A freelance contract establishes working terms between a freelancer (or “contractor”) and a person or company that requires their services. A clear freelance contract helps both sides understand what to expect from each other, so projects get sent in on time and payments are made promptly.
1. What is a Freelance Contract?
A freelance contract is a document sent by an employer to a freelancer that explains the terms of their working relationship. It sets clear expectations between the two parties for a specific project over a set period of time. This type of document is legally binding and ensures that everyone working on a given task is on the same page in terms of service guidelines.
General terms in a freelance contract
A freelance contract normally addresses the following elements:
- The names of those involved in the project
- Details about the services delivered and the expectations for both parties
- Specific dates for the work
- Terms of payment
- Legal clarification of the contractor’s role
Other names for freelancer contracts
A freelance contract is also known as a:
- Client/Service Freelancer Agreement
- Company Contractor Agreement
- Contractor Agreement
- Freelancer Agreement
- Freelancer Contractor Agreement
- Independent Consultant Agreement
- Independent Contractor Agreement
Freelance Contract Sample
The sample freelance contract below shows what a standard one looks like:
Freelance Contract
2. When Do I Need a Freelance Contract?
You need a freelance contract for a single project over a clear time frame, as opposed to a permanent, general work relationship. A company also may not involve the freelance worker as an official part of the company. Note that this type of worker is not the same as a temporary worker, or “temp,” which are often placed at a company through an independent staffing agency to fill a position for a short period of time — such as during an employee’s maternity leave. Temporary workers are technically employees of the staffing agency, whereas independent contractors are self-employed. You can also hire temporary employees using a temporary or fixed-term employment contract.
Independent contractors will generally cost a company less money than an employee does because they do not receive traditional work benefits such as health care, vacation pay, sick pay, or retirement.
Independent contractors usually work on their own schedules and are not expected to come into an office. Unlike salaried workers, freelance workers have no upward limit on their potential earnings. They are, however, expected to pay for out-of-pocket expenses unless approved by the company.
A company’s insurance does not cover the contractor, making freelancers responsible for obtaining their own insurance.
3. Consequences of Not Using a Freelance Contract
Without a freelance agreement, expectations of the freelancer and their required services may be unclear. It is imperative that both an independent contractor and their client have a common understanding of the scope of the project so as to avoid confusion or extra work.
In addition, a freelance contract establishes to the IRS that the worker is not an employee of the company. Otherwise, the company may be expected to cover the individual’s Medicare and social security taxes, as well be responsible for as any liabilities that may arise from the project.
There are serious consequences of misclassifying a freelancer as an employee and vise versa, including large fines and even potential jail time. It’s crucial that you understand the distinction between an independent contractor vs employee and the implications for yourself and/or your business.
Consequences for the contractor
- Loss of payment
- Loss of time
- Stolen work
- Freelance workers may incur a fine for not disclosing accurate earnings information on their personal income tax return
Consequences for the hiring company
- Loss of money, particularly in unanticipated expenses
- Loss of time
- Legal expenses, including lawsuits
- Breach of company information
A 1099 form marks self-employment earnings for the IRS. If a freelance worker earns more than $600 from a company, they will receive a 1099 form. You can find instructions regarding this legal requirement on the IRS’s website.
Freelance workers cannot have employees, but they can delegate work to other independent contractors.
There are many legal guidelines that a company must be aware of in order to treat their workers fairly. The Department of Labor’s website has a clear explanation of the major employment laws in the US.
4. Common Uses of a Freelance Contract
A freelance contract has a wide variety of uses. There are many types of short-term projects that an individual worker can complete for a company. These are situations in which there is a specific task that the client needs the contractor to complete.
- A magazine hires a journalist to write an article
- A small business hires a programmer to create a website
- A theater company hires an actor to perform in a play
- A think tank hires a speaker to deliver their conference’s keynote address
- A family hires a pet sitter to watch their dog while they are on vacation
- A couple hires a photographer for their wedding
- A company hires a marketing consultant to increase awareness of their brand
- An office hires a plumber to fix leaky pipes
- A mother hires the next-door neighbor to watch her child for the evening
- A student hires a tutor to help them study for the SAT
If it seems like there’s a huge range of freelance jobs, you are right: contract workers are a growing part of the population. A 2018 poll by NPR and Marist found that one in five American jobs are carried out by an independent worker.
Interestingly, many independent contractors today actually work for a single client, as opposed to multiple clients, due to in-depth projects or work agreements. However, under the Fair Labor Standards Act, these works still do not receive employee benefits including overtime pay.
According to the Harvard Business Review, misclassification of employees as contractors has resulted in major wage losses for workers.
Companies usually look to freelance workers for projects that will not require extensive training or use of company equipment.
5. What to Include in a Freelance Contract
A freelance agreement should detail the following specifications:
1. The names of the hiring company and the independent contractor
2. The services that the contractor will provide the client
- What components must be included? What is the scope of the project? What does it seek to accomplish?
- How will the work be submitted? You may wish to specify whether the file should be submitted as a PDF or a Word document, for example. Is there a file-sharing website the client wishes to use?
- Is there a non-disclosure agreement or other confidentiality form? Will the client be granted exclusivity to the contractor’s work? Note that a freelance worker has different intellectual property rights than an employee does.
- What are the client’s responsibilities? Are there guidelines for if the client wishes to change the project once it is underway?
- You may wish to include services that are not provided in order to ensure clarity.An explanation of the services that the contractor will provide the client:
3. Mutually agreed-upon project schedule with specific dates
- Are there multiple deadlines? Is there a certain time the project must be completely finished? Does the worker need to come to particular meetings?
4. Compensation
- How much will the client pay the contractor? What is the rate of payment?
- How and when will the client send the payment?
- Is there a baseline payment guarantee should the project be canceled part of the way through?
5. A clarification of your legal relationship
- Why is the work being completed by an independent contractor as opposed to an employee? This helps make it clear to the IRS that the company will not pay for the same work benefits for the worker as the company would for an employee.
- The contract has a binding effect to make sure that the work gets completed.
- Is the worker at will? Are there circumstances by which the relationship may be terminated?
In addition to signing a freelance contract, it may also be necessary for you to sign a non-disclosure agreement.