Dispute avoidance

Managing Business Risks with Contractor Contracts

Managing Business Risks with Contractor Contracts

The latest statistics from the Office for National Statistics reveal that self-employed people have increased to 15% of the workforce in the UK. Certain sectors such as construction, IT and technology are particularly affected by this trend, as working with contractors, freelancers and subcontractors are commonplace.

Benefits of Hiring Contractors or Subcontractors

Hiring a contractor or subcontractor to do a job can be very cost-effective as the company does not have to provide sick pay, holiday pay, maternity/paternity pay, pensions or other benefits.

Contractors and subcontractors also have a wealth of experience and knowledge that are often specific to a certain market or sector, so it’s often an ideal solution for expanding businesses to strengthen their position.

What are the Risks of Hiring Contractors or Subcontractors?

While contractors not being employees have certain financial advantages, companies must be aware that they also have to balance the risks that hiring freelancers can incur. One issue is that freelancers could be mistaken for employees by HMRC. Not being able to prove the opposite could lead to hefty fines and penalties.

Other main risks for businesses include:

  • Client ownership: Who owns the client: the contractor or subcontractor?
  • Notice periods: Having no notice period in the contract or agreement could help when determining your IR35 status, as employees usually get notice periods but not contractors.
  • Payment terms: Contractor contracts must clearly indicate any terms for payment that must be observed.
  • Responsibilities and liabilities: Contracts should outline what the contractor can and cannot be liable for.
  • Intellectual property ownership: For some sectors, it is key to consider ownership of intellectual property in contractor agreements in order to avoid further issues.

 

How Can I Manage the Risks of Hiring Contractors or Subcontractors?

By adopting a diligent approach to contractor management and making sure your contractor contracts are thoroughly reviewed, companies can easily manage the risks of hiring a freelancer/contractor, meaning that both parties can benefit from the agreement.

From an HMRC perspective, it’s important to make sure you can differentiate yourself from appearing as an employee by stating the contractor status clearly and have the correct documentation in order to keep HMRC off your back. To do so, it’s essential to cater for the IR35 issue within the contract itself.

Do you have all the correct documentation and contract terms in place? Take the first step towards better protection for your business by getting in touch today.

No Warranty No Clarity

This blog is part 2 of a series of 5 that is preoccupied with small business using contracts to avoid contractual disputes. Court is an expensive pursuit and building self-remedy or clauses into your contract, that are enforceable and offer solutions to problems that may arise is practically useful to small businesses. A considered contract can help you save money, time and effort.

Warranty in simple terms means performance. So outlining how the product or service will perform seems obvious but in many cases, the details provided are scant at best. In many cases, the contract generally fails to outline the key aspects of performance and in turn creates ambiguity. It’s this grey area that can lead to further issues, as during times of dispute, areas of uncertainty become points of discussion or argument.

This gets even more troublesome when there’s a returns policy or a maintenance/service agreement to support post installation or delivery. Stating what is covered by the contract with regards to the basic product’s functionality is one thing but when something breaks or fails to work, what then? Remember these products or service are manufactured and delivered by humans, so things happen, the important thing is outlining what happens next?

Going to the trouble of employing the right contract drafter to ask the right questions and create a contract that is designed to help both parties work together long-term, is worthwhile. Contracts are avoided by those who see no need for outlining the negatives…..but knowing what might happen in the event of….is arguably good customer service and is considerate to both you and your customers time and energy.

The next blog will focus on intellectual property…..

A change in the law leads to new liability for Design and Planners.

Changes to the Construction (Design and Management) regulations 2015, means that those companies (including sole traders), that offer design and planning services to both consumer (householders) and businesses could be liable for health and safety breaches on site even though the builder is the one doing the work.

Not unlike the smoking ban the liability is on those with a lot to lose, the law in that instance targets the smoker through the publican for having a person smoking on the premises, this act pushes the owner to act.  Laws are anthropological, they drive behaviour, whether you agree or disagree with them, it still means the law needs to be adhered to and in the example of the design and planner navigated so their risk is managed and the business protected.

When laws are structured like so, I can’t help but feel more than a little sympathy for the – in this instance – the design and planner who now starts the process of introducing a standard to the chain for events that will lead to a building being built.

