Are you looking to hire someone for a one-off job? Or are you feeling intimidated about the legal aspects of freelancing? This guide will help you draft a solid legally-binding contract for freelance work that protects your company and your valuable time and effort.
A freelancer is a self-employed individual who offers services to employers of their choosing. Typically, freelance workers are not committed to a particular employer for long durations of time and may even choose to work for multiple employers at once. Due to the flexible nature of their work, a freelancer might have to adjust working procedures for different firms. Hence, we recommend that both the freelancer and the employer draft up and agree on a freelance contract before entering into a work commitment.
Why you (really) need a Freelance Contract
First, let’s establish why and how a contract affects a working relationship. Small businesses often require one-off services, but don’t have resources to hire a full-time employee. As such, on-boarding freelancers with a strong freelance contract can save a lot of time, legal hassle and help build long-term relationships with the freelancers.
These are the major benefits of having a sound freelancing contract:
- It protects both the employer and the freelancer in case of any dispute or misunderstanding.
- A freelancer who is hesitant or isn’t willing to sign a contract might be a red-flag! Contracts help filter the selection process.
- Once you prepare an air-tight contract, you can re-use it with added changes in the future.
- Scope of project, milestones, delivery, and financial details are all compiled in one place, making it easier to come to terms of the agreement.
- Both employers and freelancers start on the same page by defining their rights and authority for the duration of work. This helps avoid conflicts for the duration of work.
- Lastly, it is a reliable indicator of professionalism for freelance workers.
Therefore, a freelance contract protects and benefits all the involved parties. It is essential for establishing a means of communication and agreement right from the get go and is the foundation of building strong work relationships.
What to include in a Freelance Contract: The Fundamentals
There is no guarantee that two freelance contracts will be the same. Both the requirements of the employer and profile of the freelancer can affect the structure and content of a contract. However, we have compiled a list of must-have sections.
Note: Before getting started, we highly recommend that you look up the labor laws and regulations set in place by the government and adjust your contract accordingly as different regions have different laws.
1. Names, Contact Information & Time Details
Every contract should have the full legal names of all parties involved. Up-to-date contact information must be included as well. This ensures that communication remains seamless between the employer and the freelancer. The point of contact can also act as the middleman. Lastly, the start and end dates, and the deadline of the project should be specified in the contract. A contract is only valid for the duration of the agreed upon start and end dates.
2. Financial Details
This is the most crucial section of any contract. The payment information should be specified precisely. This includes the exact amount to be paid, the payment schedule, preferred method of payment and payment dates. Some freelancers also require an upfront payment, which is usually 25-50% of the total payment sum.
This section clearly states the individual roles and obligations of all involved parties. For the freelancer, it includes the deliverable, personal responsibilities, and revision limits in some cases. Revision limits are the number of times you agree to revise the end product as per feedback from the employer. In the case of the employer, this section may include their contribution during the work duration. Employer roles can be varied based on the industry and their respective practices.
4. Confidential Information & Authority
In some cases, employers might have to disclose confidential information to freelancers. Some examples of such information are customer lists, revenue statistics, website credentials, and business strategies. These details should be mentioned in the initial contract and legal constraints should be set therein. Authority refers to the individuals who have access to and the power to distribute such information. In case of leaks, authority individuals might be held liable.
A contract should define the ownership and rights of all assets created or used during work. This can include images, logos, designs, code, or even physical objects. Employers can specify their right and ownership of IPs and designs for the project duration and freelancers can set their own claims. For commission work, providing credit can also be a good addition.
Freelancers should also confirm with their employers that they may put details of the project in their work portfolio. Finally, if a party provides or purchases any physical or digital object for use in the project, this section also includes who has final ownership. For example, an employer might provide the freelancer with a laptop or the freelancer might purchase a tool for the job. Discussing this can make clear who has final ownership of such assets and whether a party should be reimbursed.
6. Indemnity, Reimbursement & Other legal conditions
This clause specifies who is responsible for legal fees in case there is legal action. Sometimes, legal action may come from either the freelancer or employer. In such cases, indemnity can determine how the matter will be resolved. Reimbursement refers to the method or condition of reimbursing any party for services and expenses incurred, or in rare cases when the work is canceled. There might be other legal clauses added such as limitation of liability. We will discuss these in the upcoming section of this guide.
Creating your Freelance Contract: A Template
Now with a real contract example we can get down to business! We will be discussing how to draft a complete freelance contract. For this, we are going to refer to a Work for Hire agreement that was drafted for us by our legal expert. You can download this template for your reference for free! Here’s what each section’s for.
