5 Critical Protections You Need in a Freelance Service Agreement Template When Hiring a Freelancer
Are you hiring a freelancer? I'm telling you what protections you must have in your freelance service agreement template to protect your business and money.
Hiring a freelancer can make a huge difference for your business, but if you're anything like me, you want to ensure your business and money are protected. As a lawyer myself who creates contract templates for business owners hiring freelancers like you, I am giving you all the crucial protections you need in your freelance service agreement template.
You will learn about the crucial protections you must set in your freelance service agreement template that should be in any basic freelance contract template, which you can include in your template, even if you're using a simple freelance contract template free of charge from Google.
After learning all about the important boundaries you need in your freelance service agreement template, you will protect your business, reputation and money!
This post is all about the important protections every freelance service agreement template must have when hiring freelancers.
Essential Freelance Service Agreement Template
Key protections any basic freelance contract template must have
1. The right to tweak the scope of work WITHOUT being hit with extra fees
When you first hire a freelancer, you have a certain scope or assignment in mind regarding what the freelancer should do for you.
However, over time, whether within one week or over several months, you will likely want to change the scope a little.
Maybe you want to add some tasks to the list or change certain tasks the freelancer is already performing.
You may think it's not a problem to ask for additional or different work to be done by the freelancer since you are paying them by the hour anyway or a fixed fee per month/week for a fixed number of hours.
However, the freelancer may not feel the same. The freelancer may want to charge you an extra fee because the work you requested is speciality work for which more is paid (per hour). Or, the freelancer may not object at all and hit you with the bill after the work is done. Or, you need to draft a whole addendum for that additional work. If you don't know, an 'addendum' is basically an additional contract changing the terms of the main contract and, in this case, adding the additional work to the scope and determining the price (again).
In any case, you want to avoid ending up in a discussion or negotiations about the fee to pay because you just changed the scope a little.
Therefore, your freelance service agreement template should include provisions stating that you are entitled to make amendments to the scope without any extra payments being due to the freelancer, even if it results in a change in the delivery dates and deadlines.
2. Minimum number of hours in case of a fixed fee
If you hire a freelancer, you have the option to agree on an hourly fee or a fixed fee per week or month in your freelance service agreement template.
If you choose to pay your freelancer a fixed fee per week/month, you should include a minimum number of hours the freelancer must work for you.
If the freelancer does not hit the minimum requirement, that is fine. But then you should have the right to pay less as the freelancer has worked less.
Therefore, your freelancer service agreement template should state:
the minimum number of hours per week/month, and
the right to pay the freelancer a pro-rata fee based on the number of hours actually worked by the freelancer.
For example, you pay the freelancer a fixed weekly fee of $1,000. The minimum required number of hours you have stated in your freelance service agreement template is 40 hours per week. However, the freelancer only worked 30 hours that week (3/4 of the required minimum). Then, you are entitled to pay the freelancer $750 (3/4 of the fixed fee).
3. No additional compensation for extra hours
You want to set a minimum number of hours in case of a fixed be, but then you also want to include protections in your freelance service agreement template for when the freelancer works more.
If you pay a freelancer on an hourly basis, you simply pay the freelancer for the time spent. However, then you run the risk of the freelancer working many more hours than you first anticipated if you do not pay attention. That is why a fixed fee is a great idea:
you don't have to track the number of hours spent,
your costs are more predictable, and
you can more easily budget for your business.
However, suppose you do not have the proper protection in your freelance service agreement template. In that case, you can still overspend on the work your freelancer does if the freelancer works more and, therefore, requests an additional fee for overtime. You do not want to end up in a dispute with the freelancer about how much the freelancer deserves to get paid. Suppose you do not have the proper provisions in place in your contract. In that case, the court will likely decide in favour of the freelancer (the weaker party) with the simple argument that the freelancer should receive a payment that coincides with the time investment made by the freelancer.
Therefore, any basic freelance contract template with a fixed fee should include proper provisions stating that the freelancer is not entitled to additional payments for additional time spent.
4. Independent contractor status
Another important protection to include in your freelance service agreement template is a clause regarding the contractor status of the freelancer.
When a freelancer provides services to your business on a regular basis and over a longer period of time, the freelancer could be considered an employee. Sometimes, it can be hard to distinguish employees from freelancers in practice.
