congrats Malcolm!! great article, good research and good arguments. Unfortunately for our sector, there are many black sheep amongst service production companies, which leads clients to distrust. the best "thank you" for us as a service is repeat business and as a result word to mouth publicity, since this proves us to be on the right track. But unfortunately, too many times when a wrong service production company is chosen and there are problems, the production company that chose the wrong partner does not go back to their home country saying "don't work with them", but "don't go shoot there".
Which production service company?
Some two decades ago productions filming overseas - particularly in developing countries or difficult destinations - would commonly dispatch their production manager or producer well in advance of the prep start to establish government contacts and set up a bank account and payroll.
This was a time-consuming and tedious but necessary hands-on approach which many producers are managing to avoid today thanks to the global expansion of film commissions and hordes of production service companies (PSC). In fact, many PSCs have now become a one-stop-shop.
This positive development in today’s fast moving times saves a great amount of time and energy. But some producers can easily become lazy or simply too trusting when vetting companies to 'partner' with. The rule of thumb is to never compromise time allocated for researching and evaluating PSCs. Needless to say, the person behind the company is just as important as the company itself.
Producers might be better off going with a lesser known company, especially if they have a strong local independent line producer on board.
Deciding which company to work with is not a decision to take lightly when the finite moment comes to pressing the button. Getting pregnant with the wrong sort can quickly lead to nightmares that can negatively affect the shoot.
A company that worked well for one production may not be suitable for another. Is the company’s track record with only big-budget movies or can it also handle small budgets? It’s not only about the nature of the production but also the timing. Does the company have enough resources to handle more than one production at the same time? Some do not. Although they think they can. These are some of the several aspects producers should investigate.
In South Africa seldom will you find a company that rejects a production because it is busy. The idea of giving way to competition is unthinkable. However, producers might be better off going with a lesser known company, especially if they have a strong local independent line producer on board.
American studios are known to 'follow the crowd' and some have the habit of using the same company that serviced the last studio picture. Some LA producers are reluctant to stick their neck out to break this trend. As one studio executive admitted: “Sometimes it's best to carry on with tradition then risk getting blamed for switching [to a better] service company, even if the same local problems were bound to crop up either way."
American studios are known to 'follow the crowd' and some have the habit of using the same company that serviced the last studio picture.
So, using the devil everyone knows might be a safer bet, not for the production but for the producer. European producers tend to shop around more keenly, although they can also easily fall victim to unsuitable PSCs.
There are times when producers have no choice but to work with the devil everyone knows, as can be said for some parts of Sicily where working through one of the mafia families will probably create less problems then if one doesn't.
Until recently, one Eastern European country had only two production service companies. The 'crooked' one had the best government contacts and was in bed with the city mayor. They were great for a film that was heavily location-based but producers had to be extra watchful with their monies. Sadly they often realised this only too late. Some crew were receiving only half of what producers paid instead of the agreed 90% of the charge. Also ‘gratuities’ to government sources were not always received by the intended beneficiaries. As one producer put it, “the corruption system was itself corrupt”.
In principle, the right choice of production service company should save producers more money than the service fee being charged.
A low-budget film with less cash to spare might be better off using an honest, less experienced company and investing into the extended hire of a foreign Location Manager who can use extra time to develop - with the help of a local fixer - relationships on the ground with the authorities. Sometimes the old adage cannot be truer: You have to spend money to save money.
Another area of caution is budgets. Producers should be suspicious of those companies readily backing into any number. Some may be too hungry for work or simply over-enthusiastic to the risky point of not giving enough consideration to the production value demanded by the script. Backed-into budgets sometimes have little or no contingencies and the smallest of creative changes arising down the line can be financially restrictive. A free budget offered by a production service company is not always the correct budget and the assumptions made need to be evaluated in great detail. At times it might be safer to commission a budget from an independent local line producer.
In principle, the right choice of production service company should save producers more money than the service fee being charged. At worst it should balance out the service fees and still save a lot of stress, allowing producers to focus properly on legitimate problems and the usual creative matters. Sometimes, but not often, avoiding a production service company can be an economical and practical option.
