A number of our clients, and many self employed people, generally (whether operating through a Limited Company, or as a Sole Trader) have the common issue of completing work for a client, invoicing for it – and then not seeing their client for dust.
Non-payment for work for many of these self employed people can mean no food on the table, and a disheartening feeling that they have slogged their guts out for, literally, nothing in return. Not to mention that, with the current economic climate, businesses can go bust due to lack of payment from debtors.
Would these same customers go for a delicious meal at a top restaurant but then scoot away without paying – goodness me! No! That is against the law! Then why, you ask, is not paying for services or products created for these clients any different?
Often freelancers want to know what their rights are in this situation, and it usually boils down to a legally binding contract. Without both you and your client signing a contract, there is nothing to stop them not bothering to pay you – as frustrating as that is.
Our in-house Compliance Advisor, Nosheen Bashir, MBA, knows the importance of a compliant contract, being in charge of administering contract reviews for our clients, and states the following:
‘The importance of having a contract in place between all entities within the contractual chain protects you and the relationship with your clients. More important is to ensure that as freelancers you are paid! A recent study by the Freelance Union found that 40% of freelancers polled went unpaid when their clients refused to pay them fully for work performed. See full study here.
A written contract sets out the framework for a contractor’s working arrangements and defines the terms of your relationship. It provides legal protection and, where there are disputes, for example with regard to non-payment of services, a written contract will expedite matters, as the agreement would normally clearly set out what the client’s obligations are.
Not having a contract in place could severely delay any disputes being settled and it is much more likely that a contractor would need the professional services of a solicitor in order to settle such disputes.
In terms of IR35 legislation (relevant for Contractors) it would make it very difficult for the contractor to assess their level of risk with the absence of a written contract and business operations will be more intensely inspected by HMRC and is less likely to go in your favour.’
Thanks Nosheen J. As a side note, it’s a good idea to have clauses in the contract to ensure that either half money is paid before work begins or that there is a clause to ensure that if money is not paid work will not begin/continue.
So, where on earth do you get this legally binding contract to use –well, we highly recommend discussing this with a lawyer who specialises in contracts. It might sound expensive – but one meeting with a lawyer could provide you with a contract that lasts you for years – and saves you large amount of money in unpaid work. If you already have contracts in place, and the client still refuses to honour them, think nothing of phoning, emailing and writing numerous times to this client and even visiting them in person to ensure that you obtain payment. Ensure that you have given them definitive deadline dates for payments, so that you are acting reasonably and fairly.
I hope not to offend you with a swear word – but it is a truly emotive topic that people are passionate about – and I think this smart video by American Designer, Mike Monteiro, of Mule Design Studio (muledesign.com) really tackles the issue of non payment for services, specifically for the Design Professional. Click here to watch the video: ‘F*ck You, Pay me’ – the morals of the story are ‘don’t leave money on the table’ and ‘know your rights’.
To finish here’s a guide from FreelancerFolder on 5 reasons a Freelancer should have a contract:
What Legal Issues Might Contractors Face?
From tax investigations to client disputes and defamation
Does Length Of Contract Impact Your IR35 Status?
Should contractors be wary about working for a client over a long period of time?
What Do Our Contractor Accountancy Packages Include?
All your accountancy needs and more, for one fixed fee.