Before a contractor does any work, you need five things agreed and signed: a defined scope, a rate and payment schedule, an IP assignment clause, a clear statement of self-employed status, and confirmation of any insurance the contractor is expected to hold. This article walks through the sequence in the order it actually needs to happen, which is different from the order most founders discover it in, usually after the contractor has already started. It does not repeat the general content checklist in our consultancy agreement guide, which covers what the document should contain rather than the order and timing of getting it signed.
> Quick answer: Agree scope, rate, IP ownership, status and insurance before the contractor starts, not after. Get the consultancy agreement signed before day one, because a contractor who has already started work under a verbal understanding has weaker leverage to insist on terms, and the company has a weaker paper trail if status or ownership is ever questioned. The single most common mistake is treating the signature as a formality to chase once work is underway.
Why the sequence matters more than the content
Most of what a consultancy agreement should contain is well covered ground: scope, fees, IP, confidentiality, status. What gets less attention is timing. A contractor who starts work on the strength of a verbal agreement and signs the paperwork two weeks later has, in practice, already set the terms of the relationship. Renegotiating scope, rate or IP ownership after work has begun is awkward at best, and if a dispute ever arises, an agreement signed after the fact carries less weight than one signed before any work was done.
The fix is not complicated. It is simply doing the steps in the right order and treating "signed agreement" as a precondition for starting, not a follow-up task.
Step one: define the scope before you agree a rate
Scope should be specific enough that both sides could independently describe what "done" looks like. Vague scope, "help build out the platform" or "support marketing," invites disagreement later about what was actually promised, and it makes a fixed fee nearly impossible to price fairly. Break the engagement into deliverables or a defined period with a described output, and state whether the contractor works to a deadline, a day rate, or a project fee. Only once scope is genuinely fixed does a rate discussion mean anything, because a day rate for loosely defined work is really an open-ended cost.
Step two: agree the rate, the payment schedule and who covers expenses
State the rate plainly, whether it is a day rate, an hourly rate or a fixed project fee, and set out payment terms: how often invoices are submitted, the payment window, and whether there is a retainer or deposit. Contractors are commonly VAT-registered and invoice accordingly, so confirm whether the rate is quoted inclusive or exclusive of VAT. Agree who covers expenses, travel, software licences, equipment, before work starts rather than discovering a disagreement on the first invoice.
Step three: IP assignment, agreed and signed before any work is created
This is the clause founders most often leave until later, and it is the one that causes the most damage when left too late. Under England and Wales law, the person who creates a work is often its first owner unless there is an assignment in place (see Sources), which means a contractor who builds code, designs or written material before an IP clause is signed may, in principle, retain rights in it. An IP assignment clause fixes this by transferring ownership of anything created in connection with the engagement to the company, and it needs to be in place before the contractor starts, not once the deliverable is finished. Our IP assignment guide covers the underlying default position in more detail.
Step four: state the status plainly, and mean it
The agreement should say expressly that the contractor is self-employed, working under a contract for services, not an employee, and that the relationship does not create employment, partnership or agency. That statement only holds up if the actual working relationship matches it: genuine control over how and when the work is done, no requirement to accept every piece of work offered, and ideally a genuine right of substitution. Get this wrong in practice, regardless of what the document says, and the arrangement can be reclassified, a risk covered in full in our companion piece on when a contractor legally counts as your employee. For clarity ahead of that risk, see also our note on IR35 and consultancy agreements, since the same facts that determine employment status also determine tax status under the off-payroll rules.
Step five: check insurance, and put the requirement in writing
Many engagements, particularly anything involving professional advice, construction, or work with third-party risk, should require the contractor to hold professional indemnity or public liability insurance, or both, at a stated minimum level. State this in the agreement rather than assuming it, and ask for evidence of cover before work starts on anything where the exposure is real. A contractor without insurance is not automatically the wrong choice, but the company should make that decision knowingly rather than discovering the gap after something goes wrong.
