Share Article: Perils and pitfalls in freelance contracts

So you got the freelance gig and now they’ve given you a contract you don’t understand. What do you do?

It’s well worth getting some specific advice on your contract before you sign. Almost anything is usually negotiable. Many small agencies and start ups have bought or downloaded template contracts they don’t understand and are likely to listen to a reasoned argument as to why a particular clause isn’t fit for purpose and should be deleted or changed.

Getting advice isn’t expensive. For a few hundred pounds, I can review your freelance contract, translate it into plain English and discuss whether you should be asking for changes.

Some common issues:

  • Contracts designed for a limited company, but you are an individual contractor or vice versa

This is basic. Many of the terms in the contract won’t make sense if it was designed for the wrong type of contracting party. Ask for the contract to be redrafted specifically for your circumstances, or get advice on which clauses need to be changed.

  • Substitution clauses

These are often included for tax reasons, as a substitution clause is thought to prove that there is no requirement for personal service (fundamental for HMRC to argue that you are in fact an employee). You may not want to be an employee, but recognise that a substitution clause could prevent you relying on many employment protections, including in respect of discrimination.

  • VAT

You may or may not be registered for VAT. The contract may or may not recognise this and may or may not reflect the actual position. I’ve seen contracts so badly drafted that one clause describes the fee payable as exclusive of VAT and another claim that fees are inclusive of all taxes. Speak to your accountant about VAT registration and make sure the contract is clear on whether fees include VAT or not.

  • Other activities

Some contracts attempt to restrict what you do outside of your hours with the business. It’s particularly important to get this right if you have any side projects or are only working part time with one business and have other clients.

  • IP

Who owns the IP in what you create? Most contracts will want to make sure that the business owns the IP. Some go further, suggesting they own the IP in anything you “invent” whilst engaged with the business. This is clearly inappropriate if you have side projects.

  • Insurance

Many contracts are drafted to suggest you will take out insurance to cover any negligence or reckless acts by you or your substitute. If you don’t have insurance, check with the business to see if they really need this. If they don’t, get the clause struck out.

  • Restrictions on competition and poaching staff

Even freelance contracts sometimes contain restrictions on what you can do after the contract ends. Sometimes they are not fit for purpose: I’ve advised freelancers who got the job through someone they knew only to be asked to sign a contract saying they can’t work with that person afterwards. Restrictions are often negotiable if you make the case as to why they are unworkable or unfairly restrict where and with whom you can work.

If you have any questions about a freelance contract, contact Louise Taft for a no obligation chat about how she can help

T: 020 7935 3522

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