As of 2016, there are 2 million freelancers in the UK. With this in mind, we want to make sure that those living in the UK who have taken the self-employed route are making the best choices for their income and mental wellbeing, particularly when it comes to contracts between freelancer and client.
After all, you aren’t working as a freelancer because it’s easy. Most freelancers do what they do for: passion, a level of flexibility that can’t be experienced in an office or the possibility of great disposable income and financial freedom.
However, between pitching, juggling projects and writing invoices, you might have less time to think about the detailing in your contracts and therefore less time to ensure your financial freedom through understanding whether all parties are upholding their end of the bargain.
Whichever industry you freelance in, the difference from being a full-time employee is that neither parties are obliged to follow the same set of legal requirements, but this can be a benefit to you. If you work on your contracts in the right way, your journey to financial independence will be easier.
Does this all sound familiar? Then you’ll want to read these quick tips about how you can control your freelancer finances instead of being controlled by them.
First things first, make sure you have a contract you can trust
It can be tempting to rush into a new exciting project, especially if you trust the client but without a contract you could leave yourself open to late payments, no payments at all or a host of legal issues. As it stands, there is no legislation in the UK to ensure freelancers have the right to a written contract and therefore it’s your job to ensure you get one, doing so will ensure that you get timely and full payment with protection from any retaliation.
Should you be paying for the tools you’re using?
Whether you use Adobe Photoshop, Microsoft Word or a business analytical tool. Make sure your freelancer contract names the specific tools and programmes you will need to complete the project. Best of all, if your contract specifies that you reserve the right to use your tools during the period you’re working for the client, so long as the client is happy, then this could save you a monthly retainer which would eat into your profits.
Ensure your contract is IR35 compliant
IR35 is a phrase used to describe two sets of UK based tax legislation and it’s designed to combat tax avoidance by freelancers and the businesses that have hired them, who are supplying their services to clients via an intermediary, such as an LTD company but the freelancer would be an official employee if the intermediary was not used.
So, what’s this legal technicality got to do with your freelance work? As an example, if you were offered a consultancy role for £30 per hour but the contract is not IR35 compliant then this means you will pay much more tax when you go to complete your books and therefore your net take-home will be reduced.
The quick way to tackle this would be to raise your hourly rate to about £37 an hour and then you would earn roughly the same amount of money as a compliant contract on £30 per hour.
If you are offered a non-compliant IR35 contract, but you know you can get work with a compliant contract in the next month or two at the same hourly rate, then your financials would suggest you are better off waiting. If you need immediate finances and want to take the non-compliant contract, then you should speak to a lawyer about whether you have been misclassified as an independent contractor, as it’s been reported that many contract workers are classed as ‘1099 workers’ when they are being treated as W-2.
You should always know where you are with your contracts, especially if you want the financial freedom you deserve.
Check your rights for the reuse of your work
Traditionally, many clients will expect to completely own any work that you produce for them and send them. While generally this is fair, there may be some instances that you want a clause in your contract to protect this, maybe: you provided ideas they didn’t follow up on at the time, passed on templates they shouldn’t re-use or worked on a different project on their computer equipment that you want to keep.
By considering these rights, you may be able to charge more for more freelance work in the future. If you want to include clauses in your contract such as this, you should consider legal advice. You need a contract that can’t be torn apart if it was ever being queried.
In the ever-changing UK economy, freelancers in all industries play an important role in helping businesses to deliver their aims and more companies than ever are choosing to hire a pool of talented freelancers rather than permanent employees.
Latest estimates suggest that the self-employed market contributes £275 billion to the UK economy. With an ONS report saying that the number of self-employed workers has increased from 3.3 million in 2001 to 4.8 million in 2017 accounting for 15% of the UK workforce.
The chance for financial freedom through freelancing is now more possible than ever but managing freelance contracts could hinder this if not done correctly. So, make sure to consider all pointers and seek legal advice if it’s a project that could change your year!
About the author
Colin Bates is the Director of Mackenzie and Dorman, a leading solicitors based in Belfast, Northern Ireland. Established in 1904, the practice represents a tradition of over 100 years of dedicated, progressive, legal services to private and business clients throughout Northern Ireland and further afield.