I have been doing this over a decade and I thought it might be helpful to list out some common, general things you should/will/might see and ask for on contracts.
This obviously doesn’t span all contracts or industries, and the information given here is limited to my personal knowledge. I quickly jotted down things I thought a freelancer would need, and came up with these 7 areas/documents; obviously it will change or have different needs/details depending on the client and contract, but here’s what they each mean.
NOT ALL JOBS NEED THIS. But, if you’re embarking on a serious project, or you’re starting out, it’s good to know the most important bits of freelancing contracts so you aren’t caught off guard.
1. Statement of Work (SOW)
This is literally what you are going to do. What will they expect out of you? This may list anything from responsibilities to a project, to certain tasks. As an example, a freelancer may be asked to proof a document, and sometimes communication lines get crossed and they’re assuming they will receive the document to proof, not that they are ALSO writing the document AND proofing it.
This SOW will clearly state what is required, so that both parties (you and the client) have zero ambiguity about what is expected.
If you see something in there that looks fishy, ask about it. You’d be surprised.
2. Rate (Fixed or Hourly)
You have a bunch of options. Some people go by project fixed rates (e.g. $500 for the project) so that if you work 3 hours or 300 hours, you get paid the same.
Sometimes you have day rates as well, like “$500 a day”, so if you work 5 weekdays, you get $500 x 5, no matter how many hours you put in.
Others like me go by the hourly rate, most often, and I base it off an 8-hour day. I don’t work more than 8 hours unless I can bill for it (it’s very easy to get sucked into work).
Figure out what the rates are, and what you can charge. A normal workweek is 40 hours, but I have worked at clients who specified no more than 37.5 hours charged a week. Make sure it is CLEAR it is 40 hours x $whatever rate.
If you need help figuring out how to charge an hourly rate or ballpark it, I would suggest asking around to get an idea of what to charge – just ask them what they think you can get, and then aggregate the numbers and tack on an extra $10 – $20/hour (this is what I do).
OR.. you can use this method – How much should I charge as a freelancer?
As for expenses, as a consultant my expenses are always ON TOP of what I am being paid. Sometimes, expenses are baked into the rate, so you better be careful if you need to travel for work.
Usually, the contract says something along the lines of: Travel expenses are not included in the billing rate, and are in addition to the hourly rate, expensed/reimbursed with this documentation and receipts required, etc.
If your expenses are included IN the rate, it will also say that: Travel expenses are considered part of the bill rate.
I have had to work both types of contracts, and when I had expenses included in my rate, traveling within the province, I added on $25/hour to cover hotel, food, travel, and car rental/gas, however, sometimes you aren’t able to add on that much, so your actual end receiving rate is much lower than it seems after you remove expenses (which by the way, if you’re incorporated, are expensed under the company).
Understand what is covered in travel expenses, and what isn’t, and how it is calculated, reimbursed, paid for (company account/card, or your personal card), and so on.
3. Contract terms
Common pieces of info, including rates is:
- Location of work – onsite or offsite?
- Duration of contract
- Renewal of contract terms – less common but I’ve seen it
- Payment percentages – some do a 50% down 50% upon completion
…anything really, including the below.
4. Non-compete clauses
A lot of contracts have this, and it’s standard. Basically it means anything that has to do with poaching people or work.
For instance, it could say things like: You cannot work for this client directly without going through our firm. As I use a broker a lot, this is very common to make sure that consultants don’t do work under the table or on the side for the client or their subsidiaries without billing through the broker (they need their cut too on their hours).
It could include things about poaching employees, or other consultants for your company or other purposes.
It could include a 1-year clause saying that if you leave this contract/client, you cannot work for this contract/client without going through the broker for 1 year. After 1 year has passed, THEN you can have the client contract you directly and eliminate the middleman, so to speak, but before that year is up, if the client calls you back, you have to pass through your broker.
Some people say this stuff is not enforceable, and brokers are not likely to take you to court if it happens but why chance it? Who wants bad blood? And if they’re great brokers, why do you want to screw up the relationship out of greed?
5. Intellectual property clauses
All the work done for the company remains the company’s work products (this is standard). You may also have more clauses like anything you work on during company time either directly or indirectly working for the client, is also their property. It depends on the industry, but I’d read this part carefully if you are working on the side on your own business.
6. Invoicing details and terms
What are the payment terms?
Are they paying you net 30 (meaning, you put out the invoice and 30 days later they have to pay it)?
Do you have to create the invoice and send it or is it automatic? Is there a clause that says if you’re a flake and forget to bill them within 90 days for the work completed, they DO NOT HAVE TO PAY YOU (true story, I saw this).
Finally, HOW are they paying you? Are they paying you via cheque? Direct deposit? In magic beans?
7. Termination of contract
I cannot believe it when people don’t read contracts and know their termination terms. Basically, like with any employment contract — WHAT ARE THE TERMS OF TERMINATION?
Do you have to give 2 weeks notice? One month? Do they give you the same terms back?
75% of the contracts I get, are revised on my end because I see that I have to give 1-month notice but they can terminate within the week. That’s just BS, the terms should be the same for both, so I request it.
Know how to get out of your contract. Here’s a story about a freelancer I tried to help, to scare you.
WHEN IN DOUBT…
Hire a contract lawyer to read it over and to tell you stuff in plain language. They’re worth every penny. I actually slog through mine in English and in French (with French, I enlist my partner to help me read the legal language), and it’s worth the time. Trust me.