How It Works
A Freelancer Agreement is an agreement that an organisation/employer enters into with the freelancer hired by them. This agreement governs the relationship between the freelancer and the employer and it enumerates various terms of their relationship, such as deliverables, timelines, compensation, roles and responsibilities, etc.
It is pertinent to enter into an Freelancer Agreement, in order to define the scope of work for the freelancer and to restrict him/her with the obligations such as confidentiality, exclusivity, indemnification and non-competition.
Contents of a Freelancer Agreement
A well drafted Freelancer Agreement addresses the following:
- What is the job description and what are the duties of the freelancer?
- What is deliverable expected/required from the freelancer?
- What is the compensation structure?
- What is the term of engagement? Is there any lock-in period?
- Is there an exclusivity required t be offered by the freelancer?
- Are there any leave entitlements?
- How can the engagement be terminated? What is the notice period?
- How would the intellectual property in the work done by the freelancerduring the course of his/her arrangement be treated?
- Is there any non-compete and non-solicit restriction?
Laws governing the Freelancer Agreement in India
The different laws which govern various aspects of Freelancer Agreement in India are as follows:
- The Indian Contract Act, 1872
- Shops & Commercial Establishment Act (State-wise)
- Industrial Relations Code, 2020
- Code on Social Security, 2020
- Code on Wages, 2019
- Arbitration and Conciliation Act, 1996
- Copyright Act, 1957
- The Trademarks Act, 1999
- Patent Act, 1970
- Design Act, 2000
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Frequently Asked Question
What are some of the benefits for an organisation of hiring a Freelancer over an Employee?
There are certain benefits that an organisation enjoys when it hires a person as a freelancer, rather than an employee. Some of those benefits include:-
● The organisation is not bound to comply with labour laws related to an employee's PF, Gratuity and other terminal benefits on retirement or resignation.
● You can discuss deliverables with the freelancer you plan to hire and only pay on completion of the task.
● Since freelancer are not technically employees of your company, it gives your greater flexibility to control the conditions of their work and remuneration.
● Again, since freelancers aren't technically employees, your company does not bear full responsibility for their actions on the job.
● The organisation has to ensure lesser compliances in terms of freelancer, than what it has to do in case of employees.
What is the difference between a freelancer and an employee?
A freelancer is not an employee of the organisation. He/she is normally a professional who is offering services as per the scope of her/his assignment.
As an employee, one is bound by the rules of the organisation concerning employment, such as leave, attendance and working conditions. This is not the case in case of a freelancer.
As per labour laws of India, "Freelancer" position also does not entitle the person to the legal rights of the employment nor entitles him to the rights of an employee (such as PF, gratuity etc).
What is the importance of a Freelancer Agreement?
A Freelancer Agreement provides clarity to both the parties, i.e. an employer and the freelancer, as to the exact expectations of the job, compensation structure, deliverables, timelines, termination mechanism, besides other important terms.
This kind of clarity helps to prevent disputes between the parties, and if in case there is a dispute, the Freelancer Agreement acts as an evidence of the arrangement mutually agreed to between both the parties.
Is it mandatory for me to enter into a Freelancer Agreement with my freelancers?
No, it is not mandatory.
However, even though there is no law that mandates it, it is however very important to enter into such an agreement, in order to provide clarity to the both the parties as to the exact expectations of the job, compensation, deliverables, timelines, termination mechanism, besides other important terms. This kind of clarity helps to prevent disputes between the parties, and if in case there is a dispute, the Freelancer Agreement acts as an evidence of employment arrangement agreed to between both the parties.
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