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Does your business has a busy season ahead or a key project to deliver on where you’ll need extra hands on deck? You might consider bringing a contractor onto your team.
Contractors can be the hiring preference of a business owner valuing flexibility, short or non-existent notice periods when your peak needs subside – or as a way of engaging niche talent who may want to keep working with other businesses too.
5 things to keep in mind when drafting up a Contractor Agreement for your new contractor
1. Are they genuinely a contractor to start with?
Not every “contractor” is a true contractor.
If you want control over exactly when and where they work, substantial notice when they are unavailable and you don’t want them working with competitors – you are likely expecting an employee-employer relationship.
Ensure that you seek legal advice to give your business the confidence to document your arrangement properly and minimise your risk of needing to repay entitlements to a “contractor” team member who may in fact be an employee.
For example, genuine contractors are not entitled to annual leave, long service leave, sick leave, superannuation or similar payments/benefits applicable to an employee.
Employees and contractors are treated very differently at law. There are a range of factors that need to be weighed (and which continue to be developed over time through case law) to determine what a team member is rightfully entitled to at law – and what your standing is as their employer.
2. Are you both set up to win?
The best Contractor Agreements clearly articulate the needs of the business and what it looks like for a Contractor to be hitting their goals. Beyond a mere description of the services your business requires, which in general terms could be “developing sales leads for new clients” or “onboarding new clients”, consider what a successful sales professional would do for your business.
For example:
- Converting 10 leads into new clients (that have not previously been contacted by any employee, contractor or director) within 4 months; and
- Upselling 15 existing clients to increase their monthly average spend by 10% within 4 months.
3. Specify the individual you are banking on working with
A quality professional that has spent time investing in getting to know you and your business is the one you want to deliver the services.
If you are contracting with an entity, be aware that if you don’t specify a Key Person to deliver the services, you may end up working with another team member and wish it was your go-to trusted advisor.
4. Ensure that key commercials are kept quiet
Not all information is confidential but truly confidential information can be an incredibly valuable business asset.
If a Contractor is going to be accessing your business systems and leveraging know-how, intellectual property, procedures and processes, client lists and financial information – you should consider carefully how to bring their confidentiality obligations to the forefront.
While general law offers some protections to businesses, it is greatly beneficial to invest in tightly-drafted contractual obligations to further bind your Contractors and articulate the trust and behaviours that are expected.
5. Make a plan for the intellectual property that is being created
If a Contractor is going to be making unique content for your business, developing a logo for you or a novel and distinct process or invention (amongst other potential intellectual property), you need to ensure that your business holds the rights to that intellectual property.
If you don’t secure the rights to intellectual property created by your Contractor, you run the risk of being unable to use or commercialise a valuable asset. It’s worth getting right and articulating with care well in advance of your Contractor delivering services to you.
We often see clients wondering about what happens to the intellectual property that existed prior to the Contractor Agreement. It is an important distinction to make for you and your Contractor – that you both remain the respective owners of intellectual property that was yours prior to the date of the Agreement.
Next Steps
To proceed with confidence in hiring your next team member, contact Burch&Co’s commercial lawyers to continue the conversation about your business’ needs at contact@burchcolawyers.com.au
From advising on team member classifications, drafting Contactor Agreements and Employment Agreements, through to navigating our clients through tricky situations with employees and resolving tensions, our employment lawyers are here to listen and provide timely advice to support you to get back to doing what you do best.
