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Explanatory Notes
Appointment of Self-Employed Individual
EXPLANATORY NOTES
This contract is in the form of a letter and is designed for use where an individual is appointed to provide services to a company or organisation. The services could be anything from part-time work as a drama tutor to bookkeeping.
The contract will be created by an exchange of letters – the company should prepare two copies, sign both and request one copy to be returned, dated and countersigned by the individual as indicated. There are tax implications for a contract such as this – the Inland Revenue can in certain circumstances require an individual to be treated as an employee and subject to PAYE. You should take advice from an accountant on each occasion this letter is used. Specific comments on the form of letter Insert a brief description of the work or services to be performed This sets out the duration of the appointment, the start date and the notice period
The final sentence in square brackets would not be appropriate if the employer wants a long-term commitment. This specifies a minimum number of working hours per week/month and needs to be adapted to the particular circumstances. The location of the services should be inserted here. This allows the employer some flexibility, which may or may not be appropriate. The fee arrangements should be inserted here. If, in addition to fees, specific expenses are agreed – e.g. travel costs at a particular rate – these should be spelt out in this paragraph. As the individual is not an employee but an independent contractor, he/she should submit an invoice at the end of each payment period and there will then be a specified time within which payment should be made. This sets out a standard of skill and care which the individual is expected to maintain as well as a commitment to the work. This emphasises the point that the individual is not an employee but an independent contractor. Following on from 9, the responsibility for income tax and national insurance is firmly placed on the individual. However, as already mentioned, the Inland Revenue may always investigate a situation which looks more like employment than the provision of services and they have the power to require that an individual is treated as an employee so that the employer becomes responsible for PAYE etc. As the individual is not an employee, holiday arrangements would not normally be paid for and it would be to individual to agree when they go away. In the same way, illness would not be paid for. This imposes a confidentiality obligation on the individual as well as a requirement that he/she returns all papers relating to the business at the end of the engagement. A restriction on the individual would not always be appropriate or enforceable especially if the individual is providing services to a range of companies. However, in some circumstances it might be required but this is a difficult area and legal advice should be obtained This paragraph is lonely relevant to the extent that the individual might be involved in design or the creation of other intellectual property rights. Although self-evident, it is sensible to make it clear that the individual may not delegate any of their work to a third party Note: As a template, the document must be adapted to meet your particular requirements. Also, you should ensure that all square brackets and text in italics are removed before the letter is finalised.
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