INDEPENDENT CONTRACTOR AGREEMENT

By hiring independent contractors which are deemed self-employed as opposed to employees, you can avoid your obligation to operate PAYE and to deduct Class 1 National Insurance Contributions from employees' pay and you can limit your responsibilities under the employment protection acts, and your obligations relating to statutory sick pay and statutory maternity pay.

Also, the worker may prefer this arrangement in order to have more flexibility in his schedule and to take advantage of any tax or other breaks available to the self-employed.

It is extremely important that the actual status of an employee be set forth from the outset and that you review it on an ongoing basis. IF YOU INCORRECTLY DEEM SOMEONE AS SELF EMPLOYED AND FAIL TO FOLLOW THE CORRECT TAX AND NATIONAL INSURANCE RULES, YOU MAY HAVE TO PAY THE INLAND REVENUE FOR ANY UNPAID TAX OR NICS AND YOU COULD BE LIABLE TO PENALTIES AND INTEREST.

Inland Revenue might require the Company to pay 10%, 22% or 40% of the wages of a Worker who you deemed to be self-employed and whom they deemed to be an employee. On top of that amount, you might be liable for all NIC Class 1 deductions at up to the highest rate of 11% plus any interest and penalties assessed.

Employment status is not a matter of choice. Parties cannot simply decide to treat working arrangements as either self-employed or employment. THE CIRCUMSTANCES OF THE ENGAGEMENT WILL DETERMINE HOW IT IS TREATED. 

Inland Revenue will look at the following factors:

1. Right of Control....How much control a Contractor has over what work is done, when it is done and how it is done.

2. What type of equipment the worker supplies to do the job.

3. The Financial Risk to the Worker.

4. Does the worker have the right to hire and pay someone else.

5. The length of engagement.

The best way to set forth the terms and conditions of the agreement ----- THE CIRCUMSTANCES OF ENGAGEMENT ---- is to have executed a written contract between the contractor and the worker. Having a written contract shows the intent of the Company for the worker to be treated as self-employed. It also establishes the services that the Contractor will perform, and since we are the solicitors who set up the Company, we will also include special provisions to protect the Company from the Worker which:

1. Provide a clear description of the services to be provided;

2. Set forth the duration of the independent contractors services;

3. Establish the details of the independent contractor's relationship to the Company.

4. Require the Independent Contractor to maintain the confidentiality of all customer names and often business records of the company.

5. Provide that the independent contractor shall be responsible for its own expenses.

6. Provide for indemnification of the company, for claims arising out of the independent contractor's acts or omissions.

7. Prevent the independent contractor from impairing the reputation or goodwill of the Company.

8. Prevent the independent contractor from competing against the Company now and for two years after the termination of the contract.

Spiegel & Utrera can provide you with a draft of the Independent Contractors Agreement for your review. If you have any revisions, let us know and we will make the changes and deliver the final agreement with your Company.

The Agreement is very thorough and we strongly recommend you obtain it. The charge for the independent Contractor's agreement is only £99.95 pounds, if ordered with the company. If ordered later, the fee is £150. As an added bonus, we will draft the agreement in such a way, so that you can use it over and over again, with all the different Independent contractors that you may hire for your company, so there is no need to have a new agreement done for each Contractor.