For example, it is not a well-known fact that producers filming in Malta do not need a local production service company in order to tap into the island’s financial incentives and neither to hire local crew. Foreign companies can apply directly for both financial incentives and the VAT refund. Local crews can issue invoices as contract workers and it is only a section of construction crews that needs be put on the payroll but this can be setup easily by a local accountant without the need of a local service company or any local company. The "trick" for Malta is to engage the best local line producer or production manager and not to bother too much about the PSC.
It is not a well-known fact that producers filming in Malta do not need a local production service company in order to tap into the island’s financial incentives.
However, generally PSCs, as opposed to mere fixers, serve a very important role in many countries. The reputable ones have good relationships with government authorities and can help cut through heavy red tape when requesting permits for sensitive locations, some of which may need to be bonded, and also when benefiting from financial incentives and tax rebates which surface several months after the shoot. Moreover PSCs usually command better rates from local suppliers and hotels.
Some bad apples do exist. For example, it is not unheard of for a PSC to receive a VAT refund and not pass it back onto the producer. Although such dishonest companies don't usually survive for long, they do manage to sweep up a few victims whilst they do.
All in all, in today’s day and age many producers prefer PSCs to handle everything from A to Z because they “get everything on one simple invoice”, as one producer put it. American studios prefer using PSCs also because the entire structure shields them from any necessary local bribes, especially in developing nations, that may infringe on the Foreign Corrupt Practises Act.
Some may have the mistaken concept that using a local company to employ local crew will indemnify producers against serious claims for accidents on set. Adequate insurance still needs to be in place and producers must not forget to double-check any policies sought by the service company and ensure that the cost of local hospitalisation for serious accidents is commensurate with the policy cover.
Unfortunately many companies are on the take for 'introductions' and this can have costly consequences on the outcome of negotiations with service providers.
Another factor to consider is the company’s relationship with local crews. For example a company that serviced the biggest or hottest productions may not have the best reputation with crew and/or supplier payments. So, for example, in busy times when there is an abundance of work the 'A' crew might not be readily available simply because they prefer to work with the company they trust better, which pays their salaries on time and which does not play tricks with their overtime sheets, even if their salary is less. Crews are known to be quite unforgiving, unless of course if they are desperate for work.
Another old adage prevails: There ain’t no such thing as a free lunch. When making your first visit to a country it may be wiser for producers to be making the first contact with the hotel and main equipment suppliers, rather than being introduced by the service company or immediately accepting a free night at a hotel.
Unfortunately many companies are on the take for 'introductions' and this can have costly consequences on the outcome of negotiations with service providers. It is naïve to think that by vetting all invoices you can ensure there are no kickbacks. Inflated invoices can easily be rectified secretly with credit notes that don’t find their way into the production file!
The fact of the matter is there are multiple reasons why producers should or shouldn’t use a particular service company. It is safer to assume that the majority of production service companies are not very honest and suitable, until you find one that is. Due diligence involving some real time on the ground and including conversations with the last three producers/clients should help you make an informed decision and minimise the risk. A little hard work in pre-prep will go a long way in terms of monies saved and stress avoided.
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Malcolm there is a lot to comment about here - some good, some not and I dare say, incorrect. I will however, restrict myself to the comment you make about employment of crew in Malta. Your statement in this article is entirely misleading. Employment law in Malta is a specialised area and is on a par with all EU countries, so making a sweeping statement like this is dangerous. Crew engaged without giving due consideration to the law might be found to be employees irrespective of whether they are engaged as contractors. There are legal ways of ensuring that the dangers are minimised, but it is not as straightforward as you imply.
Also you write that "only a section of construction crews that needs be put on the payroll " - as far as I know the law applies equally to all. Can you please clarify your comment?
Please elaborate on where you find anything incorrect and do not "restrict" your comments, especially now that you have thrown seeds of doubt in public. Most readers are interested in a healthy debate and although you are the first industry colleague to not compliment the accuracy of my article, I am nonetheless eager to discuss.
Now about your objections regarding the topic of employment in Malta:
You are correct that there is an employment law in line with the EU. Crew members engaged as contractors could be interpreted (in terms of the law) as "employees" if they are hired under certain conditions. However my article does not imply that crew in Malta can be hired "without giving due consideration to the law", as you incorrectly imply.
