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 and rights). 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.
DETERMINING EMPLOYMENT STATUS
There are certain guidelines that can be followed to assist in making an assessment on status. These guidelines are set out below. In any event, if in doubt, it is recommended that legal advice be sought or alternatively take a cautious approach and regard all freelancers as ‘workers’.
Employee:
- must turn up for work at times specified by the organisation;
- cannot turn down work;
- must personally do the specific work they are hired to do without arranging for someone else to do it;
- must work in the way their manager wants;
- rely on one organisation for work;
- the engaging organisation preferentially gives them work; and
- work using equipment provided by the organisation.
Employees will have tax and national insurance deducted from their pay through the payroll. As employees they may be entitled to sick leave, sick pay, redundancy, maternity / paternity pay or leave. They also have the right to holiday, the national minimum wage and work place pension.
Self-employed / Sole trader ‘worker’:
(sometimes colloquially referred to as Schedule D, from an obsolete tax reference for self-employed income).
- tend to work for one organisation but not always;
- carry out the work personally;
- obligation on organisation to provide work and on individual to accept that work;
- decide themselves how the work is carried out;
- decide when and where they carry out the work; and
- provide their own equipment to do the work.
Or are listed on the HMRC list of TV and radio workers: behind camera workers roles treated as self-employed.
HMRC behind camera workers roles treated as self-employed
Self-employed/sole trader “workers” are paid gross but they also have the right to holiday, the national minimum wage and work place pension.
Self-employed / Sole trader:
- the organisation is their ‘client’ and they work for multiple organisations;
- decide themselves how the work is carried out;
- no obligation on organisation to provide work and individual can turn down work;
- can appoint a substitute to carry out the work (i.e. sub-contract the work);
- high level of autonomy on when and where they carry out the work; and
- provide their own equipment to do the work.
Self-employed/sole trader who does not qualify as a worker is paid gross.
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.
