How should a recruitment agency handle a contract extension?

When should the extension conversation start?

Four to six weeks before the end date is the working rule on most desks. By then the client usually knows whether the project continues, and there is enough time for a purchase order to be raised and for the contractor to plan.

Work back from the longest lead time in the chain. If your contractor's contract requires a notice period, if the client needs sign-off two levels up, or if the client's procurement takes three weeks to raise a PO, the conversation starts before the shortest of those would suggest. Ask the client at the start of the assignment what their extension process looks like, and put the date in the diary then.

What paperwork does an extension need?

An extension schedule to the existing terms, not a new contract. It says the assignment continues from one date to another, restates or changes the rates, and incorporates the original terms by reference. You need one with the client under your terms of business and one with the contractor's company under their contract.

Keeping it as an extension matters for more than tidiness. HMRC's Employment Status Manual says an extension on exactly the same terms may not be a new contract, whereas an extension that changes terms, or that is made by a new contract, is a new engagement for the purposes of the status determination. Doing it as a schedule keeps the paper trail small. It does not decide the status question, so you still need to ask.

Record who signed and when. If the contractor keeps working past the end date while the paperwork is still moving, you have a gap, and gaps are where disputes about terms and liability start.

Do rates and margin change at extension?

Often. Contractors ask for more at extension and clients ask for less. The bill rate has to move with the pay rate if the margin is to hold, so work out the margin before you agree anything.

A worked example. A contractor on a £450 day rate placed at £550 asks for £480 for a further 26 weeks. To hold the £100 margin the charge rate has to rise to £580. If the client will only go to £565, the margin drops to £85. Over 130 days that is £11,050 against £13,000, a difference of £1,950, before any employer costs. It may still be worth it, but it should be a decision, not something you find on the first invoice. The contract margin calculator will do the arithmetic, and mark-up vs margin explains why the two percentages differ.

Make sure the new rates apply from the right date. A rate change at extension should apply to timesheets from the extension start, not retrospectively to weeks already billed. Check that your pay and bill system prices the first extension week from the new rate.

Does the client's purchase order need renewing?

Almost always. The PO was raised for the original period and value, and an extension is more of both. Ask for the new or uplifted PO in the same conversation in which you agree the extension. An invoice for the first week of an extension that has no PO behind it is the most common reason extension cash is late.

Our purchase order numbers page covers the value arithmetic and what a chase looks like. The short version is that the PO is part of the extension, not an afterthought.

Do you need a new Key Information Document or status determination?

Two separate checks. The first is the Key Information Document. Regulation 13A of the Conduct of Employment Agencies and Employment Businesses Regulations 2003 requires an employment business to give a work-seeker a Key Information Document before they agree terms, and says that if details change after the agreement, a revised document is to be given within five business days of the change, stating when the revisions take effect. So if the extension changes the pay rate, the pay intervals, deductions or any other detail the document contains, a revised one is due. If nothing in it changes, nothing new is needed.

Whether the document applies to a contractor engaged through their own company depends on how the regulations extend to company work-seekers and on any opt-out under regulation 32(9). That is a point to settle with your adviser per contract. The Conduct Regulations entry has the background. Where an opt-out is in place, a later withdrawal of it, given while the contractor is working in the position, only takes effect when they stop working in that position.

The second check is IR35. The client decides the contractor's status and gives a status determination statement to the worker and to the party it contracts with. HMRC's manual says that if there are material changes to terms or working practices, the client should reconsider its determination and issue a new statement if the status changes. So ask the client at each extension whether the role has changed, for example if the contractor now manages staff or has taken on different duties. If the answer is yes, the client needs to look again. The status determination statement entry covers what it contains.

Do the Agency Workers Regulations matter at extension?

Only if the contractor is an agency worker. Under the Agency Workers Regulations 2010, an agency worker who completes 12 continuous calendar weeks in the same role with the same hirer becomes entitled to the same basic working and employment conditions as if the hirer had recruited them directly. Weeks count across assignments, so an extension continues the count rather than restarting it. A break of up to six calendar weeks does not reset it.

Many contractors engaged through their own company fall outside these rules. Regulation 3(2) says an individual is not an agency worker where the agency, or the hirer, is a client or customer of a business the individual runs on their own account. Whether a particular limited company contractor is in that position depends on the facts. We would not assume it either way, and a contractor who may be an agency worker is a question for your adviser before the twelfth week. The PSC vs umbrella page covers how the engagement routes differ.

What does good extension tracking look like?

A tracker is only useful if it is the thing people already look at. A spreadsheet of end dates that nobody opens is the same as no tracker.

• Every contract placement has an end date, a notice period for each side, and a named owner.
• A prompt fires well ahead of the end date for the owner, not for the team in general.
• The client's PO number, value and end date sit with the placement.
• Every extension is its own dated record, with the new rates and who signed.
• The contractor's compliance dates, such as insurance expiry and any self-billing agreement review, are checked against the new end date.
• The desk can see, in one list, what ends in the next month and what is still unconfirmed.

Where Vayora fits

Vayora creates a task for the owner of a contract placement once it is inside 30 days of its end date, and closes it when the condition clears. The Contract desk view in Reports lists the placements ending soon, ranked by days left, with their rates and weekly gross profit.

Each extension is stored as its own dated record with the extension start and end, the new bill, pay and day rates, who signed and when, and notes. Adding one rolls the placement's end date forward and marks the placement as extended. A change of rate is made on the placement's rates, which is what future timesheets are priced from.

Where it stops. The extension record exists in the system, but no screen in the app records one yet, so extensions are entered through the API for now. There is no PO value or end date on the placement, and no check that a revised Key Information Document or status determination has been issued. The contractor's self-billing agreement carries a review date, which is a useful prompt at extension. To see the contract desk, start a free trial, or read about contract finance.

Common questions

Is a contract extension a new contract?

Usually it should be an extension schedule to the existing terms, not a new contract. That keeps the paperwork short. For IR35, HMRC's manual says an extension on exactly the same terms may not be a new contract, but one that changes terms or uses a new contract is a new engagement, and the client should reconsider status.

When should I start talking about an extension?

Four to six weeks before the end date, or earlier if the client's procurement is slow or the contractor has a long notice period. Ask at the start of the assignment what the client's extension process is. The purchase order, the rates and the sign-off all need to be ready before the first extension invoice.

Do I need to give the contractor a new Key Information Document?

If details in the document change, such as the pay rate, regulation 13A of the Conduct Regulations requires a revised one within five business days of the change. If nothing changes, nothing new is needed. Whether it applies to a limited company contractor, or one who has opted out, is a point for your adviser.

Does an extension affect the 12-week agency worker rule?

Where the rule applies, weeks count across assignments, so an extension continues the count. The rule applies to agency workers, and regulation 3(2) of the Agency Workers Regulations excludes individuals in business on their own account where the agency or hirer is their client. Many limited company contractors fall outside it, but ask your adviser.

What if the contractor keeps working after the end date?

Treat it as an urgent gap. The terms may not cover the extra days, the purchase order may be exhausted and invoices rejected, and the status determination may need revisiting. Get the extension signed as soon as you can, back-dated only to a date on which both sides agree they were working on the same terms.

Sources

• The Conduct of Employment Agencies and Employment Businesses Regulations 2003, regulation 13A
• The Conduct of Employment Agencies and Employment Businesses Regulations 2003, regulation 32
• HMRC Employment Status Manual, ESM10012: status determination statements
• The Agency Workers Regulations 2010, regulation 3
• The Agency Workers Regulations 2010, regulation 7

Checked 28 October 2026