If an organisation chooses to take this approach, the employment business/agency may in turn decide to alter the way in which it contracts with the individual’s personal services company.

The economic effects of the change to the law may require a re-negotiation of the contractual terms in which the parties in the diagram above contract with each other.

Birketts has been recently advising organisations from all sectors on how best to manage this issue.

Due to the nature of the contractual relationships that can often occur in the diagram above, it can be difficult to manage the risk and responsibilities associated with this change to the law. Where a formal contract exists between an organisation and an employment business/agency or intermediary, a formal deed of variation to the existing contract will create contractual certainty. However, sometimes a more flexible approach may be needed where the supply of labour is more informal or based on the employment business/agency’s or intermediary’s terms of business. In these circumstances a stand-alone side agreement can be put in place.

We have also been advising employment businesses/agencies on how best to vary their contracts with the individuals who provide their labour through a personal service company. Whilst it is always important to keep contractual terms under review, this issue has resulted in a need for organisations and employment businesses/agencies to revisit the contractual mechanics of how they operate prior to the changes which are due to come in to force on 6 April 2021.

If you are an organisation that contracts with an employment business/agency to provide labour or you are an employment business/agency then it would be wise to seek advice on this issue. Birketts has a team of expert and experienced lawyers to advise on this specific issue and their details are below. Alternatively, please contact your regular Birketts’ contact who will put you in touch.

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