Your company may not always want or need to grow its team by hiring more employees. Consultants may be engaged for a unique skill set, a specific project, or during busy periods when more hands are needed. In some jurisdictions, visa and immigration requirements and their associated costs are expenses that startups simply cannot afford and instead they often choose to engage consultants rather than hire employees.
The nature of the relationship between a company and a consultant will be very different to the one it enjoys with its employees. To add value to your business, the consultant will need to be “in the know” when it comes to the inner workings of your operations. You may need to make certain intellectual property, financial details, or systems and controls available to the consultant. Similarly, the purpose of the engagement may be for the consultant to develop something for your business: at the end of that engagement, you’ll want to ensure that your business enjoys the fruits of the consultant’s labour and becomes the owner of the new intellectual property the consultant has created.
The terms of this special relationship should be written down in a consultancy agreement which, as a minimum, addresses these two key items.
Protecting your confidential information
A key component of your consultancy agreement will be putting confidentiality obligations on the consultant. You want to prevent your consultant taking any confidential information they become aware of during the course of their engagement and exploiting it themselves or sharing it with others.
Owning the output of the consultant’s efforts
Is your consultant an expert in their chosen field and is being engaged to develop something special for your business? If not, are you engaging them because there is a chance that they may create a new product or process for your business during their engagement? Your company won’t necessarily automatically own the intellectual property rights in the deliverables you’ve asked the consultant to deliver. Those rights should be transferred to your company through your consultancy agreement (known as an “assignment” of intellectual property rights). The assignment of rights to your company is designed to prevent your consultant from exploiting the deliverable themselves or allowing others to do so.
What else do I need to know?
If you’d like to know more, please see PROTECT my business for information on confidentiality and intellectual property.