Statement of Work - When a new model isn't new at all
Exploring alternative working models
Now that the dust is settling, are businesses regretting the decision to blanket ban as they face unfinished project work OR are businesses embracing a different model?
In the USA, consultancy companies have been on the rise for years, and we predict that's the way it will go in the UK, too. Similarly in Germany there have only been two ways of temporary working for years- either as a PAYE temp or as a genuine freelancer.
For those contractors who do not want to work on an inside IR35 basis, who are genuinely ‘in business on their own account’ and used to providing project based services, there is a SOW light at the end of the tunnel.
So what’s so different about delivering your services under a SOW?
Well, the big advantage of providing services to clients under the SOW model is that, when done compliantly, it is entirely exempt from off-payroll.
As a small consultancy (with less than 50 employees, turnover of less than £10.2 million and a balance sheet of less than £5.1 million) you will remain responsible for assessing your own IR35 status (i.e. the old rules apply) and any sub-contractors you engage will also remain responsible for assessing their own IR35 status.
Furthermore, as you will be taking more risk (i.e. being paid on a fixed price basis pending acceptance, offering more indemnities and warranties etc.), SOWs tend to be more financially lucrative.
What are the consideration points for adopting this model?
Contractors considering this model should remember that there’s a big difference between providing a service as a traditional contractor and doing so through a consultancy.
The services must not merely be a provision of labour, disguised as a consultancy agreement – adapting an existing time and materials-based contract into a consultancy arrangement with a client may be very difficult – particularly if you are continuing to provide the services yourself.
To work compliantly, contractors adopting this model will need to entirely renegotiate terms with the client and, more importantly, ensure that their working practices reflect a genuinely outsourced service. And, the smaller the company, the more likely it will be assessed as a personal service company, especially if there is only one worker.
Contents
Explore more of this series
- Part 1. Is there a SOW light at the end of the tunnel?
- Part 2. When a new model isn't new at all
- Part 3. What exactly is a SOW in legal terms?
- Part 4. How can this model benefit you if you are an agency?
- Part 5. What are the advantages of this model to end clients/customers?
- Part 6. What is a genuine outsourced service?
- Part 7. Why end clients need to conduct a SOW risk assessment
Carla Roberts
About the author
The team is headed by Carla Roberts, a dual-qualified (US/ UK) lawyer. who has over 14 years of experience advising the staffing/recruitment industry. Carla was previously Head of Legal for a large recruitment company and also worked as Sr. Legal Counsel for Alexander Mann Solutions. Her career has included another 10 years working in a compliance managerial roles for large insurance companies.
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