoice tends to encourage more prompt payment. Started doing that with agencies and I was getting them more often on time.

I guess that if I was contracted to the end client directly, then I would have to accept slightly longer payment terms – that seems normal with most contracts I have seen.

Shorter in my experience. As above, I invoice client with 15 days payment expected. If it goes beyond that I send late payment reminders. It’s only gone over once with last two direct clients I’ve had.

Suggest you check the legality of ‘pay when paid’.
20% for no risk and no funding exposure?
Find a different assignment.

Hmmm, back-to-back payment. now I have a term to search against.

This is likely to be at least 30 days, typically 45 days, and up to 60 days.[/I]

and later, or not at all

You need to have in your contract what occurs for late (or non) payment, especially as it’s only their margin that the consultancy loses plus it will mean you are reliant on them chasing the debt (and tbh on the T&C’s agreed between the 2 parties in regard to payments).

It’s a risk, and one that currently your agencies have taken – so factor that into your rates.

gonna commit another hijack. i too am a contractor with my own LTD company. my mrs has gone back to work after maternity. she has a part time job at a local firm, 24hrs a week. so far she is acting as a sole trader and she invoices them direct every month… my question is – would it be in our interests for me to invoice her employers through my LTD company and pay her a salary? They (her employers) seem to think it would? she is already a shareholder fwiw.

I was a contractor and this is how my OH started, and has been a contractor now for +10 years.

Having two fee earners means you’ve more ‘flexibility’ in paying salary/dividends/expenses, we’ve always paid each other the same irrelevant of what invoices we’ve individually posted.

Ok thanks, just having terms like back-to-back and pay when paid have given me something to Google. Sounds like these arrangements are unpopular for these situations, and of possibly tricky to enforce.

I have told them a fixed payment term or I’ll find something else.

No, just normal business risk.