We can see why the changes are in place, trying to raise the standard is the goal, the final property will be eligible for warranty and will be re-saleable, a marketable property as opposed to that of a property built based on poor standards which could lead to a disastrous set of circumstances.

This sector is already full of regulation but this new health and Safety legislation will introduce more complexity and challenges for all involved.

So, in a situation where there are multiple contractors, there will be a pressure on design and planning companies to establish the process before a shovel is in the ground.

Create Ts and Cs draft contracts that are relevant to both your business and your industry or sector.  Call us for a quote today 0141 5856384.

Is an unsigned contract enforceable?

Is an unsigned contract enforceable?

Many clients don’t come to us until they have a problem. A contract helps a businesses to manage risks but what if it is found to be unenforceable? We have been asked all the common questions – ‘Is an email a binding contract?’, ‘We have a verbal agreement, is this enforceable?’, ‘My client never signed the contract but is it still binding?’ etc.

But there is so much conflicting information available that it can often be difficult to determine an answer to these questions. If your contract is unenforceable then it means the business can end up losing out.

Looking on the internet business forums, there are thousands of questions relating to this topic. People are worried that their contract is not binding and they will not get paid or be left open to client disputes. And they have every right to be worried.

Email or a verbal agreements still count as a contract, but there can be a number of problems like proving what the terms of the contract are if it has been agreed verbally, or what terms are enforceable if it is through email. If there has been no signature it can prove difficult to determine whether the terms were actually agreed.

It’s understandable that businesses feel they may not always need a contract. If it is a repeat client, friend or known associate there can be a mutual feeling of trust, so it appears like there would be no need for anything to be put in writing formally. However, this can jeopardise and even ruin relationships; so, why risk these friendships?  A changes of client contact or peoples personal circumstances can lead to them reacting differently.  Without a contract existing relationship run the risk of turning sour.  A contract outlines what has been agreed and helps the business and client to stay protected. It allows both parties to understand what to do in any given situation, and helps to remedy any problems – therefore protecting the relationship.

It is certain that some agreements will lead to problems and by not having a signed contract it can lead to expensive legal battles.

Lord Justice Clarke has previously been quoted saying; “The perils of beginning work without agreeing the precise basis upon which it is to be done. The moral of the story is to agree first and to start work later.”

We would always recommend having a contract and ensuring that it is signed by every client. It is far safer to wait until the ink is dry before starting work.

Have you got the right contract?

Have you got the right contract?

Any good business owner will take steps to protect both their business and their clients – it helps to safeguard the company’s future and gives clients peace of mind. But how do you know that you have a legal framework in place that is suitable for your business?

It’s not as simple as you might think. Whilst you can get a DIY template for under £20, the chances of it covering your business liability if anything happens are very low. Every business is different so a DIY template or a self-drafted contract will not cover the complexities of your business and therefore may not stand up in court. And most importantly, it may not even be the correct contract that you actually need.

With technology and the way we can do business constantly changing, it is important to have the correct contracts in place. One in four websites don’t offer their customers the correct options when trading, and this could lead to problems with Trading Standards – who have the power to issue a hefty fine. Cookie policies, privacy policies and web/app terms and conditions are all contracts that you need to have in place when you are doing business on the internet. And if you do business over the telephone then a different contract is needed to ensure that you are in line with distance trading regulations.

73% of the British public have admitted that they don’t read the terms and conditions when making a purchase, but this shouldn’t be used as an excuse for businesses not to have them. If a customer has a problem then the first place they will look is your contract to try and resolve it. But the question is, which contract is needed for YOUR business?

This answer cannot be found or bought on the internet unfortunately. Every business is different and using a basic template or someone else’s contract won’t offer you the protection you need – it may be completely useless if it is the wrong contract. If you don’t have the correct contract then you are leaving the business open to problems and disputes. By taking the time to ensure that you have the correct contracts then you can save time and money.

It isn’t possible to determine what contracts you need by just looking on the internet. Yes, a DIY template or using someone else’s Ts and Cs might seem like a quick and easy option, but if you run into problems it is important to remember that this decision might cost you.