The risk with that is that the tax authorities may consider the freelancer an employee. Suppose you do not make any explicit agreements about the freelancer's status in your freelance service agreement template. In that case, you run the risk of the authorities charging you income tax and social security premiums for that freelancer.
You may also run the risk of the freelancer considering themselves an employee and requesting employee benefits.
Or, if the freelancer provides a crucial service that completely changes the game for your business, like developing software or providing an additional service that generates a majority of your income, the freelancer could end up considering itself your partner or representative and fighting you in court for wanting a share in the profits.
This all could cost you a lot of money you were not prepared to pay.
Therefore, your freelance service agreement template must include provisions making it explicitly clear that your freelancer is a contractor and not an employee, partner or representative of your business.
5. Indemnities and liabilities
There are several risks you run when working with freelancers, all of which can be mitigated to a great degree IF you have the proper provisions in your freelance service agreement template that allocate those risks to the freelancer.
You want to limit your own liability for any damages that the freelancer may suffer performing services to you. You want to exclude your liability as far as possible.
You also want to include certain indemnities in your freelance service agreement template. Indemnities oblige your freelancer to compensate you for any costs, fees or penalties you may incur that are related to the freelancer. You want to include at least the following indemnities in your freelance service agreement template:
Tax indemnities: As we just discussed, you could be hit with income tax and social security premiums if the relevant (tax) authorities determine that the freelancer is actually an employee. Even if your contract explicitly states that the freelancer is a contractor and not an employee, the tax authorities could still determine otherwise if, in practice, you treat the freelancer like an employee, like having the freelancer benefit from some employee benefits or giving the freelancer vacation days. You could even be hit with penalties. In any case, you want to be protected from such taxes and penalties. Therefore, your contract should include an indemnity stating that the freelancer must compensate you if you have to pay such taxes or penalties AND that you can even take that out of the fee you pay the freelancer.
Indemnities for intellectual property (infringement): First of all, you want to ensure that whatever work the freelancer does for you is the freelancer's own work. Even if the freelancer is not necessarily a creative, like a videographer, copywriter, software developer, or graphic designer, the freelancer will still likely create intellectual property when performing work for your business. For example, email templates or newsletters a freelance assistant creates for you are intellectual property, too. Any text the freelancer writes for your business is intellectual property. You want to know that whatever the freelancer does or creates for you is the freelancer's own creation. If it's not, the freelancer should indemnify you if you get hit with a claim for intellectual property infringement because someone found out that your email newsletter looks like their newsletter.
Indemnity for third-party claims: Not only can you get hit by intellectual property infringement claims by third parties, but also other third-party claims for things the freelancer does (and you may not even know about). If, for example, your freelancer causes damage to one of your clients, your freelancer should compensate you for whatever you have to pay to that client. Whatever claims you get for anything the freelancer was responsible for should be carried by the freelancer, not you.
These are all the protections you need in your freelance service agreement template when hiring a freelancer.
Do you want a simple freelance contract template free of fluff?
Do you want a simple freelance contract template free of fluff? And one that includes all the protections you need (as discussed in this blog post)?
Then, you can rest assured that my freelance service agreement template has all the protections you need when hiring a freelancer! My freelance contract template includes all the crucial protections AND boundaries you need to set with your freelancers.
So, if you are still looking for a comprehensive but understandable and simple freelance contract template free of fluff, you need to get my client-friendly freelance service agreement template on this page of my contract shop!
Are you using a freelance contract template free download?
Maybe you do not have the budget yet to purchase a freelance service agreement template and prefer to use a freelance contract template free download.
In that case, you can use this blog post as a checklist to ensure your freelance contract template free download includes all the protections you need!
This post was all about the critical protections every freelance service agreement template must have when hiring a freelancer to protect your business and money.
If you want to read more about the basics you need in your freelance service agreement template, read this blog post on the 13 Key Terms Every Freelance Agreement Template Must Have.
If you are a freelancer, read this blog post on the 7 Crucial Boundaries Every Freelancer Needs in a Freelance Contractor Agreement.
You can find my client-friendly freelance service agreement template (including all the protections you need when hiring freelancers) on this page of my contract shop!
If you are a freelancer, you need my freelancer-friendly freelance service agreement template that includes all the boundaries you need as a freelancer (and more) on this page of my contract shop!
