The advantages of contracting direct with clients

During your contracting career, you may have the opportunity to work for a client directly, without the involvement of a recruitment agency. Here we look at the benefits of working direct, and address some of the pitfalls.

Thanks to Brian Stalley, co-founder of Contract Spy, for answering our questions. Contract Spy monitors over 1800 company websites and over 70 job boards to identify agency-free contract roles.

If you work direct, can you keep the margin an agency would usually pocket?

With agencies taking around 15-20% of the gross payment made by the client, there is certainly room to set a rate that would be 5-10% higher than your usual agency rate as an opening gambit.

This would still allow the client to make a saving compared to going through an agency, so the deal can be advantageous to both parties.

What benefits are there to working direct?

We’ve already touched upon the potential financial advantage, but the benefits are many-fold.

One of the main ones is that you own the client relationship, not an agency. This means you are free to set up repeat business and future work directly yourself.

If you contract through an agency, both you and the client will be prevented from doing this via a restrictive covenant or “handcuff” clause in the contract, which can survive the end of the contract by 6 months or more.

Many established contractors build a portfolio of direct clients who provide them with a steady stream of work. Owning the client relationship also makes it easier to negotiate remote working or part-time working — things which an agency isn’t generally keen to get involved with.

Finding your own clients, and especially negotiating your own terms and conditions with them, also demonstrates that you are in business on your own account. This is a strong sign-post away from IR35.

Negotiating directly with a client

On the flip side, many contractors would find negotiating direct with a client a daunting prospect. Contractors do have to represent themselves in negotiations, whether that be with an agent or a client.

Some find it easier to negotiate via a third party, but many prefer to deal directly as there is less scope for misunderstandings and being misrepresented.

Like most things, it gets easier with experience.

What if things go wrong and you don’t have an agency to fight your corner?

Contractors considering going direct should do their homework on the client’s financials, particularly if the company isn’t a household name and has no financial visibility.

It is inexpensive to run a credit check on the client company to gain peace of mind that it isn’t about to go under.

It also helps to “walk through” your first invoice with the client, so you are 100% clear on the process it needs to follow. This minimises the risk of delays and introduces you to the people who can help with later queries.

How do you go about finding direct contract work?

Traditionally, word of direct opportunities has been passed on by word of mouth, where one contractor shares details of an opening with another. For this reason, contractors should always look to build their network of peers.

Direct contracts are also increasingly advertised by clients, though they are often scattered across many job boards and individual client sites.

This is where a service like Contract Spy, which aggregates potential openings, can be well worth considering for new and experienced contractors alike.

What about the contract itself?

If you don’t have a suitable contract already drafted from previous assignments, it is worth using a professional to draft your contract — especially for your first direct assignment.

Many contractors fall into the trap of signing whatever terms the client puts in front of them. However, this misses an opportunity to have the client agree to your own Terms of Business, which is a clear pointer to being in business on your own account, and another sign-post away from IR35.