Many small businesses start off by using freelance contractors as and when needed rather than permanent employees. This makes perfect sense until one knows exactly what the business will need by way of help and whilst capital is still limited and unpredictable. HOWEVER, it does NOT mean that the agreement itself with the sub-contractor can be ignored and without one, a business could risk losing not just money, but its entire business! This is why:
- There is no implied duty of confidentiality owed by a self-employed consultant (as there would be for an employee). So all of your business information, client and supplier contacts that you may share with your contractor are exposed and free for them to use as they please. Therefore, it is important to impose express confidentiality obligations on the consultant which cover his/her activities both during and after the engagement.
- For those businesses in the creative industry, it is vital to understand that if you sub-contract a creative project, the intellectual property rights (e.g. copyright) arising as a result of services provided will normally belong to the consultant and NOT to you. As you will usually want to take ownership of these rights, it is important to include specific assignment provisions in the consultancy agreement.
- If the job or project you outsource would cause a big loss if the contactor gets it wrong, you can use the agreement to impose an obligation on the contactor to take out insurance to cover his/her liability and have added peace of mind.
- Without an agreement, there is the risk that the terms between you and the sub-contractor are not at all clear and that statements you have made casually become legally binding.
- You may be inadvertently creating an employer- employee relationship and not only have to account to the tax man for PAYE and NIC, but also face claims for maternity/paternity pay, unfair dismissal and redundancy claims if you do not follow the proper process!
If you need terms to get you started, we have a brand new Freelance Contractor Agreement in our ‘oven -ready’ document shop to put your mind at rest.