Why are contracts so important as a freelancer?
No matter what kind of freelance work you're doing, contracts are part of everyday life as a freelancer, but the devil is in the detail. A freelancing contract, commonly in the form of a contract for services or consultancy agreement, should include the details and expectations that both parties hold including, but not limited to, pay rates and scope of work. Covering all your bases before signing on the dotted line helps you to get paid on time, manage your client’s expectations and stay on top of your IR35 compliance duties.
Whilst ‘freelancer’ is not a term used in taxation legislation or employment law, a freelancer is generally understood to mean a self-employed person who is not an employee or worker of the company that engages them and who is responsible for their own taxation on a self-employed basis. A freelancer typically has multiple clients and projects on the go at any one time and determines their own freelance rates.
Self-employed workers aren’t paid through PAYE, and they don’t have the employment rights and responsibilities of employees, such as the right to claim unfair dismissal or degree of control in how the work is carried out. Neither do self-employed individuals have statutory worker rights, such as entitlement to holiday and sick pay. In any tribunal or court claim where the employment status of the freelancer is in dispute, this is determined by the reality of the working relationship rather than the wording of the contract alone.
Here are three reasons why an air-tight contract is key to a successful client relationship.
Getting paid as a freelancer
Whether you’re charging your client a day rate or by the hour, being paid for your project is a top priority – after all, cash flow is king. That's why you should always sign a contract and agree a payment schedule.
Your contract should be clear about costs. Layout exactly what you expect to be paid and when – often this will be in the Schedule or Statement of Works which is a key part of the contact and should be signed off separately. As a freelancer, you can either be paid when the project is completed or in instalments, whichever payment terms suit you and your client best.
When you submit an invoice, your client typically has 30 days to pay. For larger projects with higher costs, it’s not uncommon to agree to an upfront fee.
If you run into issues with late payments or clients skipping invoices, although not always required, having your late payment fees outlined in advance can help your case if a dispute arises or you need to chase debts.
What if a client uses my work without paying?
Setting out your intellectual property rights until payment has been made usually ensures your client can’t take what you’ve produced and not pay up.
So, if your contract specifically states that your client can’t use your work without paying you, and you suddenly see a graphic you created floating around on their social media, you may be able to take legal action.
Managing client expectations as a freelancer
We’ve all been there: your client asks you to do something that’s not included in your vaguely worded contract, and they aren’t happy to find out this will cost them more.
Managing expectations is so important for a good working relationship with your client. Be transparent about the work you’re doing, the scope of the project, and how long it will take. The last thing you want is to end up doing more work without pay because your client expected something different. This is why creating the schedule of deliverables or statement of work with milestones and payment points is so important.
Making sure you’re both on the same page about the project from day one can help to avoid any disputes. This way, your client won’t be able to ask you for ‘just one more thing’ if it’s not within the work you’ve quoted for.
Once you have agreed on a brief, you’ll want to make sure your client understands what they need to provide for you to carry out the project. For example, if you’re designing new marketing brochures for a shop, they may need to give you high-resolution company logos or pay for stock imagery.
Lastly, don’t forget about edits! Sometimes a project doesn’t always meet the brief in the first draft, or your client changes their mind after seeing an idea come to life. It’s best to factor in your time and costs for any changes, and be open about any additional charges.
Staying IR35 compliant
Your contract needs to make it obvious that your relationship with your client is on a freelance basis so that you can’t be seen as an employee in the eyes of HMRC. Where you are engaged via your own limited company, your, you need to consider IR35, and when the engagement between your company and the end client’s business genuinely reflects a self-employed relationship, then this is known as being outside IR35. New IR35 rules in the private sector came into force in April 2021.
Where your end client is in the public sector or a medium or large-sized business in the private sector, they will be responsible for determining the status of your engagement. However, where you are engaged by a small company (as defined by the Companies Act), you have the responsibility and liability for your IR35 status and so it is even more important that your contractual terms correctly reflect the status of the engagement.
Want to spend more time doing what you love?
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