Consultancy agreements

More and more businesses are benefiting from using a consultant in areas such as management, IT and training, rather than taking on full-time employees.

Tax savings and operational flexibility are among the main advantages of outsourcing consultants.

However, it is extremely important to ensure a professionally drafted agreement is in place before the consultancy period begins.

 

What should I include in a Consultancy Agreement?

Don’t rely on an off-the-shelf template. We will quickly deliver an agreement tailored to your exact needs which protects your business without making the assignment too hard to complete.

Our bespoke Consultancy Agreements reflect exactly what you want the arrangements between you and the consultant to be. We will get to know what you want, and whilst no two agreements will be the same, some of the basic provisions include:

  • Employment status: setting out that the individual is self-employed and not an employee. However, just because this is what the parties agree, it does not mean that the courts or HMRC will agree too. It is not uncommon for the consultant to indemnify you for your costs if the status is wrongly applied in areas such as PAYE, NI, holiday pay and sick pay.
  • Notice periods: unlike a contract of employment there is no statutory right to claim unfair dismissal, however there may be claims for damages arising out of wrongful breach.
  • Definition of the services: this can be very important in some circumstances in order to establish liability and settle disputes if an assignment hasn’t been properly performed.
  • Substitutes: a contractor will often need to reserve the right to nominate a substitute to carry out the work. The right is rarely used but is an important distinction between employees and contractors.
  • Insurance: you will nearly always want the individual to have their own insurance against being negligent, causing damage or injury.
  • Confidentiality: the last thing you want is the consultant to poach clients, yet this is often overlooked.

We can help you to protect your business by offering guidance on what type of consultancy agreement you need, and drafting the terms and conditions for you.

 

What are the risks to my business?

The consequences of getting a consultant’s status wrong are significant:

  • The individual may be able to claim unfair dismissal on termination.
  • HMRC may demand that you account for PAYE and NI which should have been deducted at source.
  • The individual may be entitled to holiday pay, sick pay and the minimum wage.

A Tribunal can be time consuming and expensive. In the latest figures from the Ministry of Justice to March 2017, the average award for an unfair dismissal claim was £16,543. The most awarded was almost £1.75million.

Without an expertly drafted consultancy agreement you could find your business is exposed to financial liabilities, and face an unexpected Employment Tribunal claim.

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