Hiring Freelancers; Contract Basics

July 19, 2014

http://www.dreamstime.com/royalty-free-stock-photo-hello-i-boss-nametag-sticker-supervisor-authority-words-red-to-illustrate-management-director-other-superior-figure-image31478195You have chosen an editor, book-cover designer, interior designer, photographer, illustrator, audio book narrator, or other freelance contractor. Now what? How do you spell out your mutual expectations or, to put it in legal language, the terms of engagement?

Most likely, your freelancer has a form agreement, which may be a description on a website or an email only. These form binding agreements even if they are electronic. However, make sure the agreement covers the following:

Describe what services are expected: Spell out what you expect the contractor to provide. For example,

  • line-by-line editorial review for a _____ book. Describe the project’s genre, such as thriller, romance, historical novel, memoir, how-to, or travel book,
  • complete copyediting for grammar, typos, continuity, including proofreading,
  • internal layout for a specific trim size and/or for an e-book in a list of formats,
  • a specified number of rough cover designs, number of revisions, final design in print-ready PDF format and/or Adobe InDesign files, in specified sizes,
  • website of x number of pages, images, tabs, links; banners for Facebook, Twitter, etc.,
  • timing of deliveries,
  • number of revisions included in price; cost of additional revisions, and
  • format of final product.

money jar 7027604401_406e35ba1fPayments:  How much and when? Check, credit card, or PayPal? Is the payment refundable in whole or in part if you are not satisfied? Are there any ongoing payments such as royalties or renewal fees? Any expense reimbursements?

Attribution:  Are you required to give your freelancer attribution, for example, “Cover designed by XYZ,” “Audiobook narrated by GHJ,” or “Photographs by ABC”?

Credits:  May the freelancer list you as a client on his website? May he post your cover, illustration, or photo on his website? Clarify whether he must hold off posting your cover until your book is launched. I had the unfortunate surprise of discovering that a designer had posted all his cover design proposals for my project on Twitter and Facebook months ahead of the book’s release. So much for confidentiality.

Termination: Either party should have the right to terminate the agreement at any time. If the engagement is not working out, either one of you should be entitled to bail out. It’s better to lose some time and money than to stick with a relationship that is not working. Many freelancers include a “kill fee” in their agreement: if you terminate after signing the contract but before the work begins, you agree to pay a fixed amount, typically 5 to 10 percent of the total contract price. This compensates the freelancer for booking you into his schedule. A reasonable kill fee is fair.

Communication:  What is the preferred method of communication? Is the freelancer available for telephone calls? Is there a limit on the number of calls?

Rights:  The following issues are often ignored, but it is NOT TO YOUR ADVANTAGE to ignore them.

  • The freelancer represents and warrants that he has the authority to transfer the final product to you free and clear of any claims of any third party.
  • If the freelancer has used anyone else’s intellectual property, such as stock music or images, the freelancer has obtained all permissions and licenses necessary to permit you to use them.
  • The freelancer’s final product (such as illustrations and designs) is exclusively yours. However, if your design incorporates stock images from a site such as Shutterstock or a free image available to anyone through a Creative Commons license, then you will not have exclusive rights to those stock images.

Ownership: You should own or have the exclusive license to the final product, whether it is a website banner, book cover, or author photo. To gain control, the contract must grant to you an assignment or an exclusive license to the final product, although it is typical to permit freelancers to display it as part of their portfolios.

Do not rely on the phrase work-for-hire. It is a shorthand expression for a complicated set of legal rules. If you use the expression without understanding it, you may be in for some unpleasant surprises.

Here is a sample of a general assignment of intellectual property rights:

Effective upon my payment of $_____, you assign and transfer to me the Work Product and all rights, title, and interest in and to the Work Product and all versions, derivatives, and revisions, whether now in existence or to be created in the future, including all copyrights in all languages, in all known or unknown forms, media, or means of expression, all rights to display, perform, reproduce, modify, merchandise, trademark, or otherwise commercially exploit the Work Product. You acknowledge that evolving technology may result in the development of new media and means of expression and exploitation of the Work Product, and agree that this assignment and transfer shall encompass expression and exploitation of the Work Product in all media by all means whether now known or invented in the future.

TAX REPORTING

Remember the Nanny Tax—all the buzz about failing to report payments to babysitters and gardeners that brought down some Presidential appointments? Well, you won’t risk public humiliation if you fail to report payments made to editors, cover designers, website designers, publicists, or others, but you could face costly penalties. Plus, you’ll pay higher taxes.

General rule:  If in any calendar year you pay an independent contractor (other than a corporation) $600 or more for services or $10 or more in royalties in connection with your trade or business, then tax law requires you report those payments on a 1099 MISC and the equivalent state form. Most likely, you are going to pay an editor, cover designer, website designer, and/or publicist $600 or more. Remember, this does not apply to payments to a corporation such as BookBaby, CreateSpace, or Lightning Source.

If you will cross that payment threshold, ask the freelancer for a W-9. The W-9 is a simple form, and it merely verifies the freelancer’s Social Security Number or EIN. Then, early in the next calendar year, complete a 1099 MISC, file it with the IRS, and deliver a copy to the freelancer. Don’t be intimidated. These are simple forms.

If you report the freelancer’s payments on a 1099, then you are in a better position to deduct the expense from your income.

Some freelancers may balk at providing you a W-9 or having you report their payments on a 1099. Perhaps they are not reporting all their income. But to deduct these expenses without raising red flags with the IRS, you must file and deliver 1099s.

For more information on the freelancers you will need to transform your manuscript into a book, check out Chapter 3 of Self-Publisher’s Legal Handbook.

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