At Create Ts and Cs we take the time to understand your business so that we can help you to protect your business. We will get to know your operational and sales processes, assess what contracts your business requires, and draft a bespoke contract that will help to protect you and allow you to grow.

If you are unsure of what contracts your business needs, or are worried that you don’t have the correct legal framework in place, call us on 0141 585 6384 or email hello@createtsandcs.com .

 

 

 

 

Ten Reasons Why You Need a Contract

We understand that the law can appear boring and confusing, but would you use this as a reason not to protect your business? Legally, you don’t need to have a set of terms and conditions for your business, but it would be foolish not to – you should never do business without them.  We have put together a list of the top ten reasons why your business should have a legal framework in place.

 

  1. A contract will help you to navigate the law

Many people find the law complex and confusing. A contract will help to make the law more accessible and allow you to navigate it correctly. It’s extremely common for businesses to fall foul of the law because they don’t understand it, so a contract drafted by a specialist will ensure that you always stay on the right side of the law. Of course there are DIY contract templates available online, but these will not reflect your business and offer you full protection.

 

  1. A contract helps you to get paid

In your list of business priorities, getting paid will be one of the top, so if your clients don’t pay then you lose out.  A contract can communicate to clients when they can expect an invoice and when they need to pay their bills. Should they decide not to cooperate, the legally enforceable contract will support any legal action you take to recover the debt.

 

  1. A contract helps to minimise disputes or problems

Whilst a contract won’t completely stop disputes or problems, a contract can help to minimise them. Should you have a dispute on your hands a contract can help to protect you in many different ways. It encourages your client to cooperate, but if this doesn’t happen a contract allows you to mediate to try and resolve the problem, rather than paying expensive legal fees. Of course if mediation fails then the contract is a legally enforceable document so it will support you with any legal action or debt recovery.

 

  1. A contract protects your intellectual property

Protecting your business and its assets is extremely important. Intellectual property can often confuse clients because they believe they have full ownership once they have paid for a service. This is incorrect so a contract will communicate how the intellectual property is to be used. It’s a valuable part of your business and you need to ensure that it cannot be stolen or misused.

 

  1. A contract limits liability

A legal framework helps you to manage your business and limit liability. It helps to resolve disputes, helps you to get paid and protects valuable business assets.

 

  1. A contract creates certainty

Yes things can be agreed verbally, or by email, but how much legal standing do they have? The answer is very little. A contract will outline the operational and sale processes of a business and explain how the customer or client can use the services. By communicating this information you are creating certainty – all parties know how to act and what is expected from them.

 

  1. A contract provide in-depth coverage of your business

A contract will help your clients to understand your business, how it works and how they can use the services. It will provide an understanding of your operational and sales processes so that clients can manage their expectations. It’s good business practice to communicate with your clients.

 

  1. A contract helps you to give good customer service

Should a client have a problem, they can refer to the contract and it will give them all the information they need to try and resolve it. It will explain returns, refund and repair policies, warranties, intellectual property, and complaints procedure – all the things a client needs to know! By providing this information in a document that can be referred to, the client will feel they are getting a good service.

 

  1. A contract helps to build trust and give peace of mind

By putting a legal framework in place you are showing clients that you care about them, as well as your business. A contract gives you and the client peace of mind because you know any transactions and work are protected. By providing this to clients you are allowing them to have trust in the business.

 

  1. A contract allows you to manage expectations

When you communicate the terms and conditions of sale to a client you then have the ability to manage their expectations. A contract will communicate all the information they need to do business with you, so they understand what to expect. Managing your client’s expectations allows you to give them good service and encourage them to use your business again.

 

If you don’t have a legal framework in place for your business, why not? It will allow you to grow your business, keep clients happy and protect the future of the business.

 

 

 

Worrying About Late Payments

Do you worry about getting paid for the work you have done? If you do, then you aren’t alone. Nearly a third of small business have reported in seeing an increase of late payments, and to tackle the issue the government is introducing tougher laws.

The new laws will encourage businesses to pay their bills on time and crack down on unfair terms when it comes to settling a bill.

