Consultancies and employment status – the importance of having clear terms

Approximately 15 per cent of the working population in the UK are “self-employed”.  The “gig economy” and recent judicial decisions concerning those with an uncertain employment status means that it is all the more important to ensure that you have an appropriate contract in place if you are engaging self-employed individuals, whether directly or via a limited company. 

Many businesses enter into consultancy arrangements casually without a second thought for the potential liabilities that could flow from them.  For example, the finding of worker status and/or no recourse in the event that the consultant does a poor job or causes damage.  Likewise consultants have discovered to their detriment that basing the arrangement on a “gentleman’s agreement” can result in them being “on the hook” for more work than they bargained for when setting the contract price.

The following are key considerations for all consultancy agreements:

  • Scope – what exactly is the consultant being engaged to do/provide?  This will avoid misunderstandings later on.
  • Payment terms – how will payment be calculated and how frequently will invoices be paid?
  • Liability – what is the consultant liable for, how will any defects be rectified and at whose cost?
  • Intellectual property and confidentiality – will the consultant be creating intellectual property during the consultancy?  Ownership will not transfer to the client unless this is clearly detailed in the consultancy agreement.  Further, if the consultant will have access to confidential information the client should ensure that this is adequately protected within the contract.
  • Relationship – it is vital to document the parties’ understanding as to the nature of the contractual relationship they are entering into.  This can avoid issues arising later on and can be used in evidence in the event of a status claim.

We have a wealth of experience of acting for both consultants and those who engage them.  We are able to provide advice on proposed arrangements and draft documentation to properly record the relationship and minimise employment status issues.

If you would like to seek advice regarding consultancy arrangements and employment status, please get in touch with the employment team on 01702 338338 or 01277 500123.