Section 1: Establishing Primary Information.
This section starts off by stating the effective date of the contract agreement. Following that, the two parties are named and specified. The freelancer is referred to as the ‘Contractor’ or ‘Consultant’, meanwhile, the employer is referred to as the ‘Client’.
Section 2: Defining the Work, Duration, Payment and Termination conditions
Clauses 1-4 discuss the nature, scope, time limit, financial costs and future of the freelance work.
- Services clause defines the exact nature of the work to be done by the freelancer. Usually, all services are described in detail in this part.
- Duration is the start and end date of the working relationship. The contract is only valid for this period of time. Any extension is discussed in a new contract agreement.
- Payment and Compensation highlights the payment agreement between the two parties. You might have to adjust this clause based on your agreement. Some freelancers might also add an upfront payment amount. This is usually 25-50% of the total sum.
- Termination clause is created to discuss how the output of the work is to be handled once the work is completed.
Section 3: Setting Legal boundaries
Clauses 5 – 8 of the contract are used to set legal terms for the information exchange, ownership terms and rectification of the contract. Here’s what these clauses mean:
- Confidentiality discusses how confidential information provided by the client should be handled by the freelancer. Sensitive information is often exchanged during freelance work and so this section is vital in establishing legal conditions.
- Ownership and Rights determines the final ownership of all work assets, Intellectual Properties, and information. This section is vital for the final transfer of all work-related assets. Usually, the employer assumes ownership once the contract expires.
- Indemnification section states whether a party is liable to pay for any legal fees, claims or liabilities; should they arise for the duration of the work agreement. This particular clause can vary based on the employer.
- Amendment is the agreement between the client and contractor regarding modification of the existing contract terms. This clause is strictly for modifying the contract and is not used for extending or renewing the agreement. In such cases, a new contract is signed.
Section 4: Legal Authority, Conclusion & Signatures
The final clauses, 9 & 10 specify the law that the contract is made under and its validity for special circumstances. It is concluded with the signatures of the employer and freelancer.
- Governing Laws is simply the statement of the law under which the contract is made. Once stated, the parties of the contract are under the supervision of the stated law.
- Severability states whether the contract holds the concerned parties accountable if the agreement is not held valid by a court of law. This is only applicable if and when there are legal proceedings.
The contract is concluded with the signatures of the two parties. Once signed, both parties are obligated to adhere to the clauses of the contract until it expires. In most cases, the signatures are done digitally. E-signatures and signed names are both acceptable here.
Best practices for Freelance Contracts
- Financial Details: Once signed by involved parties, the finances are locked in place and cannot be negotiated. We recommend against negotiating payment amounts in ranges, eg $30-$40. This can leave the exact amount up for debate. Instead set a baseline or minimum amount at the start of the negotiation and only write down the finalized sum in the actual contract. If you are working with international freelancers, be sure to specify the currency and exchange rates as well.
- Legal Counsel: If you frequently hire freelancers, chances are you’re going to be using a contract frequently. Hiring legal counsel can be a safe investment as it makes your contract air-tight. Be sure to read up on labor laws relevant to both parties. Our website has some template contracts for your reference.
- Update your contract: As you hire more freelancers, you will likely earn new insights and details to focus on. Update your contract at specific intervals of time so that it keeps up with new trends. You might be able to negotiate better prices, set up conditions or simply add new clauses based on previous experience.
- Language: There are always chances that a new hire might be from a different region, so it’s a good idea to prepare contracts in international languages such as English and in your own local language. Always write simple and straightforward sentences. It makes your contract more readable and can close potential loopholes.
- E-signature: Be sure to sign all your formal documents and communication such as emails, and if possible, ask your freelancers to do the same. We have an article on how to sign documents that might help.
- Miscellaneous: Occasionally, there might be miscellaneous details or agreements that you might have to discuss with the freelancer. We recommend you include such unconventional details in a miscellaneous section. This can alert all parties about unique needs such as medical conditions, additional resources, etc.
In conclusion, freelance contracts ensure a win-win situation for both the employer and the freelancer. By setting up an agreement regarding work specifics, payment, deadlines, and legal aspects, both parties are on the same terms. The employer can rest easy knowing that a legally binding contract obligates the freelancer to deliver the final result.
Similarly, it can be reassuring for a freelancer to know that they will be compensated for their work. As global workplaces continue to adapt to remote work and outsourcing, freelancing is only going to grow over time. With this guide, you can confidently hire freelancers and come to agreements much quicker.