Terms of Service or Employment Contract?

Terms of Service Agreement Vs Employment Contract?

terms of serviceA terms of service agreement is quite different from an employment contract.  This is stating the obvious, but some businesses have alternative options.  When the work increases but it doesn’t justify an employment contract, you can outsource tasks without overhead costs.  If you need to employ someone full-time, then of course you need to give your employee an employment contract.  But suppose the work load requires a few hours of labour a week, would you consider the possibility of outsourcing?  Rather than having an employee, you could outsource the work to a freelancer.  A freelancer can either be based in your office or in their own office.  There’s also the possibility of offshoring – contracting a company abroad.  Or nearshoring – contracting a company in a nearby country.  These alternatives can be cost effective and help you save on overheads, while someone is doing the work and getting paid for utilising their skills.

Outsourcing, Offshoring and Freelancers

If you’re considering outsourcing or offshoring, consider this: all business relationships need a document to make it official.  If you present an employee with an employment contract, you need the same for a freelancer.  Supporters of your business need a terms of service agreement.  With a freelancer, you get a load off your plate which allows you to focus on your business.  A freelancer is a part of the team – they contribute to the success of your business.  Making your outsourced “staff” feel a part of the team, strengthens the dynamics of your company.  Remember that good relationships promote good business.  There really isn’t that much of a difference between external workers and internal workers if both are contributing to the success of your business.  But rather than get an employment contract, your external workers get a terms of service agreement.

What Is a Terms of Service Agreement?

Terms of service are exactly that – the terms you agree with a person who is commissioned to carry out certain services for your business.  Unless that person agrees to the terms and signs the agreement, you don’t have a legally enforceable document.  Both parties need to agree to the terms set out.  The terms can be set out by you or the person doing the work, or both.  The document becomes legally binding if the agreement has been signed and dated by both parties.  Hopefully, without confusing the issue too much, certain terms of service may not require a signature by both parties – a simple ‘yes’ on an email may suffice.  You need the advice of a commercial lawyer that will help you decide if the agreement will require signatures. But basically, a terms of service agreement is a document that simplifies your business relationship with someone who does work for you but isn’t your employee.

Are you thinking of getting help for your business but are weighing up the costs of hiring staff vs commissioning work to a freelancer or outsourcing to another company?  Please give us a call to discuss what options you have and how you can legitimize that business relationship and make it legally binding.  SG

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