Freelancing is a common phenomenon these days. More & more people are choosing to work as a freelancer rather than sticking to traditional 9 to 5 routine jobs due to the innumerable benefits offered through freelancing. Interestingly, one of the most attractive benefits is the ability to control your place of work, work hours, your income, and above all, whom you want to work with. Having said that, there are some significant drawbacks involved in the freelancing work too, increased responsibility, work deadlines and above all managing work quality, it’s all upon your little shoulders!
Not only this, but most freelancers also complain about the frequent tiffs with their contractors due to inadequate payments or payments received untimely. While as an independent contractor you might fear that the freelancer might leave the work suddenly without completion at the time of project delivery which may lead to the loss of your clients. On the other hand, as a freelancer, you may fear delays in payments or even no payment from the contractor. The reasons could be many, such as client running out of business even before the completion of the job, or increase in the hours of job in the respective projects, or even failure to get paid work (for initial months) that results in unpaid work. Does this mean freelancing work is not worthy enough? Not really, but you need to be careful enough to prevent the above-mentioned circumstances by ensuring there is a written legal contract mutually agreed & signed between you & the contractor, known as a Freelancer Agreement.
The freelancer agreement is drawn between a freelancer and his independent contractor (business/company) and intends to offer security & protection to both the parties to the Agreement. Having a freelancer agreement in place could have various advantages such as a healthy professional relationship, clarity in expectations & their fulfillment, and higher work satisfaction &client experience. If you are a freelancer or even an independent contractor hiring freelancers from time to time, you should consider creating one.
Before, we get to know more about a freelancer Agreement lets us read a little about the necessary concepts-
Who is a Freelancer?
Sometimes, businesses need to execute a specific/task to be completed temporarily, or sometimes their existing staff is unable to complete work within deadlines and needs additional staff. Therefore, employers find it suitable to hire a freelancer for the completion of the task/project without having to hire a full-time employee. It serves the dual purpose of achieving tasks/project completion with efficiency with cost-effectiveness for a business.
A freelancer is an individual who is self-employed out of his skills, knowledge, and experience, but neither they have one particular employer nor they are considered full-time employees of a company/business. At present, almost every professional industry like music, journalism, publishing, screenwriting, filmmaking, app design, web design, website development, copy editing, etc. employ freelancers generally on per work/project basis(for a specific project, service, or task by the client (or conventionally the employer).
Therefore, a freelancer has the freedom to engage with multiple clients and work on a variety of projects at the same time but for different clients. He has to manage his workload, work hours, and his taxes all on his own, which might look heavy, but nothing is better than being your boss!
What is a Freelancer Agreement?
A freelancer agreement is a legal agreement signed between a freelancer and an independent contractor (business/company) that sets out the terms and conditions governing the professional relationship between the two. In pursuance of the agreement, the freelancer agrees to undertake the project and complete it within the specified time and deliver it back to the contractor as per the standards and expectations set out and agreed upon between the parties. It also sets out the terms of payment per project including the due dates for receiving payments. It outlines the various terms and conditions regarding the work undertaken by the freelancer.
A Freelancer Agreement is also known as a Client/Service Freelancer Agreement, Company Contractor Agreement, Contractor Agreement, Freelancer Agreement, Freelancer Contractor Agreement, Independent Consultant Agreement, and Independent Contractor Agreement.
It helps the parties to ensure healthy professional engagement throughout work. Since the agreement is legally binding and the terms and conditions are standardized, it helps in the protection of rights from unfair exploitation of the freelancer by the contractor ultimately leading to a strong and fair relationship between parties.
Why is it Necessary For a Freelancer To Sign A Contract?
Though most freelancers do not bother about entering a legal agreement there is strongly advised for every freelancer to sign a contract. In the digital age, things are simplified more than ever, as agreements like freelancer agreements could be negotiated and signed over e-mails. Undertaking a freelancing project without signing an agreement could prove to be risky especially if there happens to be a dispute between you & the independent contractor.
Regardless of how smooth your experience working as a freelancer for your previous employer has been, there are always possibilities of facing some severe consequences in absence of a written agreement including-
i. Payment problems such as non-payment, payment of amount lesser than promised, or delayed payments.
ii. Projects with no time limitations and scope;
iii. Inability to enforce the promises discussed and agreed before;
iv. Long and tedious court battles.
Elements of a Freelancer Agreement
Now, if you have understood the importance of having a freelancer agreement in place, certain elements must be drafted cautiously to maximize their value. Even, if you have an existing freelancer agreement in place, it may be worth reviewing the agreement to ensure you don’t miss any worthwhile contract clauses.
i. Scope of work & Services
The Scope of the work and services clause defines the terms of engagement between the parties agrees mutually by each of the parties. It includes the type & nature of work, length of the engagement, any milestones, payment rates & due dates for payment. All such details must be specified with clarity to remove any vagueness or complexity in the language. Further, establishing the scope of services within the contract is crucial to setting work expectations during the project. In absence of the same, freelancers might delay the delivery of work and similarly increase the burden of projects with an increasing amount of work without a change in budget or payment.
Provided below are some of the points that must be defined under the clause –
- Date of initiation
- Description of projects & important milestones
- Periodical Targets and contract end date
- Payment schedules
- Date of completion of work.
ii. Work Deadlines
In a freelancer-contractor relationship, it is important to set deadlines for the submission of assignments within due time. There must be enough clarity in deadlines for the submission of the work which should be specified in terms of payment. Defining the time frame and formalizing the same by putting it under a clause in the freelancer agreement would also ensure that no party takes unfair advantage of the other.
