Key highlights:

• • You should always think about your payment and structuring agreements when entering contracts with tech contractors

• • We see more Time and Materials contracts, but the popularity of Milestones as a safer option is growing – with more of our clients opting for them in recent years.

• • Milestone-based agreements are best for when you’re working on a clearly defined project with limited scope – but they require pre-planning and agreement which can slow progress down.

• • Time and Materials is best for when you’ve got an open-ended project that may change in scope and need to get work started quickly.

• • For the NHS – who sometimes have strict agency budgets – milestone agreements let you dip into other pots of funding as your contractor will be working on defined outcomes.

• • Evolution can provide a full audit of your contractor workforce and help you structure your agreements with your Tech Contractors. They can also provide you with a full end-to-end payroll solution.

• • We helped payments giant Klarna with their contracting compliance as they scaled through Europe

What are Milestone-based Agreements on a Tech Freelancer Contract?

Milestones are dates identified in the contract by which the contractor must complete certain critical activities to advance a project.

Milestones are key points in a project where the client can assess the contractor’s progress and determine whether the project is on track. They are usually defined in the contract between the client and your company. Common examples of milestones are completion of a prototype, submission of a completed project, or launch of a finished product.

The client usually pays for these milestones as they are reached. This type of billing is called milestone billing.

When to use Milestone-based Agreements:

• • You have clear requirements and determined deadlines;

• • You have a limited or fixed budget;

• • The project scope is limited with clearly defined progress markers;

• • You want a structured process with opportunity to review work before committing further

Benefits of Milestone-based Agreements:

• • The client knows exactly how much they will be paying for each stage of the project.

• • The client can budget for each stage of the project in advance.

• • If the project is delayed, the client only pays for the work that has been completed.

• • One flat fee, no surprises, or hidden costs

• • More accurate billing

• • Flexibility to increase or decrease work as needed without incremental charges

What are Time & Material Based Agreements on a Tech Freelancer Contract?

Time & Material Agreements (T&M) presuppose billing clients for actual work scope based on hourly rates of labour. You, as a client, will be charged for the amount of hours spent on a specific project, plus costs of materials.

When to use T&M price contract:

• • Long-term projects with dynamic requirements;

• • Project scope is not yet fully known;

• • You want the flexibility to modify the scope or vary the workloads

Advantages of Time & Material Based Agreements

• • Easy to implement

• • Work can start immediately

• • Provide you with the flexibility needed in your agreement as you’re only paying a set amount for the materials and time taken to complete the project

• • Make negotiating terms and conditions easy as these are established quickly when writing a T&M contract (as long as you and the contractors are able to reach a mutual agreement and neither party try to negotiate terms that would only provide benefits for themselves)

• • Allow you to cap the maximum amount of hours for the project, which makes it so that you don’t have to deal with Contractors who may take as much time as they want to make more money

Audit Your Contractor Base to Determine the Payment Structure for your Business

When it comes to understanding the various ins and outs of working with contractors, it’s a good idea to draft in some help from those who work with contractors every day. At Evolution, we provide compliance and risk services for our client who hire contractors across 4 key areas:

• • Ad-hoc audits – To provide you with a comprehensive solution to align your local and global workforce, we can assess and ensure compliance for any country; updating wherever and whenever you require.

• • Three Tier Compliance Review – We perform our compliance review on 3 levels; legal (giving you protection in law), contractual (minimising your hiring risk) and regulatory (protection against industry specific regulation like SQEP and DBS).

• • Migrating Acquisitions – Acquiring a new company and migrating assets, including any contractor population isn’t as simple as it sounds as many of them may be based elsewhere, or be payrolled in ways your country doesn’t deem compliant. When your company acquire a company with a freelancer population we migrate them to be payrolled according to your countries laws and regulations.

How we Helped Klarna stay Compliant while they Scaled

To handle the key processes of compliance for hired freelance staff, Evolution provide 4 key areas of payroll and compliance services for Klarna:

The aspect of our service that Klarna has benefitted from the most has been our audit of their current contractor base and their overseas contractor base – to see where they can payroll compliantly.

Read more about our work with Klarna here.