IT Subcontractor Agreement

IT Subcontractor Agreement

EMP.CONT.28

When dealing with specialist services such as IT services, it may often be the case that a service provider (or “main contractor” in this context) wishes to sub-contract all or part of the services they are contracted to provide.

This IT Subcontractor Agreement is designed for use where services are to be obtained from an individual IT specialist who is a sole trader working on a self-employed sub-contractor basis, and it has been designed to be sufficiently broad to cover a range of different types of work. The specific details which will be unique to each transaction should be provided in a series of schedules, outside the main body of the contract.

This document is designed for use alongside the IT Service Agreement, also available from Simply-Docs. The clauses in each document are designed to mirror and/or complement each other. In particular, this agreement includes a provision to the effect that it will not come into force until the main contract does and will terminate automatically in the event that the main contract is terminated (subject, of course, to the obligation to make reasonable payment for any work already completed by the sub-contractor). 

Other key provisions in this form of agreement cover elements such as fees and payment, insurance, confidentiality and liability.

This agreement emphasises the individual’s status as a sole trader working as an independent sub-contractor, and under its terms the individual sub-contractor retains a degree of independence in decision-making. This document states that the individual is not employed by the main contractor but self employed. It provides that the main contractor does not have to pay taxes, national insurance contributions, pensions, benefits or similar. Under this template, the main contractor pays fees to the sub-contractor, and it is up to the sub-contractor to pay any sums due in respect of tax, national insurance etc.

This template aims to reduce the risk that the individual sub-contractor might be deemed in law to be a de-facto employee of the main contractor rather than (and as intended) a self-employed contractor. However, whether he is treated by HMRC, an employment tribunal, or any other body, as a self-employed contractor will depend not just on the content of this contract. It will also depend on all other circumstances, including the practical implementation of the sub-contract, and the arrangements between, and conduct of, the main contractor, the individual sub-contractor, and any person engaged by the sub-contractor to carry out any of the IT services for the sub-contractor.

HMRC provides some guidance on its website about self-employment, but its decisions as to whether someone is self-employed are often based on a “balancing exercise” in which it gives weightings to various factors. However, neither the HMRC guidance nor case law are sufficiently precise to make it possible to predict how this “balancing exercise” would be carried out or what the position will be in any situation. For that reason we recommend that you take professional employment law, tax, and NIC advice in relation to your particular circumstances before deciding to use or adapt this document.

Nevertheless, a carefully worded agreement, ensuring the independence of the individual sub-contractor is a key starting point. As a self-employed individual rather than as an employee of, the main contractor, he is, for example, free to provide a suitably qualified person in his place rather than carry out some or all of the IT services personally, and is free to determine when, where and how the services are completed (subject of course to the main contractor’s and its client’s requirements).

We have also provided a version of this template, the IT Sub-Contractor (Company) Agreement (in the Business folder, in the Company Subcontractor Agreements subfolder), to be used when the sub-contractor entering into the agreement with the main contractor is a personal service company (or other intermediary company) rather than an individual IT specialist providing the IT services for the main contractor. Please see the information page accompanying that version for guidance about tax, employment status, and IR35, where the sub-contractor engaged is such an intermediary company, and the IT services are carried out for the intermediary by the individual IT specialist engaged by it.

Optional phrases / clauses are enclosed in square brackets. These should be read carefully and selected so as to be compatible with one another. Unused options should be removed from the document.

This IT Subcontractor Agreement contains the following clauses:

1. Definitions and Interpretation

2. Commencement Date

3. Engagement of the Sub-Contractor

4. Status of the Sub-Contractor

5. Sub-Contractor’s Obligations

6. Service Provider’s Obligations

7. Provision of Equipment

8. Insurance

9. Fees and Payment

10. Indemnity

11. Liability

12. Confidentiality

13. Non-Solicitation

14. Force Majeure

15. Term and Termination

16. Effects of Termination

17. No Waiver

18. Further Assurance

19. Costs

20. Assignment and Sub-Contracting

21. Time

22. Relationship of the Parties

23. Third Party Rights

24. Notices

25. Entire Agreement

26. Counterparts

27. Severance

28. Dispute Resolution

29. Law and Jurisdiction

and the following schedules:

1. The Main Contract

2. The Sub-Contracted Services

3. Equipment

4. Software

5. Sub-Contractor’s Fees

6. [Insurance]

This document is in open format. Either enter the requisite details in the highlighted fields or adjust the wording to suit your purposes. 

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