Freelance Contracts: Are notice periods a good idea?

One of the things guaranteed to provoke debate is the whole question of notice periods in freelance contracts. On the face of it, an equal right for you and the client to step out of a contract looks like a good thing to have. But are they really worth anything?

What about your IR35 status?

Firstly, an employee has to have a right to receive notice if they are to lose their job, and has to give notice of their intention to leave it. If your contract has no notice periods in it, then clearly you are not an employee and that has to help your IR35 defence.

Secondly, if your client has to give you notice to leave, that implies that potentially he has to pay you for working when, in fact, there is no work for you to do: after all, if there were he wouldn’t be letting you go. That in turn implies a degree of Mutuality of Obligation above the irreducible minimum, which is one of the keystones of IR35 assessments.

However, as with most things, it’s not all about IR35.

The commercial issues

From your side, you would obviously like to be able to drop a contract for any of a number of reasons. Snag is, if you are being paid to deliver something and that something hasn’t yet been delivered, why are you looking to leave? The usual analogy is the kitchen fitter; would you take on a builder to do the work knowing that he could decide halfway through that he wanted to leave? Thought not. That’s what substitution clauses are for: if you have to get out, first try and provide an alternative supplier.

From the client side, clearly he wants you to stay to the end of the agreed contract to do the job. Equally, he wants to be able to drop you instantly if your services are no longer required; that’s why he’s using a contractor in the first place. So notice from you and zero from him is a good thing for him.

So perhaps an asymmetric notice arrangement is the answer; you need to give him some weeks notice of leaving while he only needs give you some days. That at least covers the business risk to both parties in a reasonably fair manner and doesn’t damage your IR35 position.

Negotiating a settlement

Finally if you have no right to notice, that doesn’t mean the contract can’t be terminated early by your side. You just have to negotiate a settlement position that suits both sides.

But consider: elsewhere in that contract will usually be a clause that the engagement can be terminated with immediate effect at the client’s sole discretion for any number of reasons. So like it or not, you actually never do have an effective notice period from the client anyway.

So why worry about it in the first place?

By Malvolio

Image by jovike

What do you think? Do you insist on a notice-period in your freelance contracts?