As an SME ourselves, we know that operating with smaller teams can often produce fantastic results. Clients get to know and respect your team members and those employees can take individual ownership of ensuring you provide a quality service or product. It can also be a very cost-effective way of running your business, as it means that you can avoid the inevitable costs associated with having lots of employees.
What to do when you can’t handle work in-house?
In an ideal world, your small team will be able to handle anything that the client throws at them. However, there are times when they will need support that you simply don’t have the expertise to provide. In such a scenario, an efficient and cost-effective way of ensuring your clients’ needs are met is to engage a third party to provide the services that you and your team cannot.
Enter stage left the consultant, the contractor (or even potentially the sub-contractor). For this article we are focusing on the provision of services by individuals (as opposed to large corporates like McKinsey).
If you run or manage a company of any size then you will have come into contact with these terms. It is worth us spending one minute however to explain what they mean.
What is a consultant?
Some people might differentiate between consultants and contractors by reference to the fact that consultants tend to “advise” (i.e. the valuable transfer is that of knowledge and experience), whereas contractors tend to be engaged to execute on and deliver a particular service.
At LawSimple, we think of them as essentially the same. They are the counterparty to a contract to provide services (which might be advice, but might also be preparing substantive work product) for you the engaging company. Even if the document is given a different label (consultancy agreement/service agreement/contract for services), it is doing the same thing.
If you need help with getting a consultant/service provider onboard then don’t hesitate to reach out to our team.
When is a consultant not a consultant?
One of the key things to be aware of when engaging a third party service provider (and which we can explain in more detail over a call), is that the primary risk to bear in mind is recharacterisation. In this context, we mean the legal recharacterization of the relationship from one of contracting company + consultant (GOOD), to employer + employee (BAD). Employment law (rightly) imposes a number of obligations on employers like contributing to pension plans, and restrictions on how the relationship can be terminated.
One of the main points of engaging a consultant was to avoid the overheads of having an employee. We can help you draft the consultancy agreement to put you in the best position possible to avoid this recharacterization, but in brief you want to avoid treating the consultant like an employee. If a consultant has to work fixed hours, if they get paid a regular amount every month, if they can’t work for other people, then whatever the label, they start to look an awful lot like another member of staff.
When it comes to “control”, less is more! So bear that in mind!
What is a sub-contractor?
A quick note to finish on is sub-contracting. When a company agrees that a contractor will provide services (e.g. build a building on land that the company owns), the contract will often engage a sub-contractor to actually perform the services. In the example above the sub-contractor might be a plumber.
The consultancy/service agreement will say whether the counterparty can engage a sub-contractor. If you don’t want that, after all you probably went to that particular consultant/service provider because you thought they did good work, then you should stipulate that in the contract.
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