Consultancy agreement

Three documents cover work done by someone who is not an employee, and choosing between them is not a matter of taste. This one is for a limited company supplying ongoing advisory or specialist services through a named key individual, with the right to send a substitute. The freelance agreement is for a one-off project with fixed deliverables. The contractor agreement is for a self-employed individual working on an ongoing basis at a day or hourly rate.

Picking the wrong one matters because each is drafted around a different set of status facts, and a document that describes an arrangement you are not actually operating is worse than no document at all.

Who decides the tax status

Clause 5 deals with the off-payroll working rules. Where the client is a medium or large company it has to assess the key individual's employment status and issue a Status Determination Statement, and it carries the liability for getting that wrong. Where the client is small, measured against the Companies Act 2006 criteria, the responsibility sits with the consultancy company instead. That is a genuine allocation of risk rather than a formality, and it is the first thing to settle before the fee is agreed, because the answer changes what the engagement costs both sides.

Substitution is the clause that earns its place

A right to send a substitute, which is real rather than theoretical, is one of the strongest indicators that an engagement is not employment. Schedule 2 asks for the key individual and the approved substitutes. A right that exists on paper but has never been capable of being exercised carries very little weight, so the list should be one you could actually use.

What else the agreement settles

The services and fees at Schedule 1, expenses, invoicing and payment terms, intellectual property in what is produced, confidentiality, data protection, insurance, and termination with the notice each side gets. Optional clauses can be deleted where they do not apply, which is worth doing rather than leaving them in as decoration.

The status question behind the paperwork

Employment status is decided by what happens in practice: whether the work has to be done personally, how much control the client has over how and when it is done, and whether there is an obligation to offer and accept work. A consultancy agreement drafted around substitution and autonomy will not protect a client whose consultant works fixed hours under supervision alongside employees doing the same job.

Where an engagement is long-term or high value, or where the status position is unclear, our employment law and HR solicitors review the arrangement as well as the words, which is the only way the answer is worth anything.