Typically, smaller business are more approachable and would rather solve a problem than add to it. Small businesses won’t have a legal, or debt recovery department that can chase outstanding bills so when a bill hasn’t been paid it is usually a director or key employee that has the responsibility of chasing money. This takes up time and effort, and when there is a small workforce this can have a detrimental effect on business.

A new report from the Association of Chartered Certified Accountants revealed that businesses with less than 50 employees are twice as likely to have problems with late payments, compared to larger organisations. SMEs are also less likely to increase their workforce if they are faced with late payment.

Outstanding bills or non-payment can endanger a small business and it is important to try and overcome this problem. The government is introducing these new laws to show that the UK is a safe place to do business, and encourage economic growth.

The following measures will be introduced to tackle the problem:

  • Consulting on ways to tackle poor payment practices
  • New laws to increase transparency on the payment practices of large and listed companies and help change corporate payment culture
  • Strengthen the Prompt Payment Code
  • Leading by example on public sector procurement

Whilst these laws will help to solve the bigger problem, it is important for you as a business owner to take action for your own business as well.

You can’t always ensure you will get paid on time, but you can ensure that your business has protection that will help when it comes to recovering outstanding bills. A correctly drafted contract will outline your sales and operational processes, and can communicate to clients when you expect payment. Because it is legally enforceable it can also help you with any legal action that may follow.

In 2014 small firms accounted for 99.7% of all private sector businesses in the UK. Whilst they may not have the same financial status as larger businesses, they still need protection, and the best way is by having a good contract in place that will reflect your business intentions and put the company in a position of strength come a dispute.

 

Protecting Your Business Against Bad Weather

Want to give your business a more professional appearance? Give your clients peace of mind? Protect your business?

Two words. Bespoke contracts.

It’s prudent to consider what type of contract will best serve your business – why acquire a contract that is unenforceable and doesn’t represent your business.

And with the business world constantly changing it’s vital to have a contract that will withstand change.

Tailored to your business, bespoke contracts can allow you to grow whilst protecting everything you have built.

Planned and considered contracts become relevant during times of dispute; why take the chance and use a contract where you are unaware of the legal and commercial impact on you and your business.

DIY templates are readily available on the internet with prices starting at just £17, which are easily to download and use.

However unlike DIY templates, your business is not mass produced. Every business is unique and therefore needs a set of terms and conditions to match.

A bespoke contract is way of communicating with clients and allows both parties to understand their duties, rights and responsibilities.

 

Contractor and IR35 myths debunked

As you head to work on a Monday morning do you ever stop to think how many of these people rushing past actually work for themselves?  Recent ONS figures show that over 730,000 people are self-employed, the highest figures since records began 40 years ago.

Since the economic crash in 2008 people have jumped at the chance of self-employment – which brings freedom. You can be your own boss and reap the rewards of your own hard work. And as you grow it gives you the opportunity to take on more people to help build your business.

With 47% of university graduates forced to take non-graduate jobs, freelancing or self-employment is becoming a popular option for those fresh out of university.

Those in the technology and media industries have a wealth of opportunities to become freelancers and will be part of a strong business group that continues to grow steadily.

It is now common practice for businesses to hire a freelancer, or contractor as they can be known. Not only can they be more cost effective but they also have a wealth of knowledge and experience which can be extremely attractive to an expanding business.

A report by the Recruitment and Employment Confederation revealed that the majority of UK employers plan to hire more contractors, for both short-term and long-term job contracts.

Despite contractors receiving no sick pay, holidays or pensions, many consider freelancing a lucrative option as they can demand a higher rate of pay.

However, a recent number of cases has flagged up the need for freelancers to differentiate and protect themselves, not only to manage the liability within the business but to clearly define the relationship between both parties regard HMRC IR35 regulations.

In 2009 Dragonfly Consultancy Ltd lost their case against HMRC and were ordered to pay £99,000 in backdated taxes. John Bessell was contracted by AA to become a systems tester between 2002 and 2003 but after a judge deemed that clauses in his contractor agreement were added to get round IR35, he was forced to pay.

Essentially the aim of the IR35 legislation is to ensure that individuals are working as a contractor rather than an employee in order to reduce their tax liability and National Insurance contributions.

If you are caught then you can face paying years of backdated tax, obviously not a good option for a university graduate with student loans.