I am simply making it clear that anybody telling producers that the shooting crew must be on a payroll as "employees" is very misleading and this is usually an attempt to compel producers to use a local PSC even if the person running it is inexperienced.
As you correctly say, there are legal ways of ensuring that "dangers are minimised", ensuring that a crew member is not hired under certain conditions that "tick the boxes" of certain criteria laid out in the law that "altogether" may lead to a misinterpretation of his status with the production company.
Furthermore the crew contracts must be well drawn up to ensure clearly and fairly that there is no 'misunderstanding'. Remember that when the latest employment law was drawn up in Malta, as usual there was little or no real consideration to the (unique) nature of the film industry and therefore it is up to local producers or production managers to "minimise the dangers" and meanwhile still work within the law. Malta is not an exception. A local qualified line producer or production manager would know all this on the back of his/her hand.
As regards to construction crew, for the benefit of other readers who never filmed in Malta, I shall elaborate: there are a certain number of skilled personnel who are registered as "self-employed". I have filmed several small movies in Malta with perhaps only 15-20 skilled personnel in the construction team and these were paid by invoice (ie: under the VAT system). However the larger part of construction workers in Malta, skilled and unskilled, are not registered as self-employed and hence need to be put on a payroll and engaged as employees. Even so, producers can do that without the need of a local Production Service Company. They can hire a local payroll company or have a similar setup through their accounts department as long as they register for a PE number with the tax authorities.
I have filmed some 50 productions in Malta, many of which with a respectable local law firm involved for contracts, and I have no doubt that we were within the law at all times.
Malcolm I have not implied that you did not ensure that employment contracts were within the law for your own productions but simply that the comment that you made here was misleading. For your own reference you can refer to LN44/2012.
With respect to what you write on construction workers. Again this applies to every person not to just a section of construction workers. It totally depends on how the person is registered if at all - and that applies across the board.
As for the rest - let me simply say that I would not intentionally seek to harm colleagues whose livelihood is dependent on the film industry and and who have their fates intrinsically linked to the success of the film industry in Malta, unlike yourself who provide services in different countries and are not here all the time. Malta is no different to other countries in that a PSC can provide an invaluable service through the various arrangements that it can bring to a production and with the right PSC on board, life for a production can be made easier and less costlier. I guess on this we are in agreement.
I will not indulge further into a public spate of words with a lawyer as yourself.
I stand by everything I wrote but before I rest my case here are some final comments.
You are simply applying a legal rendering on a non-legal argument. Your last "construction workers" comment is basically saying the same thing I said in my reply to you - but since I fear you are 'inadvertently' adding confusion to readers, it is important to clarify that with construction workers producers have less of a choice as to "how to engage them" because other than the 15-20 film-experienced craftsmen that exist as registered self-employed, the rest are not and therefore they have no other way than to go on the payroll. Productions with moderate construction needs may require less than 20 persons in the construction team and in such a case a producer may never need to setup payroll for anyone. If anyone is uncertain in understanding this concept he/she is more than welcome to contact my company.
On a last note, your comments are verging on offensive. First you insinuate that I am advocating "engagement without giving due consideration to the law", and now you are insinuating (for anyone with a brain able to read between the lines) that I am intentionally seeking to harm colleagues whose livelihood is dependent on the film industry. This cannot be further than the truth. I have a very serious and vested interest in a PSC in Malta (www.pcpmalta.com) and my article was entirely unbiased, if anything shooting myself in the foot with my own honesty. I am a strong believer that visiting producers are told about every option of how to operate in Malta and all ways of how to structure themselves legally and cost-efficiently. It is then up to them to choose the way that suits them best. I guess on this we are in agreement.
PS: Always remember that all these flexible options offered by Malta to foreign producers makes the island a very attractive place to shoot. Some countries force producers to sign on with a local PSC in order to tap into the financial incentives or even just to retrieve the VAT locally. Malta does not force this condition onto foreign producers and this is good news that should not be purposely kept under wraps.
It is in the interest of Maltese stakeholders to promote this information and ensure such positives remain in place. Any future regulations should only be introduced with this in mind.
