CONSULTING SERVICES AGREEMENTS
Hiring a Business Consultant has many benefits. One of these is the explicit non-permanence of the association between the parties. Hiring a consultant allows a business to avoid the considerable tax and administrative costs that come as part and parcel of hiring and maintaining permanent staff, while providing access to specialised skills and expertise.
Contracts of services (also referred to as consulting service agreements) are essential business tools. In the absence of clearly defined terms of services, misunderstandings may develop. Unfortunately when the expectations of the client or the service provider are not met, problems arise. Its time like this both parties will wish they were bound by a Service Agreement.
A Consultancy Agreement formally establishes the relationship between the Client and the Consultant. Consequently, there is no room for ambiguity regarding the scope of the work and the nature of the consultancy relationship; both parties know that the relationship exists and the Consultancy Agreement formalises the arrangement and binds the parties legally.
A well-crafted Consultancy Agreement states what is expected from the consultant and defines that this is not an employer / employee relationship.
It’s worth noting the ATO and Fairwork Australia are actively scrutinising 'sham' Contractor Arrangements and an employer should be wary that they are not putting their business at risk by engaging in such contracts. Although there are many circumstances where it is lawful for a business to engage an independent contractor, the law is there to protect employees from being treated as independent contractors when they should in fact be regarded as an employee. Having your documentation in relation to the contractors or consultants is vital if you want to stay out of the sham contracting minefield. Furthermore A consultancy agreement gives you strong legal recourse if either party fails to honour their obligations under the agreement.
What to include in your agreement?
- The Parties - including individual or company names, addresses and the entities ABN.
- The term of the agreement – will the arrangement be until certain milestone are reached? ie the project is finalised or will the project have a specific term, say 6 months?
- Of course you will need to define the nature of the services and/ or specific detailed deliverables that the consultant is required to provide. This might include where the services are to be performed, reporting procedures and milestones for completion of particular projects.
- Will the consultant be required to provide specified personnel? Does the company want the right to veto any substitute when specified personnel aren’t available?
- Is the consultant/consultant company (as applicable) registered for GST?
- Will the consultant receive a set fee? If so, is the fee to be paid at fixed intervals (for example, weekly, monthly or quarterly) or only on completion of a particular project?
- How will expenses be approved? Will they be agreed in advance, subject to an upper limit or just submitted on a "reasonably incurred" basis?
- Whether you are developing a new product, working with an established customer base or interacting with employees of the client, confidentiality provisions are an essential component of a quality document.
- Who has ownership rights to any intellectual property developed during the term of the relationship?
- Conflicts of Interest. The client may want to negotiate some protection against the consultant doing similar work for competing companies during the engagement.
- Dispute resolution – you would hope you never need to act upon these provisions however having a clearly defined procedure for resolution of disputes can potentially save you thousands in legal fees and years of heart ache. This provision is designed to keep you out of court.
- It should be made clear that in providing the Services, the Consultant acts as an Independent Contractor and not as an employee, partner or agent of the Client.
- Insurance risks and other liabilities should be considered.
Although it may seem daunting at first, drafting you own Consultancy Agreement may be easier than you think. RP Emery and Associates have several Consultancy Agreement templates crafted by legal professionals, specialising in contractor and employee relationships. Visit www.rpmery.com.au for more details.
Also see Company Consultants Agreement