The pre-day-one checklist
| Step | What to settle before work starts |
|---|---|
| Scope | A specific, checkable definition of the deliverable or engagement period |
| Rate and payment | Day rate, hourly rate or fixed fee, VAT treatment, invoicing and payment terms |
| IP assignment | Ownership of anything created assigned to the company, signed before work begins |
| Status | Explicit self-employed, contract for services statement, matched by real practice |
| Insurance | Professional indemnity or public liability cover confirmed and evidenced where relevant |
Getting it signed before the contractor starts, not after
None of this needs to slow the engagement down if the paperwork moves as fast as the conversation. Our guide on drafting a consultancy agreement with AI covers filling in the scope, rate, IP and status terms, then sending it for signature the same day, before the contractor's first task. 99 Data Rooms assembles the agreement from vetted England and Wales clauses through AI Legal Drafting, a live feature that selects existing clause wording rather than inventing legal language, and it remains a starting point rather than a substitute for review on anything unusual.
Send the finished agreement for e-signature in the browser: electronic signatures are admissible for most commercial documents in England and Wales, with exceptions including deeds, wills, land transfers and lasting powers of attorney, so a consultancy agreement signs cleanly this way, and the returned PDF carries an audit certificate recording who signed, when and their IP address. Gate the draft behind a verified email while it is under review, so only the intended contractor can open it, and keep the signed original in the same place you will need it if the engagement is later reviewed or renewed.
If the engagement runs to a fixed term with a renewal option, note the date somewhere that actually reminds you rather than trusting memory. Our guide on getting reminded before a contract expires covers the mechanics.
This is written for England and Wales, where the legal default on IP ownership and the tests for self-employed status both come from domestic law. If you are engaging a contractor from another jurisdiction, the specific statutory position will differ, but the checklist, scope, rate, IP, status, insurance, agreed and signed before work starts, is the same list to hold your own template against.
Frequently asked questions
What should be agreed before a contractor starts work?
Scope, rate and payment terms, IP assignment, a clear statement of self-employed status, and any required insurance. All five should be settled and, ideally, signed before the contractor's first day, not chased as a formality once work is already underway.
Do you need an IP assignment clause for a contractor?
Yes. Under England and Wales law, a contractor may retain rights in work they create unless those rights are assigned to the company, so an IP assignment clause should be agreed and signed before any work begins, not after the deliverable is finished. See our IP assignment guide.
Can a contractor start work before the agreement is signed?
They can, but it weakens the company's position on every point the agreement was meant to settle, from scope to IP ownership to status. If a dispute arises, an agreement signed after work began carries less evidential weight than one signed before it started.
Does a contractor need to invoice for VAT?
Many contractors are VAT-registered and will invoice accordingly. Confirm before work starts whether the agreed rate is quoted inclusive or exclusive of VAT, so there is no disagreement on the first invoice.
Should a contractor hold insurance?
Often, yes, particularly for professional services or work carrying third-party risk. Set a minimum level of professional indemnity or public liability cover in the agreement and ask for evidence before the engagement begins, rather than assuming cover exists.
Draft your consultancy agreement with AI
Assemble a consultancy agreement with scope, rate, IP assignment and status stated plainly, drafted from vetted England and Wales clauses, and signed before the contractor's first day. The free tier gives you three rooms and twenty-five active links, forever, with no card required; the AI drafter and e-signature start on Pro at £19 a month. Start for free.
This article is general information, not legal advice. Employment status and IP ownership both carry real legal and tax consequences, and anything unusual about the engagement deserves review by a qualified adviser before you rely on it.
Sources
- Copyright first ownership (why a contractor's work needs an assignment clause to transfer to the company): Copyright, Designs and Patents Act 1988, s.11, https://www.legislation.gov.uk/ukpga/1988/48/section/11
- Employment status tests: gov.uk, Employment status, https://www.gov.uk/employment-status
- Off-payroll working (IR35): gov.uk, Off-payroll working (IR35): detailed information, https://www.gov.uk/government/collections/off-payroll-working-ir35-detailed-information
- Electronic signatures, validity and exceptions including deeds, wills, land transfers and lasting powers of attorney: Law Commission, Electronic execution of documents (2019), https://lawcom.gov.uk/project/electronic-execution-of-documents/ ; HM Land Registry Practice Guide 82, https://www.gov.uk/government/publications/electronic-signatures-accepted-by-hm-land-registry-pg82