Contracts with Interim Managers
This page explores the subject of interim management contracts between providers of interim managers like Executive Interims and the interim managers themselves.
Contractual Structure
Clients contract with interim management service providers and interim management service providers contract with the interim manager's limited company. It is therefore important that the benefits and obligations in both contracts are consistently expressed in both contractual relationships to ensure that the interim manager's relationship with the client is addressed appropriately, despite privity of contract.
The content of the contracts will typically be affected by a number of issues.
IR35
IR35 is tax legislation, which can lead to five figure tax liabilities for interim managers. Contracts therefore typically include a number of features in an attempt to mitigate the potential risk that an interim manager may be judged as being subject to IR35. Contractually in order to do this it is necessary to demonstrate that the executive interim manager is in business for his/her own account. Contracts demonstrate this by affording the interim manager with complete flexibility regarding how, when and where the requirements of the assignment are satisfied. Contracts also ensure that interim managers are obliged to provide their own resources to complete the assignment including for example reference materials, software, and hardware etc.
The contract also clarifies that an interim manager does not receive the benefits which typical employees of the client otherwise might; which typically include health care, access to the company car scheme, paid holidays, paid sick-leave, bonuses, share options, employee discounts etc. The contract must ensure that an interim manager's limited company can demonstrate a significant degree of commercial risk. This is normally achieved by ensuring that the deliverables of the contract are covered with a maximum contract value, such that if a contract duration exceeds an anticipated time limit, then the client pays no additional cost. Since the client's contract is ultimately with the interim manager's limited company rather than the interim manager, the Inland Revenue expect that interim manager's limited company retains the right to substitute the interim manager, with another suitably qualified interim manager, and for it to be able to do so without the client objecting unreasonably.
Notice of Termination
It is accepted practise that the client at very little notice can terminate contracts for a particular assignment. To some extent this is a measure of the interim management service provider's confidence in their capabilities. A zero notice termination clause arguably indicates that an interim management service provider is very confident in their ability to provide the right interim managers and consultants for their clients. Executive Interims - Supply Chain Practice has a zero notice termination clause.
Interim management service providers usually ensure that interim managers can't terminate the currency of an assignment if its quality is adversely affected in the view of the interim management service provider (and by implication the view of the end client).
Payment Terms
Interim Management service providers typically pay their interim managers after clients have first paid them. Since an interim manager or consultant may have been "on the beach" for some time before commencing a new assignment, it can be important for the interim manager that the payment cycle isn't unnecessarily drawn out. Executive Interims - Supply Chain Practice typically invoices clients monthly - beginning after the first two weeks, and are paid after a further two weeks. This ensures that the interim manager is paid for at least half a month's work, within the first month.
Liability
It is normal for an interim manager or consultant to have at least £ 250k of professional indemnity insurance, although some interim managers have as much as £ 1m of cover. Interim managers typically limit their liability to their professional indemnity insurance, since the value of assets held on the balance sheet of their limited companies are not usually significant. Clients are encouraged to consider whether the level of professional indemnity insurance cover held by an interim manager's limited company is sufficient for their needs, and if not to request that greater cover is provided.
Confidentiality
It is normal for contracts to ensure that interim managers protect client confidentiality. Intellectual Property
Typically the intellectual property associated with the results will be owned by the clients and the intellectual property in the methodology will be owned by the interim manager or the interim management service provider. If for example the interim manager's own intellectual property is used or modified in the course of the assignment, or where pre-existing intellectual property can be shown to be the interim manager's that property typically continues to belong to the interim manager. Expenses
Typically expenses incurred by the interim manager during the assignment will be charged at cost to the client, without an administrative fee.
Non Solicitation
Interim managers are usually contractually prevented from soliciting business from an interim management service providers end client.
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