With IR35 reform looming, operating under a Statement of Work (SoW) – which is a contract outlining deliverables that must be achieved to complete a project and receive payment – may become increasingly popular. This is because when a legitimate SoW is in place, the responsibility for determining IR35 status will sit with the company outsourcing the work, which could be you, the contractor or the agency you work through (as opposed to the end-client).
However, creating an SoW in the first place, particularly when you’re working with a new client, can be difficult. In this article, we’ll outline a simple process that we have found works well for contractors who are new to or relatively inexperienced in this particular field.
What is the problem that this engagement is trying to solve? This should be stated from the outset, given all the deliverables should link back to solving that particular problem.
Next, compile a document of everything you think you’ll need to accomplish during the project. At this point, don’t worry about order, just focus on making a note of these things, which could include: options analysis, a roadmap, blueprint, solutions analysis document, HLD (high-level design), LLD (low-level design), a gap analysis document, stakeholder map, weekly status update report and so on.
You should then decide how you’re going to achieve these things specifically. Define these deliverables and write down the process required to produce them, so you can clearly articulate what’s in and out of the project scope.
Bear in mind that tasks are not deliverables – they’re the actions that need to be taken to achieve the deliverables. As such, each task you write down should explain a specific action to be taken, which will lead to a specific deliverable. Just having the outputs/deliverables in isolation without the context that the tasks provide renders the SoW quite meaningless.
Remember, an SoW isn’t a job description, so it mustn’t read like one. This is where many contractors slip up, as often the information that they would have received from the client or the agency comes in the form of a job description. Your SoW needs to focus on the specific tasks to be performed and the output/deliverables that will be produced as a result. The language needs to lean towards the delivery of a specific outcome. Words like ‘assist’, ‘support’, ‘help’ and ‘be part of’ have no place on an SoW.
If you’re part of a much larger programme of work, you need to be very aware of the timing of the project. This is so your milestones link to those deadlines. Producing a final document that’s signed off mid-project wouldn’t look very professional or consistent under scrutiny. Secondly, milestones that always finish at the end of every month aren’t always realistic. As we all know, projects rarely wrap up nicely at the end of every month. If only…
Make it clear what you consider to be out of scope – in other words, things you won’t do as part of the engagement. This is helpful for areas such as supervision, direction and control, as the work you perform will be explicitly stated. With this detailed, you and your team (should you have one) can push back against unwanted requests, which helps demonstrate that the service provided is genuinely outsourced.
Be clear and concise. Make your SoW as short as possible, avoid words with multiple interpretations and ensure it’s easy to understand. Remember, we aren’t developing overly stringent and inflexible work packages here, so it’s important that a degree of movement is incorporated into your Statement of Work.
Ensure that everyone who has a say in the SoW is involved in the process – from the client to any sub-contractors, HR managers and, when involved, agencies. This helps assist with transparency, with each party in agreement of the contract and singing from the same hymn sheet.
Similar to how ‘like for like’ substitution does not happen in reality, HMRC expects a new contract to be created every time there is a change in the process – this simply isn’t feasible in my opinion. As a result, the SoW needs to be written flexibly and all changes to it should be documented in a ‘Service Report’, to demonstrate the compliance required.
It’s very important that a Statement of Work includes a clear authorisation process. This could be something as simple as an email authorisation, a service report sent to the client or a stakeholder meeting where your findings are presented.
There’s no hard and fast rule to pricing, however, even when consultancy organisations submit work, the client nearly always wants to see the rate card for everyone involved. Most organisations’ procurement systems are still mainly set up to deal with a T&M (time and material) model, even when you are quoting a fixed price. Our advice, therefore, is to quote the time you expect the tasks to take – for example, your day rate plus a 10% or 15% contingency fee.
In the lead up to IR35 reform in the private sector, drawing up a watertight Statement of Work and insisting to your client that you operate under one may prove vital in helping to protect your IR35 status going forward.
This article was written by Ben Clark, CEO of The Sub Bench, which is a new concept that helps contractors legitimately promote their outside IR35 status. To learn more about how this service helps remove the notion of personal service, please click here.