Why do you need a consultancy agreement?
There has been a dramatic increase in consultancy work in the last couple of years, with COVID- 19 having a huge impact on the future of businesses. More and more companies have chosen to use consultants compared to hiring full time employees in these uncertain times. When hiring consultants, it is important to have a written agreement in place to ensure the smooth running of the relationship. MLS has some tips to save you time and money when it comes to choosing consultants.
Why do businesses need consultants?
Consultancy offers freedom to both the consultant and the company, as both parties are able to negotiate working hours, fees and the type of work to be carried out.
Reduces costs for the business
By taking on a self-employed consultant rather than an employee, a company can save thousands through not having to pay for employees’ pension contribution, tax etc. It is the responsibility of the self-employed consultant to tend to this.
In return, a self-employed consultant is in a unique position to work flexible hours and earn more than an employee (consultants are usually experts in their field and thus keep the majority of the billings). Also, there are ways in which consultants may pay less tax as they are self-employed, for example by claiming back expenses used to carry out their work.
Protects company data and IP matters
IP is a major concern for businesses, especially as they wouldn’t want others taking their idea or sharing client information e.g. software companies. By adding a clause in the agreement which stipulates that the business owns all the IP produced by the consultant, it protects company secrets from being used unfairly and sets clear boundaries on the matter.
Risks of not having an agreement
The assumption of an employee/employer relationship
Businesses should be wary of exercising a great degree of control when hiring consultants or in the creation of an agreement. If this does happen, they may risk the relationship turning into that of an employer and employee, which means that the consultant may be able to exercise the same rights as that of an employee.
If a consultancy agreement is not adequately drafted and does not contain the type of work to be completed, this can cause misunderstandings and may fall outside of what was agreed by both parties. If this occurs, both parties are at a loss as the work produced will not be correct and it could cost the business more time and money to get it finished.
Contents of an agreement
A typical consultancy agreement will usually contain the following:
- Description of the work
- Terms and conditions
- Payment details
- Ownership of IP
- Confidentiality clause, if relevant
- How expenses are to be handled
Each consultancy relationship will require clauses that suit that particular relationship and will be dependent on the type of work involved. MLS can provide you with initial support over the phone and guide you through the whole process of setting up a consultancy agreement that is right for your business.
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