In a contract of service, each party has the right to impose any commercial terms that they wish, as it is a service contract. Thus, every party is free to impose whatever commercial terms they wish, since it is a commercial agreement. However, it is important to protect client interests through provisions that are strong enough to protect the consultant’s interests, but not so strong that he or she is viewed as an employee or worker. Consultancy agreement india typically contain clauses that cover the following topics:
1. Contract duration
- This contract may be related to a specific project or deliverable, or it may be for a fixed period of time, or it may be terminable by either party at any time as long as the contract is in full force and effect.
- A client who can terminate with a shorter notice period is less likely to be considered as an employee.
- It is not appropriate to include either.
2. Provided services
You may find these general provisions in an agreement or you may find them in a separate schedule that details them in greater detail.
3. Consultant’s responsibilities
An employee could be considered a consultant if the consultant’s agreement includes detailed and restrictive obligations resembling those imposed on employees.
- Care and skill level
- Spending time
- Preparation of reports
- Following policies relating to health and safety, anti-corruption, and social media for clients
4. Payment terms and fees
In order to calculate commissions, there are two methods for doing so; either calculating specific deliverables (for instance, target-based commissions) or by estimating the amount of time spent. Commercial negotiations are the only way to resolve all problems. During the employment tests, consultants must demonstrate that they are taking a commercial risk in order to be hired.
5. Equipment supply
In addition to the requisition of their own equipment and materials, consultants are usually required under a contract to supply their own tools and materials. The better the employment test results, the less integrated the consultant is with the client’s business processes.
It is possible for consultants to send substitutes to provide services in place of them under a substitution clause. In this situation, self-employment status can be established, especially if it is exercised actively. Clients may only want individual consultants with specific expertise, so it may not always be feasible from a commercial standpoint.
7. A tax and national insurance contribution
In accordance with the agreement, the consultant will be charged with taxes, national insurance, and VAT (if applicable).
8. Taking responsibility
Providing services to clients may result in a consultant being indemnified for losses caused by his or her acts or omissions. It may be a good idea for a consultant to water down any indemnities, so that any liability will not be based on an indemnity but on a normal contract basis. A consultant may also wish to include a clause limiting their liability, perhaps linked to the amount of their fees or the amount of insurance coverage.
9. Purchasing insurance
A consultant’s agreement should include a requirement to maintain appropriate insurance. Examples may include:
- An individual consultant might not find the policy suitable because of its relative cost since it covers personal injury, property damage, and product liability.
- CGLI is the most comprehensive form of insurance for clients, customers, and suppliers. This alternative insurance is less thorough than CGLI, but still covers the same things.
- Employers are required to have an employer’s indemnity insurance policy. This insurance covers employee injuries, and it is mandatory for all employers to maintain this insurance policy. Only the individual consultant(s) employed by the service company will require this coverage.
10. Keeping information confidential
A consultant generally does not have an implied confidentiality obligation, which means that the agreement between the consultant and the company should include provisions relating to confidentiality specifically.
11. Various activities
It is not advisable to restrict a consultant from doing other work during the engagement if the engagement stipulates that they cannot do so. Consultants with other clients are deemed self-employed if they do so. Providing consultants with the opportunity to work for their competitors or to undertake work that would adversely affect their ability to provide services may not be a commercial proposition for clients.
12. Covenants of restriction
To protect its commercial interests, the client may wish to impose restrictive covenants on the consultant after terminating the consultancy agreement. It is possible for consultants to establish customer, supplier, and employee relationships with their clients, which they can then use when meeting other clients.
13. Property rights
When employees create intellectual property while employed, it generally belongs to their employer. As opposed to company-consultant relationships, consulting relationships typically involve a consultant owning and maintaining the IP they create for a client while on assignment.
14. Protecting data
As part of GDPR, the client must provide the consultant with a privacy notice. Finally, if the consultant will be the data processor, then GDPR could cover their obligations as well.
15. Status of employment
A statement in the agreement may confirm that the consultant is an independent contractor, rather than an employee. This way, the parties’ intentions are made clear on the agreement’s face. However, the court may still deem the contractor to be an employee or worker despite this.