In case there happens to be any lack of clarity regarding the deadline schedules, there would be the possibility of a delay in project delivery or payments, which could frustrate either party. Further, there must be a time frame for any queries/concerns posed by one party and answered by the other. If the project is divided into segments, deadlines should be assigned to each of the phases. Further, where the nature of work changes the work deadline must be changed accordingly.
iii. Payment terms & conditions
Everybody likes to receive and enjoy the fruit of their true labor after submission of their assignments within the contract’s description of work and services or where the work is in segments, a crucial portion of the contract. But, if he fails to get paid promptly on the agreed date even after completion of work, it might frustrate him.
To avoid such a situation, it is necessary to include terms & conditions related to payment in a detailed manner. Provided below are some of the points that must be defined under the clause-
- Whether the payments would be made at an hourly rate or a fixed price?
- Would there be any minimum or a maximum number of hours calculated?
- What will be the due date for payments and what will be the manner of payment
- Would there be any late fee/ interest charged in case the contractor fails to make payment?
- If the freelancer expects to receive money in advance, then the amount and the time frame within which they expect to receive such advance from the other party.
iv. Ownership of IPRs
Under a Freelancer Agreement, the parties may mutually agree on the ownership of the work delivered by the freelancer. Generally, it is the independent contractor who reserves the ownership of the work since he pays for the work to be done. They preserve full rights related to the ownership of all aspects of the project deliverables. Further, if such an independent contractor transfers such proprietorship rights to his clients, it is up to the client to make decisions regarding the use and the manner of use of such work.
On the other hand, if the freelancer wishes to retain the ownership of certain elements of work such as proprietary rights in any software developed or music created, the respective freelancer agreement will specify the client’s rights and their usage terms separately.
v. Term & Termination
Normally, there is uncertainty regarding the duration of work between a freelancer & the independent contractor. Throughout the agreement, either party may realize that things are not working due to a lack of effective communication, missed deadlines, payment delays, or any other reason. However, the parties may agree upon certain events happening which may lead to termination of the agreement.
Further, having a date of termination is helpful for the parties to prepare for the loss of income/work product when the contract is terminated.
vi. Competitive engagements
Freelancers do engage in professional work from multiple clients at the same time. Therefore, the parties to the agreement must acknowledge and agree on the exclusivity of services of the freelancer in case the freelancer is working with clients that may have similar services or business areas.
vii. Non-disclosure and Confidentiality
This is one of the important clauses that should be included in the Agreement. Since a freelancer is not a full-time employee of the company/business, he would not be bound to non-disclosure of any sensitive business information (or client’s information) that comes into his knowledge in the absence of this clause. It could be anything such as client lists, business strategies, proprietary processes, trade secrets, financial information, and more. Thus, the clause of Non-Disclosure may either be included in the freelancer agreement or could be a separate agreed or signed non-disclosure agreement (NDA).
viii. Amendments or Rectifications
Any creative work is always open to improvement through observation & review, but making changes/alterations repeatedly on the same project could frustrate the freelancer especially when he is burdened with other projects already. Therefore, the parties to the Freelancer Agreement could mutually decide the number of alterations and revisions for projects in the agreement and the process and timeline for making such amendments.
In case, the freelancer wishes to charge additional payments for making any revisions or amendments, such payment rates could also be mentioned under this clause.
ix. Dispute Resolution
Unfortunately, there may be situations where disputes may arise between the parties and they wish to settle the dispute amicably. For which, they may include a mechanism for the resolution of their disputes through arbitration before taking the matter to court. They may also decide on the Governing Law & Jurisdiction of the Court for dispute-related matters.
Benefits of a Freelancer Agreement
i. Builds Mutual Trust & Confidence
No business/professional relationship could work without mutual trust between the parties. Therefore, a freelancer agreement ensures that the freelance services are carried on agreed standards and the freelancer is paid accordingly on time.
ii. Exercise Legal rights
Since a freelancer agreement outlines the rights and responsibilities of the parties during their engagement, the possibilities of any uncertainty or disputes do get reduced. Further, it also provides a mechanism to be adopted by the parties if any dispute takes place to settle it amicably.
iii. Scope and Confidentiality
A Freelancer Agreement also includes a clause that specifies the scope of services are to be delivered by the freelancer with the provision that any information received by the freelancer regarding the company/business must be held in confidence.
iv. Secures payment
Additionally, the agreement helps the freelancer to secure his payments timely and avoid losses for the company/business.
Documents/Information required to prepare a Freelance Agreement
- Identification proof of the parties such as Aadhaar, PAN, etc. for freelancer & CIN no. of the company;
- Address proof of the parties to the Agreement (i.e. Aadhaar);
Conclusion
Any self-employed person working as a freelancer would tell you that the feeling is truly liberating and has helped them to achieve more than they would have in a traditional 9 to5 job. Similarly, hiring a freelancer rather than a full-time employee also saves costs and affords a quality of work for businesses.
Thus, whenever two parties come together for such a transaction, they expect a positive outcome of such engagement without having to face issues like misunderstandings or disputes. A solid agreement that is legally binding and outlines the terms and conditions of client engagement can protect the parties in case of disputes and helps to run your business smoothly without having to lose your clients’ trust and their business. But, if you fail to have one, you might far be losing your client’s trust and most importantly business.
Therefore, whether you are a freelancer or an independent contractor always ensure there is a solid agreement in place, and such agreement is prepared by a legal professional having years of experience in the field and who has an eye for details, to balance the interests and expectations of both the parties and focuses on future outcomes.
