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Independent Contractor Agreement
The agreement governing a company and someone who works for it without being employed by it. What decides which of the two you have is the substance of the arrangement, not the title on the document.
- Ownership of what the contractor creates, assigned rather than assumed
- Scope, deliverables, fees and the payment structure written in
- Written to reflect a contractor relationship rather than an employment one
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- Guidance on notarisation, which is advisable for this agreement
- Drafted by experienced lawyers for the engagement you actually have
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What an independent contractor agreement is
The contract governing the relationship between a company and an independent contractor, protecting both.
An independent contractor agreement governs the relationship between a company and an independent contractor, and it exists to make sure both the company and the contractor are protected.
It is used when you are hiring a contractor rather than an employee, and the difference is one of control: with an independent contractor you have a say about the final job to be done, and not about the methods, the timings or the materials used. It can be signed where you will be completing projects for a person or a company from time to time, or where you will be receiving services from a contractor. In it you specify the terms of the job, the payment structure, an estimate of how long the work will take, and the rest of the detail.
It is also known as an independent contractor contract, a freelancer contractor agreement or a contract labour form. It is advisable to have it notarised by an official notary.
- Between
- Company and contractor
- The test
- Control over the work
- The result, not the method
- Paid by
- Invoice
- Fees, not salary
- Should state
- Scope, fees and term
- And the expected duration
- IP
- Assign it expressly
- It does not pass by default
- Notarisation
- Advisable
- Also called
- A freelancer contract
Why businesses have us draft it
- A lawyer looks at the substance of the engagement before the wording
- IP assignment drafted properly, which is where most templates fail
- Payment structure, milestones and expenses written in
- A master agreement you reuse for every contractor
- Thousands of businesses served across every state in India
What the drafting covers
- A consultation call about the engagement and how it will actually run
- An agreement drafted from scratch by an experienced lawyer
- The terms of the job, the deliverables and the estimated duration
- The payment structure, the invoicing arrangement and expenses
- Confidentiality and the ownership of anything created during the work
- Revisions after you have read the draft
If the way you describe the engagement on the call sounds like employment, we will say so. A contractor agreement over an employment relationship protects nobody.
Three things templates leave out
Who owns the work
A contractor is not an employee, so what they create does not vest in you automatically. Without an express assignment, the company that paid for the code, the design or the copy may not own it.
No employee benefits, said out loud
A clause recording that the contractor is not entitled to leave, PF, ESI, gratuity or notice is worth having, both to set expectations and as evidence of what was intended.
How it ends
A notice period, what happens to work in progress, and what is payable on termination. Contractor engagements end more often and more abruptly than employments do.
Why the agreement matters
It protects both sides
The company knows what it is getting and by when; the contractor knows what they are being paid and for what. Neither is relying on an email thread.
It keeps the relationship what you intended
A written agreement setting out that the contractor controls their own methods, timings and materials is evidence of what the arrangement actually is, if it is ever questioned.
It secures the work product
An express assignment of intellectual property is the only reliable way for the company to own what it paid for. This is the clause that costs money when it is missing.
It is reusable
One master agreement, with a schedule per engagement. After the first, hiring a contractor is a one-page document rather than a negotiation.
Employee or independent contractor
The document does not decide this. The substance of the arrangement does. A "contractor" who works your hours, at your desk, under your direction and for you alone is an employee whatever the agreement is called.
| Attribute | Independent contractor | Employee |
|---|---|---|
| The test | ||
| They doYou have a say about the final job to be done, and not about the methods, the timings or the materials used to do it. That is the core of the distinction. | You doThe employer directs how the work is done, when it is done and with what, which is what the employment contract gives them the right to do. | |
| A project or a termFixed-term projects, or work delivered from time to time. The engagement is defined by the output. | Full time, indefinitelyHired to hold a position rather than to deliver a defined thing, and the relationship continues until one side ends it. | |
| Usually their own placeContractors generally work from their own offices or premises, often on an hourly basis, and usually for more than one client. | Your premisesAt the employer’s place of work, on the employer’s equipment, during the employer’s hours, subject to whatever the contract says about remote working. | |
| What follows | ||
| Fees against invoicesThey raise invoices for the fees agreed, and account for their own tax. TDS is generally deducted at the rate applicable to the service. | A fixed salaryPaid a salary with tax deducted at source under the salary provisions, along with the statutory deductions. | |
| NoneNo leave entitlement, no provident fund, no ESI, no gratuity and no notice period beyond what the agreement provides. | As the law requiresLeave, provident fund, ESI and gratuity where the thresholds are met, and the notice period the contract and the state’s Act require. | |
| They do, unless assignedNothing passes to the company automatically. An express assignment in the agreement is what transfers ownership of the work product. | The employer, if the contract says soAn employment contract normally provides that intellectual property created in the course of the employment belongs to the employer, and that clause is what makes it so. | |
| This agreementAlso called a service agreement where the contractor is engaged for a specific project for a limited period. | An employment contractOr an employment agreement, which is the same document under another name, plus the offer and appointment letters that precede it. | |
| Next step | Get started | Know more |
Swipe the table sideways, Independent contractor stays in view. Open any attribute to read the detail behind both answers.
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What is the difference between a contractor and an employee?
Control. With an independent contractor you have a say about the final job to be done, and not about the methods, the timings or the materials used.
A contractor is hired for fixed-term projects and paid fees against invoices; an employee is hired full time and paid a salary. Which of the two you have is decided by how the arrangement actually works, not by what the document is called.
What happens if a contractor is really an employee?
The relationship is treated as employment whatever the agreement says, which brings provident fund, ESI, gratuity, leave and notice obligations with it, usually retrospectively.
That is the risk the drafting is trying to avoid, and it is why we ask on the call how the engagement will actually run.
Who owns what the contractor produces?
The contractor, unless the agreement assigns it. This is the difference from employment that surprises companies most, and it is the clause worth checking in anything you have already signed.
Does it need notarising?
It is advisable to have the agreement notarised by an official notary. It is not a condition of validity, but it makes the execution much harder to dispute.
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