Practical guidance on negotiating contract terms – while keeping your clients on-side
If you’re self-employed, be it contractor or freelancer, your contract is vital in helping you to protect yourself against any negative outcomes. These could include unfair treatment by your client, refusal to meet your payment terms, or even a challenge over your IR35 status by HMRC.
They also, of course, help to protect your client, by ensuring everyone is clear on exactly what you’ll be delivering and, come April 2021, it will provide valuable evidence should they be challenged over Status Determination Statement (SDS).
As a contractor, you have a responsibility to yourself (and also your client) to ensure that everything in your contract is exactly how it needs to be – take particular care in making sure there are no loopholes that could cause you or them any problems further down the line. This means thoroughly reading the contract before signing, making note of any changes that need making, and negotiating these with your client.
But how do you do this without alienating your client?
Communication is key
Once you’ve noted any changes that need making, communicate them to your client without delay.
– Be clear and direct by referring to specific sections and clauses, telling them specifically what the change needs to be. Does the wording need changing? Does something need to be removed? Does something need to be added?
– Be polite and don’t assume they’re out to trap you into a poor contract. In all likelihood, it’s a standard contract template that they use and simply hasn’t been tailored.
– Send the changes in writing but if you need big changes, it may also be worth calling or arranging a meeting.
The clearer you are with your communication, the more receptive your client will be. No one likes to wade through pages of waffle, so be direct and specific.
Educate your clients
When telling your clients what changes you would like to see made to your contract, you should also be educating them as to why you want to see those changes, especially where they relate to IR35 status. For example:
– You want the contract to refer to your company name rather than you as an individual to show that you are not providing a personal service;
– You may want a right of substitution clause adding in (and signed separately) that demonstrates you have the right to choose and supply an alternative contractor to carry out the work;
– You may want it made clear that you choose your days of work and working hours as well as your location of work to demonstrate that you have control and are not an employee.
Of course, there could be lots of changes you would like to make for a variety of reasons but it’s key that you don’t have anything in the contract that suggests you are anything other than a genuine self-employed contractor.
When explaining this to your client, point out that it’s in their best interests as well since they will become responsible for your IR35 status determination from next April and, if they are also the fee payer, they will hold tax liability for your engagement. This helps demonstrate that you’re not just being awkward for the sake of it, but have everyone’s best interests at heart.
It could also be beneficial to gather and provide any evidence you may need to back yourself up. This isn’t to say your client won’t believe you, but they may need to justify changes being made to a contract, so in doing this you are giving them the tools they need.
Be flexible and show willingness to compromise
Be prepared to show some flexibility in order to get what you want when it comes to contract negotiations. Remember that some clients – particularly those in big corporate behemoths – may have to jump through hoops in order to make changes to contracts so show a willingness to compromise on certain points in order to keep your client on-side.
There will always be things that need to be a certain way, for instance, those that underpin your off-payroll status. However, there may have to be some give and take. So, you may need every mention of the word “employer” to be changed to “client”, but perhaps in exchange you could allow a clause saying you need to come into the office on occasion to suit the requirements of the project to stand.
As we mentioned earlier, your contract is there to protect you, your client and anyone else in the contractor supply chain, particularly when it comes to worker status and tax liability. To bolster this, you should also check out our IR35 Protect insurance packages. These flex to cover whoever holds the tax liability and cover you for HMRC taxes, fines and penalties, as well as a variety of legal costs.
In addition, the Standard and Premium packages include IR35 Status Reviews by our expert panel, who can examine your contracts thoroughly so you and your client know where you stand.
Call us on 01242 808740 or visit our website for more information.