What is a Independent Contractor Agreement?
An Independent Contractor Agreement is a legal contract which allows a business to engage a contractor for the provision of services.
Independent Contractor Agreements are very common and can be used in almost any industry. They can be used when you outsource work to a contractor for on-demand services, expertise in a particular area or to complete specific tasks for a project.
A well written agreement will not only provide you with legal protection, it will also help manage your contractor’s expectations.
Who can use this template?
- A business (“principal”) engaging a contractor for specific services or a project
- Independent Contractor
- Freelancer
- Consultant
Do I need a contract?
Yes, definitely! A contract protects both you and your contractors.
Putting things in writing protects both parties and gives certainty.
Contracts are about more than wrapping your contractors up in red tape and telling them what they can’t do. Think of your contract as relationship insurance: it does all the hard, boring work of keeping the relationship on track, so you can focus on the fun part – the actual business.
Other names for an Independent Contractor Agreement
- Contractor Agreement
- Freelance Agreement
- Consulting Agreement
- Services Agreement
What does this Independent Contractor Agreement template include?
Our Independent Contractor Agreement template covers everything you need:
- Contractual Relationship – makes it clear that the contractor is not an employee, agent or partner
- Term – how long they will be engaged
- Services – the services to be provided by the contractor
- Scope – the scope of the services the contractor will provide
- Equipment – generally contractors provide their own equipment
- Payment – covers payment terms
- Statutory Obligations, Licences and Registrations – to make sure contractors comply with their legal obligations
- Compliance – to make sure contractors follow your policies and procedures
- Restraint – to protect the interests of the client. In practice this can be difficult to enforce.
- Confidentiality – to keep confidential information private between the two parties
- Intellectual Property – this covers the rights to intellectual property created
- Guarantee and Warranties – guarantee as to due care and skill and any warranties provided by the contractor
- Indemnity – important legal clause
- Dispute Resolution – process to manage a dispute if a problem arises
- Termination – this explains how either party can terminate the agreement
- General – includes standard contract clauses such as Assignment, Severance, Entire Agreement, Waiver and Governing Law
- Job Sheet – table with summary of the Job (services, scope, start date, key responsibilities etc)
Differences between an employee and a contractor
Whether you are an employee or a contractor depends on many different factors.
Independent contractors generally:
🔹 work for themselves and are their own boss
🔹 are free to accept or refuse work
🔹 control their own working times
🔹 provide their own tools and equipment
🔹 have no guarantee of future work
Employees generally:
🔸 work in someone else’s business
🔸 are subject to controls on how, where and when they do their work
🔸 are paid a wage
🔸 receive employee entitlements, such as sick and annual leave
🔸 have the expectation of ongoing work
Further Information
We recommend you visit the Fair Work Ombudsman website to read more. If you’re an employer, visit the ATO’s website to learn the tax and super obligations for both employees and contractors, and read more about the differences between them.
Do contractors need an ABN?
Yes, they do. Contractors are self-employed individuals or companies. To legally operate as a contractor in Australia you need to register for a Tax File Number (TFN), Australian Business Number (ABN) and in certain circumstances you need to register for Goods and Services Tax (GST).
What is sham contracting?
A sham contracting arrangement is when an employer attempts to disguise an employment relationship as an independent contracting arrangement. This is usually done to avoid paying employee entitlements. Even if you make an innocent mistake, you can still be fined!
If you’re convicted of sham contracting, you could be hit with a fine of up to $12,600 as well as back-payment of wages and entitlements.
Our Independent Contractor Agreement template makes it crystal clear that you have a true independent contractor arrangement.
How do I include all of the details for the job in the contract?
We have included a Job Sheet in the contract where you can write down all of the specific details of the services or project. This includes things like job description, start date, services to be provided and fees.
Does the contractor get paid a fixed fee, or an hourly/daily rate?
It’s up to you to negotiate fees with the contractor.
For a specific project, you might like to have the cost certainty of a fixed fee, but it’s very common for contractors to charge out at an hourly or daily rate.
Some factors that can influence the fees include the length of the project, the skills required to do the job and the scope or size of the project.
How do I stop a contractor from taking my clients, or competing with my business?
We have included a restraint clause in our Independent Contractor Agreement template to prevent the Independent Contractor from taking clients or employees away from your business, or competing with your business. Please note, in practice this can be difficult to enforce and you should seek legal advice.
Can this Independent Contractor Agreement template be used by both contractors and businesses hiring them?
Yes, this template is suitable if you are a contractor, or a business looking to hire a contractor. However, if you’re a contractor, you may prefer to use a Service Agreement as the terms have been drafted to be more favourable for the contractor (service provider).
Can we negotiate on the key terms of the Independent Contractor Agreement?
You bet!
Before you kick off your project, you should discuss the commercial terms and negotiate a position that both parties are happy with.
Don’t forget to make sure that the terms you have agreed to are reflected in the final contract that both parties sign.
What can I do if things don’t work out?
We have included a termination clause in the contract which explains the conditions and notice period required for either party to terminate the agreement. For example. if one party breaches the agreement and fails to remedy the breach within 14 days, the other party is within their rights to cancel the contract.
Our template allows for the business (principal) to terminate for non performance or if the contractor fails to meet key responsibilities listed in the agreement.
Is this Independent Contractor Agreement template legally binding?
Absolutely!
All of our templates have been drafted by qualified Australian lawyers who hold an Australian legal practicing certificate.
We are affiliated with a commercial law firm based in Sydney.
