It is very important to distinguish between these 2 categories of personnel.
The key differences relate to taxation and ownership of Intellectual Property Rights (“IPR”).
Whereas the law operates to vest IPR in employee creations automatically in the employer, that is not the case with self-employed contractors where assignment documentation is required to achieve this end.
Many start-ups hire independent contractors to help start their business instead of employees. When doing so, it is important to distinguish between hiring someone as an employee or as an independent contractor. Especially given that there are a number of employment law issues that need to be considered.
When engaging contractors to provide you with their services, you should always have a signed contract in place detailing:
- what they will be doing
- what you will be paying
- what you expect to receive from all of this
A contract provides a solid and concise foundation that will help you navigate the law and make sure that you are on the right side of it. Both parties may need to refer back to an underlying agreement over the course of a project, it should provide security and peace of mind for both parties and may help avoid costly and time-consuming conflict.
When preparing a contractor agreement, we would expect to see a number of provisions included in the agreement, these include and are not limited to:
- Intellectual Property Rights (IPR)
It’s important for founders and investors to be confident that a company owns the IPR needed for its business.
It’s vital that anyone who is involved in developing IPR on behalf of the company should be required to transfer the relevant IPR to the company – this should be covered off in the contractor agreement. Such a relationship could cover code, design, graphics, text and other content.
- Date of completion and payment terms.
Being as detailed as possible in the agreement eliminates confusion as to the responsibilities of both parties. The agreement should be specific on deadlines for completed work and should include a timeline and terms for when and how the contractor will be paid.
- Not an employee
The intermediaries legislation (i.e. IR35) is a piece of legislation designed to stop workers fraudulently claiming to be contractors in order to take advantage of associated tax benefits.
The agreement should contain as many indicators of self-employment as possible, if caught by the IR35 GPS, the company would have to pay income tax and National Insurance Contributions as if the contractor were employed. There should also be an indemnity from the contractor to the company to cover the financial and other consequences of such a re-classification by HMRC.
If you are in the process of drafting or negotiating such an agreement please contact us using the contact form.
The following is a non-exhaustive list of standard template documents which come up in this context and for which we can quote a fixed price. They can subsequently be customised to specific requirements for an additional fee (determined according to your specific requirements).
- Assignment of Intellectual Property Rights
- Confidentiality Agreement
- Consultancy Agreement
- Contract of Employment
- Director’s Service Contract
- Non-Disclosure Agreement
We also provide a very cost-effective service for creating EMI option schemes.
Please click here to email Simon Halberstam, Head of Technology Law, or call 020 3206 2781.