For example, Anika, last summer during a public session with the minister responsible for film, your company proposed that the current cash rebate is only given on condition that foreign producers enter into a co-production agreement with a local entity. Whilst this bodes well for the local producer, it would harm the industry to great lengths as it would result in a decrease of foreign film work going to Malta. It is not easy for every production to get into the complicated structure of a co-production, especially if they already have genuine co-producing partners. The cash rebate in Malta should remain a straightforward incentive as it currently is.
wow great article malcolm. Like your calling a spade a spade. Small correction perhaps cos I noticed some US guys are beginning to shop around so there’s some good news.
Read the debate lol. Its so not fair for this article to get discredit without tangible stuff just cos a PSC in Malta doesn’t like the revelation that it can be indispensable! Makes the small country look very small minded. It is not! I was there recently on a very small thingie, its crews are awesome and so switched on. A great place to shoot. Will not hesitate to go back. Just wish the vat came back faster. has it got better? And yes we paid everyone by invoice. Clean and simple! But on some projects I like a PSC if it gives added value (like Palma Pictures that invested lots and is a true 1-stop-shop.) All the same who cares if PSCs are not needed in Malta – except the producer saving the money.
You should know most or all of these maltese PSCs are one man shows run by production managers (or dare I say wannabes). If a PSC aint needed the PMs can still be hired in their own roles. Just be watchful, from the 20 on the commission list there are only maybe 4 worth meeting. Check the credits are real and invite them for lunch. Do this in any country not just malta.
Some of the savings for not using a PSC can still be used for paying the PM to set up basic stuff in some extra pre-prep and for the lawyer to write up contracts. Everyone gets to work all the same and producer saves money so everyone wins even malta!
I found that article interesting reading thanks Malcolm and raises a number of good points about our sector. The big trend down under is that most of the traditional larger Director focused production houses have turned to production service work to bolster their falling margins from the ailing local TVC production sector ever since the recession started. Every man and his dog is now a PSC including some tiny operators without any real qualifications for the title so you need to be careful who you are talking to.
Looking at some of the big guys the care shown to this part of their business is often less than optimum and lacks the personal touch. They typically hire in freelance line producers to handle their lower priority work which they are too busy to deal with, nor have a great interest in. So the benefits of teaming up with one of these so called local heavy weights are often offset by a lack of continuity, and less commitment to a positive filming experience. There are other things one could say about the results but the word on the ground is that some clients are departing of late with a sour taste in their mouths lacking any real desire to return.
It’s a sad trend really but there are the good guys out there also who keep doing us proud and hopefully clients will see the light to choose more carefully which does seem to be the focus of your article. Good for you.
I am a strong believer that specialists make the best SPC’s. I reckon they run a tighter ship too. But I would say that now wouldn't I? I am waiting for the rebuke....
Thanks for the insight. I love your phrase "Every man and his dog is now a PSC". It pretty much nails it. It is frustrating to see productions have a bad experience with a PSC and then blame the country itself. Part of the blame lies on producers who do not perform enough due diligence. In fact I would go as far as to say that some producers get ripped off because they "allow" themselves to be ripped off. Its as simple as that. And we must remember there are all sort of PSCs, ranging from those that are one man shows, as Andrew rightly points out above, to those that invest in human resources and full-time management, training, continuous government lobbying for incentives, serious office space rented all year around and global marketing with attendance to the important markets etc (Such as Film Afrika in South Africa. I admit I am friends with this company but its structure is seriously worth appreciating). My take is go with a PSC where possible, as long as you can get real value out of it. Just negotiate the service charge according to the value.
You are right that the "heavy weights" are not always the best choice. When you squeeze them you might discover they are less committed to the 100% personalised service that you are entitled to. Some operate like a sausage factory. Of course there are exceptions.
Thanks for your comments. The VAT refund timeline in Malta has not improved since two years ago and it still generally takes 5 months from the due date of the return. However the VAT department has been quite film-friendly over the last years and it has made an exception for foreign productions whereby it allows productions to submit the return on a monthly basis rather than quarterly, thus minimising the waiting time from date of expenditure (hence minimising cash flow problems).
