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5. Payment terms
Payment terms must also be set out as precisely as possible. In the external cooperation contract you should specify how your cooperation is evaluated. Does the client pay for the time you spend working for them, or are you remunerated for finished products or services? In case your cooperation lasts for a long time, it is also necessary to set up regular payment terms (for example, by bank transfer on the 20th of the following month or on the basis of an invoice). In the case of a one-off cooperation, it is possible to agree on an advance invoice on the basis of which the client pays the agreed amount in advance.
In some collaborations you can also agree on a performance fee. In this case, be sure to mention the rule according to which the bonus will be paid or provide a link to the detailed specification of this bonus.
Tip na článek
Tip: Have you been left with unpaid invoices due to poorly set payment terms? Read our article on how debt recovery works.
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6. Contractual penalties
For cases of breach of contractual obligations, which are relatively common, it is necessary to negotiate contractual penalties. Remember that the contract should provide for penalties for both (or possibly all) parties involved. Most often, we encounter contracts where penalties are remembered only for the client.
There should be penalties for unpaid invoices (e.g. a fraction of a percentage of the amount due for each day of delay), late delivery of services or unjustified and premature termination of cooperation.
7. Termination of the cooperation contract between self-employed persons
Before starting a collaboration, consider how long you plan for the contract to last. Whether you opt for a fixed-term or an open-ended contract, be sure to clearly specify the notice period or the conditions for immediate termination of the contract (cases where the services provided are not paid for or the contractual performance is not delivered). Do not forget that the contract should set out the methods of withdrawal for all parties involved.
However, sometimes the contract continues and nothing “happens” under it, i.e. in particular no invoicing takes place, even in these situations we recommend formally terminating the contract.
8. Further and final provisions
Quite often you will have to deal with the issue of non-misuse of information, patents or licenses provided. You can either write the treatment of such information directly into the self-employed person’s cooperation agreement, or you can use a secondary provision in the form of a non-disclosure agreement. To get all the important information, read our article on NDAs or what to look out for when entering into a non-disclosure agreement.
The final provisions are then the same as any other contract. State:
- how the contract can be amended or supplemented,
- how many copies of the contract are made,
- how the contract can be terminated (if not defined in the termination clause of the cooperation contract),
- the declaration of the parties to the contract that it has been concluded after free expression of will.
Quick checklist before signing the cooperation agreement
- Check that all facts are stated in the contract in sufficient detail and clarity.
- Do not rely on free templates of the cooperation agreement and define the subject of the cooperation as precisely as possible.
- Clearly define the responsibilities of each party.
- Spend enough time to define the payment terms – the amount, the method of payment, specifying bonuses. This section should include setting regular payment terms or advance invoice terms.
- Verify that the contract provides for penalties for breach of contractual obligations for both parties. As well as the terms for termination of cooperation.
Cooperation contract “abused” by the scarcity system
For a long time now, many employers have been resorting to a cooperation contract between self-employed workers instead of a traditional employment contract in order to save on social security and health insurance contributions. However, the “shvarcsystem”, as this phenomenon is called, is not a standard relationship between two independent entities in the role of supplier and customer. Their cooperation has the characteristics of an employment relationship.
What are the classic features of a shvarcsystem?
- There is a relationship of superiority and subordination between the cooperating parties (the boss is clearly in charge).
- The work is carried out on behalf of the employer, who is responsible for it.
- The employer’s resources (e.g. laptop) are used for the work.
- The work takes place during set working hours at the employer’s workplace.
If your collaboration shows the features above, it could be classified as a shvarcsystem. It should be noted, however, that the State Labour Inspection Office always assesses the specific situation = it evaluates the concluded cooperation agreement, assesses superiority/subordination and other parameters of work performance.
Both parties pay for the shvarcsystem
The Inspectorate can impose fines of hundreds of thousands to several million crowns on the employer, which can be increased by the retroactive assessment of tax and insurance contributions. However, even an employee who works under an IČO will not avoid the penalty. This person may be fined up to CZK 100,000.
How to avoid the shvarcsystem?
It is important to maintain a purely business-like relationship when doing business and to avoid the characteristics typical of the roles of employee and employer. A good cooperation agreement can help with this.
If you are working on an ICO for a client, you should ideally make your own decisions about working practices, not be in a subordinate role to the client and do the bulk of the work at your own or a neutral workplace. Not all of these criteria need to be met, of course, and as mentioned above, a well-set up collaboration agreement will help to reduce the risk. However, one of the most important features is that you will be working for other clients, even on smaller jobs, and that the main client will not fully restrict you from doing such work. However, it is important to say that as long as you are not deliberately operating a shvarcsystem , you have nothing to worry about.
If you are not sure that your cooperation agreement is legally in full order, use our services. Just submit it online and you can have it checked within 48 hours.
