Taxes & business banking for the self-employed


Contracts for Freelancers Part Two: What every freelancer should include

Last updated on Feb 21, 2020

Kate Bailey

Freelance Editor

Oct 18, 2019

For many freelancers, the task of not only creating a contract or having a contract created can be a daunting one. The reality is though, is it is no different in terms of its function when compared to a job contract. Ultimately a contract exists to protect both parties, yes, but more importantly outline a clear agreement of the work, expectations, and how the stakeholders shall conduct themselves.

Contracts are agreements, and solidify the agreements you make in business is key to your freelance success. So, what should every freelancer include in a contract?

Well, first we will cover off some of the basics you are likely to see on contracts. Much like invoices it can be very easy to pick up a contract and see how you could replicate it to suit your business. And yes, even though you are not a lawyer, that should be good enough? At some point, someone's lawyer check over this right? So, let’s save time and make something that works? Right?

Sadly, no. Not right. Without understanding each tiny component of the contract - how can you understand when something has gone wrong? How can you rely on the document to provide the protection or recourse it is designed to? This is a contract yes, but that’s just a heavy term for an agreement which is legally defined as the mutual understanding between two or more legally competent individuals or entities about their rights and duties regarding their past or future performances and consideration.

You should be in full, mutual agreement before you even start your work - as many freelancers will tell you, it’s a mistake you’ll only make once to know the full consequences of (tip: it’s usually loss of money).

So, let’s start with some of the key basics

  1. Names, contact information, and dates.

    The full names of both parties should appear at the beginning, and also throughout, any contract. You should include current postal information for all parties, and ensure all names reflect as per the taxation or business establishment documents. Essentially, no nicknames of pseudonyms.

  2. Your role.

    This should be a singular term which best encapsulates the services you are providing to your client. Of course some clients need more than one service, so you can present this information as a Service Package, then list in sub detail as to the services you are providing. The assumption is that freelancers do not need a job title as such, however, it is an incredibly handy tool for defining the role the services themselves are playing in your clients business.
    It can also be a great way for clients to verify your remuneration - as salary information for similar roles is available to the public, unlike wider public checks on averages for freelancers doing a similar role. Further, in the event the client asks for work outside of this role - you can back up an airtight scope of work with the clear definition of what you were hired to do.

  3. Payment information.

    Having this in the contract ensures there are no payments accidently being made elsewhere, or, any deviations from the agreement. For example, perhaps a client wants to pay from a private account to avoid VAT or something similar - you both as able to verify the account the payment should go to, the fact it is primarily used for business and as such items like VAT are owning regardless of the Owners discretion.

4. Timeframes and Deadlines.

This not only needs to be made clear in the scope of work but also as a summary in the main contract. Key milestones should be marked and often, relate to payment deadlines similarly. While delays often occur, the contract can be referred to amend these delays or to refer the client to original timeframes. Similarly, you can be held accountable by your client for late or missing work. This is one part of contracts that neither part is keen to commit to, however, it serves to require written or verbal verification of changes - meaning that just because Joe from Copy mentioned in passing the project will run long, you only have to factor in this change or note this change by following up with your client liaison and clarifying, ideally, in writing how the timeframe or deadlines will deviate from the contract.

5. Ownership.

Ensure that you include all limitations on the use of your work on your contract. Most freelancers are happy for their clients to own the products of their work, and generally there are rarely any problems with this. However, it becomes a little more difficult once the client starts using the work in places that were not outlined in the contract OR provided consent of use by the freelancers. Basically, you want to make sure that IF your work is not used correctly, you have recourse to point this out.

6. Confidential information.

As it stands, most contracts - not even just ones related to employment - include some form of confidentiality or non-disclosure agreement. For better or worse, it’s actually not just the company that needs protecting here. You are not just handing over work but oftentimes trade secrets of your practice and craft - even if you are not providing step by step manuals, clients will infer your process or professional strategies. Many freelancers will tell you they have rendered services only to have a client take a template of that process and internalise the work, usually fobbing it off to an unpaid or barely paid intern. Again, this is not every case nor by any means the majority, however it is common enough that it should be included as a consideration as to what is confidential to you and your business.

7. Limitation of liability.

This is also important as another frequent dispute amongst freelance services providers and clients is: ‘’this is YOUR fault!’. What can be hard to do without a contract in place dictating where your liability begins and ends, is unequivocally proving it is indeed not your fault and in any case, not your responsibility. This is also sometimes a tool used by clients to avoid final payment or to expand the scope of work without adjustment of payments.

Details, details, details...

Where you should get more detailed and where the crux of the details should be, is in the Scope of Work. This is where the protections around your deliverables and work shall be - and it’s not just for the contract/agreement, but actually the basis document for freelance work and project management. A scope of work should include:

  • Project objectives
  • Goals
  • Sub-phases
  • Tasks
  • Resources
  • Budget
  • Schedule

Using a scope of work as a foundation, you can also define what you WILL NOT be doing as part of your contract with your client. This includes limiting the number of revisions, outlining what is considered a scope creep (aka work that may seem like it is apart of the job, but creeps outside of the scope in a general sense).

Terms for Late Payments

The freelancers I know are all nice people who like to give their clients the benefit of the doubt. But a benefit of the doubt doesn’t cover your tax prepayments or put food on your table. Staying solvent is entirely dependant on cash flow when you are a freelancer. Not only can you outline late payment as a breach of contract, but you can also stipulate penalties for a breach of contract. For example, you can establish a % liability your clients are required to pay if they are late in paying bills - and this is the foundation of legal recourse. That said, setting strong terms in your contract should indicate to clients you are not to be messed with when it comes to receiving payment for services rendered.

Contracts help you avoid Fake Employment

Lastly, we have spoken about bogus self employment before, but it is worth noting that a solid Freelancer agreement or contract will help circumvent any confusion from the tax office, and any exploitative measures by potential clients. For example, over-regulation of the activity sequence - leads to the obligation of the independent employee to be bound by instructions. In this case, the freelancer could be classified as an employee. For the client this would result in the revival of the social insurance obligation and a high additional payment. For the freelancer, additional questions will be raised by the authorities.

Of course, once you have built and crafted a solid foundation contract - making adjustments for offers based on individual clients can become very easy. Many freelancers turn to a legal professional to get their contract template created, much like  going to a tax advisor - and are then able to make adjustments with the piece of mind a lawyer has vetted their terms. Regardless, an airtight contract is an investment of time, and an insurance policy every freelancer should invest in.

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