It’s an occurrence that freelancers and contractors either dread or know all too well: You’ve completed work for a client and sent it to them, along with an invoice, happy with another job well done.
You’re either met with one of two things:
Laying out the level of service, the T+C’s and payment plans on the table before any clocked minutes even begins is the best way to ensure this doesn’t happen. It ensures that your time isn’t wasted, not only in the unknowingly working for free but the hassle of then trying to fight for the money you were banking on receiving.
However, without any written correspondence relaying this information, often signed by both parties, you don’t really have a leg to stand on when trying to claim this back from the company.
This is where a contract for services comes into play.
You may think a contract is just a contract but in the world of employment there a couple that differ slightly depending on the work being done and the relationship between the two parties.
A ‘contract for services’ is not to be confused with a ‘contract of services’. See? Sneaky little one-word change there. We’ll talk about the latter shortly, but you’re here to learn about a ‘contract for services’. This type of contract is a legally binding agreement between a business and a self-employed individual.
That last bit is pretty crucial.
So, if you’re a director of a limited company and you take on contract work, or you’re on the books of an umbrella company or maybe you’re riding the freelance train as a lone wolf, a contract for services is the one for you.
Remember earlier when I talked about a ‘contract of services’? Well, here’s where we’re going to get into the nitty-gritty of what that means. The ‘of’ version is a contract between an employer and an individual who has become an employer of a company.
This differs from a contract for service because this lays out exactly what you’re doing for the client, as opposed to signing your working life away as part of a company.
Where employers have to set work and employees have to complete it in a contract of services, a contract for services works strictly on a business-to-business basis.
A contract of service is a continual relationship with continuous work until one party decides it’s time for it to end. It is one in which a duty of care needs to be upheld by the employer. If an employee acts out of line, they are under the employer’s contract, and therefore the business. This means the employer is liable for any misconduct the employee does.
There are certain responsibilities that a client has to carry out when taking on a contractor and certain rights that a contractor has when working with a client. Let’s go through some that may appear in a contract for services:
These are just a few generalised responsibilities from both sides but should give you an idea.
In short, YES.
It may sound scary, but as a director of your own limited company, you have a responsibility to follow certain regulations and obligations. If you don’t, this may result in a breach of contract.
This breach could result in legal action, causing you extra, unnecessary costs, hiring lawyers and scary jargon, which you could probably really do without, running your own burgeoning business and all.
Creating a contract for services often falls by the wayside when taking on a new client, because you either don’t have a legally binding one to hand or you’re scared this might scare them off.
If, however, you are working as a director of a limited company or under an umbrella company, your relationship to any client, large or small, is the same as a bigwig conglomerates relationship to its contractors and you wouldn’t see those guys heading into a big deal without dotting the i’s and crossing the t’s with a fine-toothed comb, would you?
According to the BBC, self-employed workers have been on the up for the past two decades and now account for over 15% of the working population.
It could be the pull of flexible work or that some workers just had no other choice. All we know, thanks to the ONS, is that unemployment was at its lowest since 1975 in May 2018 mainly due to the boost in self-employment.
What it lacks in job security and basic workers rights, like sick pay and redundancy, it makes up for in being able to choose your own hours, take on different kinds of work and get a new team every few weeks, months or even daily.
The way in which we can take on work nowadays has also changed.
A sharp rise in technology means that people can work from anywhere at any time.
Wi-Fi at every turn, cloud sharing, and video calls have all made it possible to run a business from home, café or even the sky.
The workforce has caught on, seeing this freedom and control to create their own workload as an opportunity.
This type of workforce is known as the ‘gig economy’, where workers often do the odd job for clients on a buyer and supplier basis. This could lead to on-going work, or lots of ‘gigs’ for certain projects.
Job sites like Upwork and People per hour are based purely around freelancers taking on one-time ‘gigs’.
According to McKinsey Global Institute, there are 5 million people in the UK currently working as part of the gig economy.
With the further increase in shared working spaces and the growing number of limited companies making the UK tax enforcers knees quiver, this number is set to keep on growing. This shift is exactly why basic contracts for services are needed now more than ever.
While most bits of paper for your business are for the benefit of HMRC, Companies House or your clients, this type of document could save you a whole load of hassle and makes sure your business is carrying everything out safely and legally.
