The National Minimum Wage (Amendment) Regulations 2024 came into force on 1 April and provided...
A consultant is usually a self-employed independent contractor who is engaged to provide specific expertise for a particular project.
Consultancy can allow a company to access a particular skill or expertise that it does not have within its existing workforce, without needing to spend time recruiting or training employees. It is a more commercial and flexible relationship than employment, which makes it ideal where the company has a limited or short-term need for the skills or expertise that the consultant provides.
The use of consultants has, however, come under increasing scrutiny in recent years. in respect of their tax and employment status.
Since the tests for determining employment status for employment law and tax purposes are not exactly the same, it is advisable to seek professional advice on these issues.
It should become clear from the information provided below that there are a number of pitfalls to avoid with Consultancy Agreements and they are best drafted with care and professional advice. Contact us on 01827 317070 for further advice or email employment@pickerings-solicitors.com
What to Cover in a Consultancy Agreement
There are some key points that should be covered in a Consultancy Agreement.
Consultant's Duties and Obligations
This clause will set out :
The timescale for which the consultant is contracted to perform services for the client if a time-based rather than a deliverables-based approach is taken.
The services being provided, including any related milestones and deliverables.
Stipulation that the consultant is obliged to carry out the services with due skill and care (although a consultant will be under an implied duty to work with due skill and care).
Sets out other obligations, such as providing information to the client or complying with company health and safety regulations.
When drafting a consultancy agreement you need to take care over the detail, because if it imposes detailed and/or restrictive duties on the consultant, this may suggest a level of control that indicates that the consultant is, in fact, a worker or employee.
Likewise, the clause should not include any employment-related benefits such as holiday entitlement/pay and should clarify that the consultant will not be paid for any period during which the services are not provided, for example, due to the consultant’s absence.
Substitution
You may consider including a clause to enable the consultant to provide, at their expense, an approved and suitably qualified substitute to carry out the services in the consultant’s place. This should be on the understanding that the consultant will continue to be subject to all obligations during the substitute’s appointment as if it were the consultant carrying out the work.
If you decide to do this, you should be careful to avoid including anything which limits the right to provide a substitute, since this would risk a finding that the right of substitution is a sham. In turn, this could lead to the consultant being found to be either a worker or employee rather than genuinely self-employed.
Indemnities
An indemnity provision could protect the company from any loss sustained as a result of:
the consultant’s acts or omissions in the course of providing the services,
any claims arising out of the allegation or finding that the consultant is an employee or worker of the client,
any liability to tax or NICs on the consultancy fee, where the liability falls on the company rather than the consultant.
Confidentiality
Detailed confidentiality provisions should be included in consultancy agreements as, unlike employees, consultants are generally under no implied obligation of confidentiality. Make reference to the use of social media as part of this if appropriate.
The company should ensure that the confidentiality provisions cover all types of information which it considers to be confidential and to which the consultant will have access.
GDPR
Consultants have rights as data subjects, so the company as a data controller must provide consultants with a privacy notice, setting out what personal data the company holds in relation to them and how and why that information is being processed.
Other Clauses
Other clauses commonly included in consultancy agreements include:
- A requirement for the consultant to maintain appropriate insurance cover;
- Obligation on the consultant to account for their own tax, NICs, and VAT (if applicable) on the consultancy fee;
- The requirement for the consultant to supply their own equipment and materials;
- Statement excluding the consultant from having employment status; and
- Arrangements in relation to the creation and ownership of intellectual property.
If you need advice on Consultancy Agreement, contact us on 01827 317070 or email employment@pickerings-solicitors.com