I'm glad you found the hiring of crew a simple manner when you were in Malta. That's generally how it is. It is fair to note that Anika was writing from a legal point of view which deserves some credit because the employment laws in Malta were not written with the film industry in mind and therefore one should always be watchful. The law was designed to stop abuse by employers who were forcing employees to work with them on a freelance basis in order to minimise employer's liabilities in more than one way.
In any case, the focus of my article is about PSCs and not how to engage crew. Considering the current situation in Malta I suggest the following Rule of Thumb:
- When shooting a TVC, use a PSC because you won't have time to set up a structure. You probably hardly have time for normal prep or construction!
- When shooting a film for a few months, hire the best available PM or LP who should also know what the latest employment laws are in respect of crew and their (latest) interpretation by the labour department. Paying by invoice should be very fine as has been in the past. However, if the matter is too grey and unclear, send your production accountant to the tax office to get (within an hour) an employment number. Then assign one of the assistant accountants to manage payroll. If you go down the payroll route, contract crew in such a manner that gives due consideration to the social benefits that you will be paying on their behalf and which they will not have to pay as a self employed. Clarify bonuses and sick leave in advance so that there will be no abuse from any crew just because of their employment status.
- When engaging crew for well over six months for prep/shoot/wrap, it is probably best simply to go on payroll as described above because a large part of your crew's annual salary will be depending on your production. (I believe the cutoff is 75%.). For those crew that work within their own time schedule and bring their tools of trade, they should be OK as contract workers.
For long productions it is not a bad idea to have a lawyer on a retainer but make sure you find someone that does not err on the side of 101% safety at the cost of being totally impractical towards production. Some laws are known to be quite impractical if you had to apply them to the exact letter.
Disclaimer: The above does not constitute legal advice. But it is based on extensive production management experience combined with past legal advice :-)
Malcolm I am only seeing this now. I am all up for debate and discussion so long as it is polite and non-aggressive. Using the word "inadvertently" as you did in reply to my comment would imply that I was purposely seeking to confuse readers. And this when the opposite is true, as I simply clarified a point you made which might have confused readers.
If you write an article you should be open to accept correction or even criticism openly without one fearing being attacked simply because they might not agree with you.
As I wrote before, I agree with most of what you wrote. Besides the simple clarification I made, what I took umbrage too is that you write what the "trick" for Malta is, implying that that is the best way forward, when the truth is that most of what you write in your article as to the advantages for using a PSC, are equally applicable to Malta as they are elsewhere.
As to whether one should "impose" the use of a PSC or not, this is a question for debate and there are many arguments for and against. Let me assure you that the position put forward in that consultation session was spurred on purely to protect the film industry in Malta. But this is not the place for that discussion which I hope can be held in a healthy manner.
Yes all options should be presented but clearly. Including the practical considerations in not using a PSC rather than presenting things as an easy way forward. It is up to the foreign production to then determine what is the best route for them. Ultimately whether one uses a PSC or not, all boils down to the production manager/line producer be it in his/her personal capacity or through the company. Proper due diligence should be done and references checked to ensure that the required experience is there.
I am always happy to discuss things with you, anytime, anyplace - even if over just a coffee - I'm sure we are on the same page on lots of things. Though please don't get upset if I don't agree with you on everything.
Half of what you wrote now is agreeable. We shall not argue on the rest. Life is too short. Stay assured no offence was ever taken from my side. Merry Xmas!
We shot a teaser for a Filipino/American film last DEC. in Manila. We used a production services Company that normally does Music Videos. The director was brilliant, and we had an A list cast. However setting up the legal part of the shoot was hard. Money transfers etc. The important thing is that you find a good Fixer that you can trust to handle all of the paper work.In a country like The Philippines production managers have been known to take the money and run. I was very lucky and pleased with the end result.
Virginia, I do not recommend you give your cash management to any production manager unless you know him well. My article referred to the option of productions running their own show and managing their bank account in a host country as was the practice more commonly two decades ago. Either that, or use a very trusted fixer as you say or use an established production service company. What is key is that you do your due diligence by calling past clients. Don't simply get impressed by the websites or people who have the gift of the gab. Better to use a lesser experienced one who needs some hand holding but is honest and trusted also by the local community, then to use a crook simply because he/she is the devil everyone knows.
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