EM Law are experts in drafting, negotiating and advising on consultancy agreements. We have extensive experience in advising on consultancy agreements for use where the consultant is working both locally and internationally and in particular in the delivery of complex projects.
Types of consultancy agreements
The classic form of consultancy is an agreement between an individual consultant and the client for whom the consultant performs services. The arrangement is based on the fact that the consultant is genuinely self-employed (so, in business on their own account) and is not an employee of the client.
Consultancy via a service company
It has become increasingly common for the client to contract with a service company (the consultant), which then supplies the services of an individual or individuals. Often a service company is wholly owned by the individual, who may also be its employee and sole director. In these circumstances the service company is sometimes referred to as a “vehicle” company.
The use of service companies has increased because it has a number of advantages for the individuals working under the arrangement: they can limit their liability, and, if appropriately structured, receive the consultancy fee in a more tax-efficient manner (for example, as a dividend).
The service company structure involves a potential disadvantage for the client company, which will not have a direct contractual link with the individual. A direct link can be valuable when enforcing important terms of consultancy agreements, such as confidentiality and intellectual property provisions. A side letter is a possible solution to this issue.
Drafting consultancy agreements
The relationship between client and consultant is a simple contractual one. It is subject to less statutory regulation than employment contracts so there is more scope for flexibility in the terms of consultancy agreements.
Parties should be aware that consultancy agreements cannot be used to hide a different type of relationship. The Supreme Court has made it clear that written contractual terms that do not reflect the true agreement between the parties may be disregarded when determining employment status. Therefore, while the terms of consultancy agreements will be important to determine the scope of consultancies, it will not be possible to insert terms (such as substitution clauses) that do not accurately reflect how relationships work in practice, to try to negate employment status.
There are a number of key clauses that are present in most consultancy agreements, as well as clauses that it will be beneficial to one or the other side to include.
Consultant’s duties in a consultancy agreement
A duties clause normally:
A substitution clause will give the consultant the right to send a substitute to provide the services in his or her place. This will be useful in establishing self-employed status, particularly if the right is exercised in practice. However, it may not always be viable commercially, as the client will often only want the expertise of the individual consultant chosen.
Tax and NICs
It is common for consultancy agreements to provide that the consultant must account for his or her own tax and NICs (and VAT, if applicable) on the consultancy fee.
Unlike employees, consultants are generally under no implied obligation of confidentiality. Therefore, it is important to include express confidentiality provisions in consultancy agreements.
The client should consider whether to include a clause in its consultancy agreements providing for consultants to maintain appropriate insurance.
Indemnity provisions in consultancy agreements may include any loss sustained by the client as a result of:
Statement on employment status
The agreement may provide a statement excluding the consultant from employment status. While the provisions of consultancy agreements will not be determinative of employment status, it is useful to evidence the parties’ intentions on the face of them.
The client may wish to protect its commercial interests by imposing restrictive covenants on its consultants, to apply for a limited period after the consultancy agreements have terminated. While it is very rare to impose a strict non-competition covenant on a consultant (not least because it might be indicative of employment status), other types of restrictive covenants are more common.
It is crucial for consultancy agreements to include appropriate provisions dealing with intellectual property rights. Unless otherwise stated, the consultant will generally be the owner of any IP that he or she creates during the assignment.
"Neil and his team have undertaken several items of legal work covering contracts, agreements and share option schemes for IMC Worldwide... View More Testimonials"
Gavin English MD IMC Worldwide Ltd
"Neil at EM Law advised us with regards to GDPR. He was thoughtful and thorough.... View More Testimonials"
COO of a Strategic Communications Agency
"I want to thank Neil at Emerging Law for his support and guidance whilst I have been setting up my own business. He has talked me through the step by step stages and legalities involved so that I can make informed decisions about my business approach... View More Testimonials"
Ayshen Ali founder Attainers Limited
"I felt incredibly fortunate to have come across Imogen. She was fantastic at helping at every juncture... View More Testimonials"
SM, Recruitment Manager
"Neil and Lauren were both very helpful in drafting contracts I needed for my firm... View More Testimonials"
Alex Mosley, Director Perrygate Property Limited
"Neil and Helen provided us with an employment contract and terms and conditions of business. We found Neil and Helen to be extremely informative and helpful throughout the process... View More Testimonials"
Grant Lambert MD Honor Search (Digital Recruitment)
"Neil Williamson, I cannot thank enough for his work and legal advice, which had brought the great result.... View More Testimonials"
"Neil was brilliant, patient and thorough guiding me through queries setting up my business to be compliant.... View More Testimonials"
Kate York, Photographer
"Neil and I worked alongside each other for several years securing software business overseas for Crown Agents... View More Testimonials"
Nick Small Director Nick Small Consulting
"What can I say about Imogen? She was the shining star in what was a very difficult time for me.... View More Testimonials"
VR, Nutritional Chef and Culinary Manager
"Imogen....has a very personable approach and is succinct in her communication. I would highly recommend her... View More Testimonials"
KE, Development Manager
"Imogen has always given me sound, objective and carefully considered legal advice.... View More Testimonials"
MB, Senior Sponsorship Manager
"Thank you for all your help with the matters regarding my company, you have been thorough in all aspects to the finer detail... View More Testimonials"
John Taylor Director Glo-bell London Ltd
"Neil is able to address complex issues, give us advice that we can follow and come up with creative solutions... View More Testimonials"
Ismet Yucetas CEO Middle East Air Drilling Services
"Imogen is a fantastic employment lawyer. Clear, supportive and very skilled in her area.... View More Testimonials"
LC, Director at a Management Consultancy
"Neil helped us structure, negotiate and put in place our first client software-as-a-service contracts. His technical and commercial advice was invaluable - he understands exactly where we are coming from... View More Testimonials"
Lena Rosenior CEO De Graft Management Ltd
"Cardno has worked closely with EM Law since 2013. The advice and support provided to our business by EM Law has been of a high quality, relevant to our requirements and more importantly helped us to make the appropriate decisions that have contributed to the success of our business... View More Testimonials"
George Mukkath Managing Director Cardno Emerging Markets (UK) Ltd
"We have been working with Neil for many years now, more recently on a retained basis because he has become someone we trust and who understands our business requirements. ... View More Testimonials"
Rupert Wood CEO Wasteland Ski Ltd
"We have worked with Neil and his colleagues on a number of different company issues including business acquisitions, client contract and employment matters... View More Testimonials"
Dave Dadds CEO DRD Communications Ltd
"Starting a new venture, within a new country......I needed someone who could understand the complexities and culture of the venture...... View More Testimonials"
Maren Koros CEO Afyacore
"EM Law have supported Anexsys with a number of legal issues, ranging from drafting complex IT contracts to developing conflict policies and advising on a range of complex multi-jurisdiction legal issues... View More Testimonials"
Rob Crowley MD Anexsys Ltd
Can We Help You?
We are here to help with any of your questions.
Just click "Yes" below.
Please enter your question below
Please enter your name and email address so than we can send you a response
Thank you for sending us your question. We will contact you shortly to discuss this.
Sorry, there is a technical issue. Please contact us by telephone: 0203 637 6374