I am working a large programme currently using an NEC3 ECC Option E Contracts, soon be transitioning to NEC3 ECC Option C Contracts. (I personally work Employer side).
A question has been raised as to how many hours a contractor can claim for an individual against our contract in instances where the individual in question is also spending time working for another employer.
Example - We have defined a 40 hour working week is allowable for our contractor to apply for providing the contractor complies with the terms of the contract (Required to provide the works & within the working area). The contractors cost to employ calculation (which provides the individuals people cost rate) is also based on a 40 hour week, as are the individuals T&C’s. Our contractor is claiming that if said individual works a 50 hour week (40 hours to our contract, 10 hours to a different employers contract) they are still within their rights to apply for 40 hours of cost against our contract using the same rate. Please note: Person in question is not entitled to overtime.
My stance is that as the contractor can only recover defined cost they should only be able to recover the defined cost incurred. This would either result in a pro-rata calculation being applied to time, or the cost to employ rate would be reduced to take into account the revised working hours.
The Schedule of Cost Components (NEC3) at sub-clause 11 states;
‘Wages, salaries and amounts paid by the Contractor for people paid according to the time worked while they are within the Working Areas’.
I believe that this means the Contractor is paid a ‘proportional’ amount for people, based on what that person is paid and how many hours they spend in the Working Area.
If a rate has been calculated based on a 40 hour working week, then the 40 hours used is, presumably, based on the forecast number of hours that individual works in a week. If that individual is also working on other contracts, I would suggest that the ‘proportional’ hourly rate cost on your contract should be reduced, to take account of the fact that not all their time is spent working in the Working Areas on your contract.
The fact that the individual is not paid for ‘overtime’ hours means that the cost to employ per hour decreases the more hours they work. If they do get paid overtime, then the cost to employ per hour would increase and, strictly speaking, the hourly rate on your contract would increase due to the increase in the amount being paid to that individual.
The Contractor’s ‘cost to employ calculation’ is simply a mechanism to allow People costs to be paid. Presumably you have not included this as a contract document so you are not ‘bound’ by the calculated rates. I am also presuming that your contract includes reasonable auditing rights to allow a forensic examination of costs.