Consultants, contractors and sub-contractors – what are these roles and how do they differ? The terms consultant, contractor and sub-contractor are not mutually exclusive and there is often overlap in when and where the terms are used
The information below is provided in the context of consultants, contractors and sub-contractors being individuals that would typically provide services to SME businesses rather than larger organisations. For example, a national company appointed by the government to undertake a major infrastructure project.
Our focus here is where an SME engages a consultant or contractor in a sub-contractor capacity, i.e. the SME is providing a service to their client but they wish to sub-contract some of that work out.
You might be thinking you don’t need an agreement because;
- You’ve known the contractors for a long time – you work on a handshake.
- The job is quite small.
- You’ve never had an issue.
- The work is for a client who you’ve been helping for a long time.
- This is a casual arrangement – you’re not employing anyone, so why have an agreement?
But what if……………?
- Something goes wrong and you have nothing in writing to help you resolve the issue.
- The job value may be relatively small, but if something went seriously wrong, the impact could be much greater.
- Things can change – do you want to hope that will be the case or be safe that even if something happens, you’re protected.
- The contractor tries to supply services directly, cutting you out of your long standing client relationship.
- Someone (e.g. HMRC) or even the contractor claims they are an actually employee and should be treated as such.
Putting in place a contractor agreement will help protect your business, through;
- Setting out what happens in the event of a dispute between you, the contractor and the client.
- Making it very clear who is responsible for what in terms of delivery and what happens if something goes wrong.
- Placing a clear obligation on the contractor to have taken appropriate steps to reduce risk – e.g. insurance.
- Protecting your relationship with your client and any intellectual property that you own.
- Ensuring that there is a very reduced of anyone claiming the contractor should be treated as an employee.
Our Approach to Contractor Agreements
Understanding
There are two aspects here. Firstly, we will take time to explain to you how sub-contractors differ from employees and the key considerations you will need to take into account. Secondly, we’ll ask you questions so we understand exactly what work the sub-contractor is undertaking for your business, where and how they are doing that work and the relationships they will have with you and other people within your business and importantly, your clients.
Agreeing
We’ll agree with you on the key concerns you have, what risks you and your business are exposed to and the potential solutions to minimise those risks. From this conversation, we will recommend the most appropriate legal documentation and structure to suit your circumstances and needs.
Drafting
Once we’ve discussed and agreed on the appropriate solution, we’ll then agree on a fixed fee for completing the work and the drafting process can begin. This may involve a more detailed conversation with one of our associates. Following this, we’ll produce a first draft for your consideration.
Finalising
Once the first draft has been produced, we’ll take you through the document and make any amendments that are needed. There might be one or two cycles of this refining process. Once we concluded, we’ll produce a final draft and you’re good to go ahead and implement the agreement with your sub-contractor(s).
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