Contracts for work or services can be written, verbal or implied. Therefore, a binding agreement may exist even if a written contract has not been issued or signed (although note that contract law can be complex and there are some areas where written contracts do have to be in place, such as when dealing with property). In any event, producing a written contact is always recommended and ensures that both parties are clear of the terms of the contract.
It is also recommended that parties ensure a contract is signed as this confirms that the parties have accepted the terms of the contract. However, even if a contract has not been signed, it will generally be implied that the contract has been accepted if the work has commenced or if a payment has been made by an engaging entity under the contract.
There are a number of types of contract that are often used when engaging workers on a production. It is important to understand the distinctions between the different types of contracts for services and therefore the resulting responsibilities of the production. A summary of the main types of contract for work and services is set out below:
Employees – Employees are employed under a contract of employment. They generally have less autonomy in how they carry out their work but have the widest range of employment rights. They must be taxed under Schedule E meaning that their tax must be deducted at source via payroll. Employer national insurance contributions (NICs) are also payable and should therefore be included in the budget at the outset of a production.
Employees can generally be employed in all grades although it is not typical for heads of department to be employees. However, employment status is ultimately determined by an employment tribunal and depends on the actual working relationship between the engaging entity and an individual (for example, how much control the entity has over the worker) rather than what the contract states. Therefore, if there are any doubts as to the status of an individual, it is recommended that legal advice be taken.
Self Employed / Sole Trader / Schedule D – These are all names describing a contract where the individual is engaged under a contract to provide services and is paid gross. However, they also often have the status of a ‘worker’ which means that they sometimes benefit from a limited range of employment rights (such as a right to holiday, the national minimum wage and work place pension). In a production context, Schedule D are typically those working in one of the job titles included in the HMRC list of TV and radio workers: behind camera workers roles treated as self-employed but can also be a worker engaged in a different capacity who works with autonomy and manages their own time and resources.
As they are self-employed, they can be taxed under schedule D meaning they are responsible for their own tax. However, HMRC rules stipulate that the engagement for these workers must in on a specific production only otherwise they may eventually be deemed to be an employee instead. In such cases, legal advice or advice from HMRC should be sought.
“Specific production” means either:
- a feature film, single drama, single documentary, commercial or music video, or
- a single programme or series of programmes, at a specific interval for a fixed term
Loan Outs – Key talent and crew are often contracted via loan-out agreements. A loan-out agreement is an agreement where the services of an individual are provided (or loaned out) via a company. This means that the engaging entity contracts directly with the company rather than the individual. In such cases, the company rather than the engaging entity is typically responsible for dealing with the tax on any payments made under the agreement.
There are benefits to both parties to contract in this way but there can also be risks with this approach if the agreement is not drafted correctly (i.e. the producing entity needs to ensure that intellectual property created by the individual is assigned to the production). It is therefore best practice to seek legal advice when producing a loan-out agreement.
If the company is personal service company then IR35 rules may apply – see Crew Payroll.