Issue like who owns the client and client contact, payment terms and the issue of the ownership of intellectual property are key in a contractor agreement.  A diligent approach to contractor management will help the company manage the risk of hiring a freelancer or contractor and allow both parties to benefit from the agreement.

From a HMRC perspective it’s critical that both parties differentiate themselves by catering for the IR35 issue within the contract.

 

Common contractor myths debunked

                                                                                                    

  1. I don’t get holiday or sick pay so I am not an employee.

Whilst getting these benefits obviously points towards being an employee, it isn’t enough proof, in terms of IR35, that you are not an employee. IR35 regulation requires further differentiation apart from sick and holiday pay.

  1. In terms of IR35, the regulation applies when I have been working as a contractor with the same company for 2 years.

IR35 depends on how and who you work with on a contractual basis. The day to day client engagement and the shape of that relationship is much more important that how long you have been working in one place. The perception may be that the longer you work somewhere the more likely you are to be deemed as an employee, and HMRC may use this information when assessing your employee status.  Again, the risk of this issue can be managed in a contractor’s agreement.

 

  1. I have other clients so I am definitely following IR35 regulations.

It is important to remember that IR35 applies to each individual commercial contract. Having more than one client helps to show that you are on the right side of IR35 however there is other criteria to demonstrate IR35 compliance. The majority of this criteria is echoed in the contractors’ agreements.

 

 

Consumer Protection for Businesses

Starting your online business can be a daunting task, especially with a very long to-do list before you are actually up and running.

One of the things that can be easily forgotten about is having a solid set of terms and conditions drafted for your website or app. Neglecting this task, which many people deem dry or boring, can result in late or non-payments meaning that the business could be out of pocket.

Shockingly one in four websites is not offering their customer the correct options when trading online – ultimately breaking the law.

And now that the government is cracking down on businesses that don’t protect their consumers it is vital to ensure your livelihood is properly protected.

In 2012 Groupon found themselves in hot water with the Office of Fair Trading.

The OFT found that the online discount giant was guilty of ‘widespread’ breaches of consumer protection laws and was forced to change their ways or face court action.

New government research shows 87% of UK consumers feel knowledgeable when choosing and buying goods and services

And 70% of consumers said they know they have the right to return a product bought by phone, post or over the internet 4 days after it is delivered.

With consumers becoming savvier, the government reformed consumer laws and distance trading regulations in June 2014 to make them more accessible and easier to understand.

The Office of Fair Trading closed its doors in April 2014 and replaced by the Competition and Markets Authority, who closely monitor consumer law compliance.

And in order to strengthen these changes further the Consumer Rights Bill, which is currently working its way through Parliament, will outline the standards consumers can and can’t expect when they are purchasing online.

The Bill once passed will simplify enforcement powers and make it easier to prosecute rogue traders.

Consumers know their rights and by not acknowledging these, new businesses entering the online marketplace can also attract unwanted attention from Trading Standards.

They conduct random inspections of websites, carry out test purchases and cancel orders to test distance trading regulations.

If they find failures then they have the power to enforce financial penalties.

Trading Standards Scotland Chairman Colin Baxter has warned of the dangers new businesses face when entering the world of online business.

He said: “With the continuing expansion of e-commerce in the UK, new entrants are joining the market every day, many of them small micro-businesses with little experience of consumer law.

“We are concerned about the high levels of non-compliance. It’s a legal requirement to protect online buyers, to ensure fairness and a level playing field for reputable retailers, and to ensure the smooth working of the internet marketplace.”

It is the responsibility of the online business to ensure their website and online offering is reputable.  This includes being aware of the responsibilities as an online trader and ensuring the correct procedures are in place before trading online.

By not following the law and communicating the correct legal rights to online consumers, businesses are taking a huge risk.

A company that is serious about customer service and building a sustainable online business will take the right steps to ensure both themselves and their customers are protected”.

 

Create Ts and Cs provide a bespoke set of Terms and Conditions for your business at a fixed price, this unique approach to individualising commercial Terms and Conditions allow Start up and SME sized businesses the opportunity to protect themselves, manage risk and guard against future unnecessary disputes at an affordable price. Download: terms & conditions | privacy policy