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Managing people: Using contractors and freelancers

Areas to consider:

Status

Contractors and freelancers are not employees of the business. They are independent individuals who are contracted to deliver services for the business under a ‘contract for services’.

As a business, you are still responsible for their health and safety while on your premises and for having appropriate public liability insurance and employer’s insurance.

Contractors are often used when there is insufficient capacity in house to deliver a specific time bound activity or when specialist input is required.

Care should be taken when taking on workers on a self-employed basis or through an intermediary company if the role is seen to be an ‘employee’, as this is seen as off payroll working and your business could still be liable for PAYE and NI payments. All contractors and freelancers must have a Unique Taxpayer Reference.

Further guidance:

Contract Types and Employer Responsibilities

Understanding Off-Payroll Working

Check Employment Status for Tax

Appointing contractors and freelancers:

When appointing contractors and freelancers, you will need to clearly define what services you require them to deliver – the specification of services.

You should also consider how you will evaluate the bids you receive, e.g. specific skills and knowledge criteria, value for money etc.

The written specification should identify:

what is to be done
who is responsible for what
timescales for completing task(s)
how achievement will be measured detailed performance criteria including key performance indicators
targets, benefits and expectations.

You should use a selection process and seek quotes from various contractors to assess who best meets your needs. Appointed contractors should be awarded a contract for services with clear terms and conditions for delivery, monitoring and payment terms.

Contract for services

You should set out a formal written agreement with the contractor – a contract for services. This should provide a description of the duties or services to be completed and the price to be paid as well as contractual terms and conditions regarding the rights and obligations of both parties.

Entering into a formal agreement helps to ensure that your business has enough recourse when there are disputes or disagreements.

You will need to put in place a process for managing the contract to ensure that the contractor is delivering services in line with the agreement.