Consultancy Agreements
What Are Consultancy Agreements?
Where an individual is self-employed, a consultancy agreement will be the contract which will outline the obligations between the company and the consultant.
Whether you are an individual or a company, we can advise on the contents of a consultancy agreement. If we can be of any assistance with drafting agreements, or with regards to worker/employee/consultant status, please contact us by clicking the button below.
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Why does it matter?
Although a consultancy agreement may expressly outline that an individual is to be regarded as self-employed, is the paperwork in place is not always conclusive as to the actual employment status or to an individual’s tax status.
A company should be careful as to how they treat an individual who should be self-employed, and what wording is used in conjunction with their contract, and how they are instructed, dressed, their ability to delegate etc. Otherwise, although a company may have assumed that the relationship is purely contractual, an employment relationship (and the corresponding rights and responsibilities) may have been formed.
How can we at Thrive help?
In the course of drafting any consultancy agreement, we can work with a company to assess the appropriate status of the individual and can advise as to whether the agreement accurately reflects that relationship.
If you think Thrive Law can assist you further, get in touch today at enquiries@thrivelaw.co.uk
FAQs
A consultancy agreement should clearly define the scope of services, the fee structure and payment terms, the duration and termination provisions, and the intellectual property position (who owns work produced). It should also address confidentiality, data protection, and whether the consultant can work for competitors or clients of the business.
The detail around termination matters particularly. Many consultancy arrangements run into difficulty when one party wants to end them and there’s no clear mechanism for how that works.
A consultant (or independent contractor) provides services to a business but is not integrated into it in the same way an employee is. They are self employed and they typically control how and when they work, provide their own equipment, bear their own financial risk, and can work for multiple clients simultaneously. An employee, by contrast, has a contract of employment, works under the control of the employer, has statutory rights including holiday pay, sick pay and protection from unfair dismissal, and is generally integrated into the business.
The legal distinction matters because employment status determines what rights and obligations apply. It also determines tax treatment, which is where IR35 becomes relevant for businesses engaging consultants through personal service companies, although we are not tax advisers so cannot advise on this issue in isolation. The fact that a contract calls someone a “consultant” doesn’t settle the question of their actual status.
Yes, and it happens more often than many employers expect. Employment status is determined by the reality of the working relationship, not the label on the contract. Tribunals and courts look at the substance: how much control the business has over how the work is done, whether there’s personal service (can the consultant send a substitute?), whether there’s mutual obligation, and the degree of integration into the business.
Where a consultant is found to be an employee or a worker, they may be entitled to statutory rights they haven’t been given: holiday pay, national minimum wage, whistleblowing protection, or unfair dismissal rights. For the business, this creates significant retrospective liability. If you regularly engage consultants on long-term arrangements, it’s worth having those arrangements reviewed. Get in touch with our team here.
