What is a freelancer?
Freelancers declare their own income and pay their taxes individually, whereas an employee has his taxes deducted from their salary directly.
Also, freelancers do not receive any of the usual company benefits, so they would have to pay their own pension and health insurance if they need it.
They can be hired for specific, time-limited projects or on an on-going basis for many different types of work, in different projects. A freelancer can work with various clients and can share their time in different companies, which means multiple agreements, as long as there is no conflict of interest. Important to mention here that depending on the deliverables, freelancers may have intellectual property rights on their written or otherwise product, unless their agreement mentioned otherwise.
What is a freelance work contract?
A freelance work contract or agreement is a legally binding document between a self-employed freelancer (independent worker) and a client/company, which outlines the main terms and conditions of their work relationship. Usually such a document defines the purpose of work, potentially specific project deliverables, payment details, deadlines if any and other essential details affecting the collaboration. It serves as a plan for the project or projects, but also as a protective measure for both parties, outlining their expectations and aspirations. In short, a freelance agreement prevents any professional misunderstanding or conflicts and reassures both parties of the smooth progress of their collaboration in case of any dispute.
Why is a freelance contract important, and what should be included?
In more detail of the definition above, why is it important for a freelancer or a client to have an agreement if the work is not permanent and/or full-time?
Here are some of the reasons:
- Financial security of the freelancer in case of payment disputes
- Clear goals, expectations, and deliverables for both the freelance worker and the client/company
- Specification of deadlines, if relevant
- Mention of reimbursements, if relevant
- Clear terms regarding the termination of the work relationship
- Intellectual property rights clarifications
- Confidentiality matters
Mandatory data that a freelance work contract should include:
- Contact information of both parties
- Scope of work - Project breakdown
- Payment terms
- Legal terms
- End product ownership rights and licenses (intellectual property rights/copyright)
- Termination terms
- Competitive engagements (Non-compete clause)
- Non-disclosure (NDA agreement), right to disclose, and confidentiality
- Contract amendment: Potential changes and revisions
- Indemnity clause
- Other general clauses (Force Majeure, insurance, dispute resolution, and more)
- Signatures of both parties
Types of freelance contracts
- 🚀 Project-Based: Contract specific to one single project. Scope of work, deliverables, and deadlines, as well as payment terms, are mentioned in the contract, which automatically ends when the project is completed.
- 🛠️ Ongoing: With this type, the client is paying the freelancer a stable fee for a certain period of time to secure their services. There is no definite end date, and it provides the freelancer with a steady income.
- ⏱️ Hourly: In some cases, there are agreements defined by hours worked. That means that the duration is not defined, and the amount of work varies as needed, so the freelancers are paid based on the number of hours they work.
- ©️ Licensing Agreements: Those are more specific, depending on the field of work, which would usually be subject to intellectual property. It refers mainly to photographers, writers, designers, and other content/creative-related professions. Those contracts define intellectual rights, both property and usage, exclusivity, duration, and other license-specific terms.
- 📝 NDAs: NDAs, or ‘Non-Disclosure Agreements’, even though usually a clause of a contract, can also stand alone as a separate document. While often part of a larger contract, NDAs can also stand alone. Those are mainly drafted to ensure client confidentiality.
Differences in contracts based on different fields of work, jurisdictional differences, and differences between ‘freelancer’ and ‘independent contractor’
Different fields of work
The specifics of the freelance work define how the contract needs to be drafted. The most common examples are:
- Finance/Accounting: the clauses should be clear on services (for example payroll) and confidentiality.
- Social media and digital marketing: performance metrics need to be included
- Web design: deliverables and timelines need to be outlines
- HR and administration: the services provided (tasks) need to be clearly defined, as well as non-compete clauses
- Coaching jobs: session specifications need to included as well as clauses ensuring confidentiality and clear terms in case of cancellation
- Writing and translating: details of project, rates and deadlines ideally included in a contract
Jurisdictional differences
Something important to take into consideration as well are potential jurisdictional differences between EU, UK, US and Canada. Here are the most important ones:
- EU: GDPR compliance
- US: Work-for-Hire Doctrine, which intends intellectual property rights even without agreement, for freelancers
- UK: IR35 rules which are defining the freelancer work status regarding tax obligations
- Canada: GST/HST registration for over certain amount of earnings, for tax purposes of freelancers
Main differences between freelancer and independent contractor
Freelancing and being an independent contractor might have a lot in common but it is not the same position exactly. Technically, a freelancer is a type of independent contractor and of course they share a lot of the same terms, but they are also different in many ways. Let’s see the most important differences:
- Freelancers have an ongoing agreement for multiple projects, while a contractor is usually hired for a limited period of time and a specific project
- Freelancers can work for multiple clients at the same time, while contractors are usually bound by a non-compete clause to collaborate with only one client at a time
- Freelancers may have intellectual property rights on their work, unless mentioned otherwise in their agreement, while contractors definitely don’t.
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Learn moreExample of a freelance work contract
This is a simple representation of a freelance agreement. The clauses vary depending on what we saw in this article, and it can of course be more details, but this is the main body:
This Freelance Agreement is made on <date> between:
- Client: Name and/or company name
- Freelancer: Name and/or business name
1. Scope of Work
Description of services provided.
2. Deliverables Deadlines
List of deliverables and equivalent due dates - if any specific ones.In case of ongoing work, this point doesn’t apply.
3. Payment Terms
Rates and payment method mainly.
4. Ownership Rights
Client or freelancer retains intellectual property rights (copyright)
5. Confidentiality
Both parties agree to keep all sensitive project and business information confidential.
6. Termination
Either party may terminate with [X] days’ written notice. Work completed to date will be paid in full.
7. Governing Law
This agreement is governed by the laws of [Country/Region].
8. Signatures
Dated signatures of both client and freelancer.
Conclusion
In this article, we saw everything you need to know when starting as a freelancer or when thinking of hiring one or more freelancers for your business. Drafting the contract is not a very difficult procedure, but you would need to be attentive to what should be definitely included, such as specific clauses depending on local laws and the specific scope of work.
As a freelancer, you would need to read the agreement thoroughly before signing to make sure your rates, schedule, and intellectual rights are clearly defined.
