We don’t like to tell clients “you must have a contract”, although as contract lawyers of course it is something we would recommend! And where you are engaging freelancers there are a few reasons why having a contract is key.
Intellectual property rights
It is a common misconception that if you pay someone to create something, such as a logo, you will automatically own the intellectual property rights in that output. But that is not the case! If there is nothing in writing, the intellectual property rights will automatically be owned by the party that created the output. See “I own what I pay for. Right?” for more information. So it’s important that you consider what rights or licences you need in any output created for you and include relevant provisions in the contract. See “Don’t learn the hard way!” for what could happen if you don’t!
Data protection
There are a few instances the law requires a contract to be in place – and the arrangement between a data controller and data processor is one of them. The distinction between a data controller and data processor is about whether:
you are deciding how to process the personal data, what for and who is using it etc – data controller OR
you are processing the personal data on behalf of another – data processor.
See “Data Controllers and Data Processors” for more information about the distinction.
So depending on the type of services being provided by the freelancer, they could be acting as a data processor, e.g. if they will have access to your customer database in connection with carrying out software development. If so, there are certain things which the law says must be included in the contract between the parties. Of course if they aren’t processing personal data then this isn’t a concern, such as if they are simply designing a logo for your business.
IR35
In today’s world, we can’t mention freelancers without mentioning IR35! It is HMRC that would decide whether or not a freelancer is “inside or outside IR35” and the contract may be one of the things that HMRC refers to. For example, some of the factors that HMRC may consider include:
working practices and the level of control you exert, such as working hours
if the freelancer has the right to substitution.
So you could use the contract as a tool to help with this assessment – although HMRC would look at what is really happening not just what the contract says. So make sure you follow your contract!
See “What is IR35?” for information on IR35.
If you frequently use freelancers to support your business operation, get in touch if you would like to discuss your contract requirements. Contact Alison on alison@law-point.co.uk or call 01202 729444.