Initiating a contract also shows that you’ve not only got a good business head on but that you’re serious about the work. It sets a level of prestige in the client’s mind.
By this point, you should probably have a good idea of what a contract for services is, but the big question is: when should you use one? Strictly speaking, a contract should be drawn up, signed and dated before any work between a client/agent and limited/umbrella company takes place. No matter how big or small the job, for a friend or even friend of a friend, if you’ve got your sights on getting paid, there should be a contract. Without one, misunderstandings can occur, wires can get crossed and expectations can sometimes not match up.
Whenever you’re not sure of something while you’re undertaking the work, such as if you agreed to complete a certain task or the amount of time you said something would take, you can refer to the contract. It’s a bit like your legal Holy Grail.
If situations change, for instance, the client has had a setback with the project and needs to change your start date, or one of their other contractors has decided they can’t do the project anymore and needs you to take on the remaining work, the contract can act as an original document to discuss negotiations and be amended from there.
It also ensures that clients don’t try and get more work out of you than they've paid for.
You should send one if:
This is obviously not a definitive list, but just a few of the most common reasons you would have a contract. Like I mentioned earlier, however, if work is taking place and you’re being paid for said work, in any capacity, a contract should come along with it.
Some templates can come across a bit more formal than others. If this is too detailed, just cut out bits and cater it to the type of work you’re doing. This is, unfortunately, a time when you can’t get out of reading the small print.
Here's one from template.net that works as a pretty good blueprint:
STANDARD SERVICES AGREEMENT
THIS AGREEMENT is made on
[Month, day, year]
collectively referred to as the "Parties". RECITALS
The Buyer wishes to be provided with the Services (defined below) by the Service Provider and the Service Provider agrees to provide the Services to the Buyer on the terms and conditions of this Agreement.
The Service Provider shall provide the following services ("Services") to the Buyer in accordance with the terms and conditions of this Agreement:
[Insert a description of the Services here]
1.2 Delivery of the Services
The Service Provider shall provide the Services at the following site(s): [insert details here if applicable]
[Specify whether the price will be paid in one payment, in installments or upon completion of specific milestones. These details should be specified here.]
2.1 Intellectual Property Rights
The Service Provider agrees to grant to the Buyer a non-exclusive, irrevocable, royalty free licence to use, copy and modify any elements of the Material not specifically created for the Buyer as part of the Services. In respect of the Material specifically created for the Buyer as part of the Services, the Service Provider assigns the full title guarantee to the Buyer and any all of the copyright, other intellectual property rights and any other data or material used or subsisting in the Material whether finished or unfinished. If any third party intellectual property rights are used in the Material the Service Provider shall ensure that it has secured all necessary consents and approvals to use such third party intellectual property rights for the Service Provider and the Buyer. For the purposes of this Clause 2.1, "Material" shall mean the materials, in whatever form, used by the Service Provider to provide the Services and the products, systems, programs or processes, in whatever form, produced by the Service Provider pursuant to this Agreement.
2.3 Limitation of liability
2.4 Term and Termination
2.5 Relationship of the Parties
The Parties acknowledge and agree that the Services performed by the Service Provider, its employees, agents or sub-contractors shall be as an independent contractor and that nothing in this Agreement shall be deemed to constitute a partnership, joint venture, agency relationship or otherwise between the parties.
Neither Party will use, copy, adapt, alter or part with possession of any information of the other which is disclosed or otherwise comes into its possession under or in relation to this Agreement and which is of a confidential nature. This obligation will not apply to information which the recipient can prove was in its possession at the date it was received or obtained or which the recipient obtains from some other person with good legal title to it or which is in or comes into the public domain otherwise than through the default or negligence of the recipient or which is independently developed by or for the recipient.
Any notice which may be given by a Party under this Agreement shall be deemed to have been duly delivered if delivered by hand, first class post, facsimile transmission or electronic mail to the address of the other Party as specified in this Agreement or any other address notified in writing to the other Party. Subject to any applicable local law provisions to the contrary, any such communication shall be deemed to have been made to the other Party, if delivered by:
Clause(s) [insert amended clause reference(s) here] shall be amended to read as follows:
AS WITNESS the hands of the Parties hereto or their duly authorised representatives the day and year first above written.
for and on behalf of
for and on behalf of
[the Service Provider]
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