Contracting for the first time, constructing a contract

An old employer of mine has approached me to do some freelance work to which I have said I am interested. I explained that since leaving I have never done any freelance work so I would have to set up all the admin of that before hand.

I know I need to register as self employed but I am in the dark about offering them my contract. What is typically the etiquette/procedure of doing this and is it something that's done days in advance of actually working? They've offered me two tasks shall we say on the job but I'm clear in my mind that I am only prepared to do offer my services in one of these tasks so how to I go about putting MY TERMS down in writing, making it clear but at the same time professional without causing offence. I do already know what my price is having done some research.

They messed me about as an employer and now I just feel they've come crawling back asking for my help so I want to make it clear that I'm the boss not them. Having never freelanced I'm not sure what steps to take here. For example I will work 8 hours per day, if they ask me to work on how does this work being a contractor? As an employee you just felt compelled/pressured to say yes all the time.

Further to this, how do I handle the matter of money and payment? What sort of documentation do I need to present to them on this? What I guess I'm really asking in this post is what steps I need to take to protect my self and not get fleeced or taken for a ride or messed about with.

1. Get a good template services agreement. (Feel free to contact me through my profile and I will send you one) This agreement should lay out your legal position as an independent contractor, scope of services, financial responsibilities, and payment structure.
2. You have less rights as a contractor than as an employee. You are not the boss now. They are still the "boss of you" -- because as
   a client they are "always right" You will not be protected by
   employee rights. Your only power will be that you always had -- the
   right to walk away. If my client asks me to stay I ask how long. If
   they ask me to jump -- I ask how high.
3. You are not an hourly employee. Don't think like an hourly employee. You are a contractor. They pay you for a deliverable. A
   project. You are responsible for managing the time to accomplish the
   promised deliverable. Your quote or bid may be based on hours, but
   you are not an hourly employee. There might be contractors that
   hang it up after 8 hours. I don't know. I have never met one.
4. Trust is Important : The fact that you have already expressed concerns about how you will be treated is a yellow flag at best. Be
   concerned. You have your own reasons to have left. Are you really
   ready to go back? I have never found that it is "better" as a
   contractor. If you are going back to "prove something" -- I am very
   doubtful that will be successful.
5. Each client is different so each of your contracts will be different. Based on what you have said I would recommend that you consider personalizing the service agreement to include: Pre-payment/retainer on work, Payment penalties for the delay of dependent deliverable; "Do it myself" clause for dependent deliverable that are not delivered on time; Pre-agreed upon reporting structure
6. Logistics. Have a service agreement with a scope of service. Be paid for deliverable. Invoice according to the
   agreement. Provide the invoice to the accounting department. have
   them write a check and provide it to you. Deposit the check in your
   account. Start working on the next period, deliverable, milestone.

Since you have dealt with this firm before (as an employee) and have a track record where they messed with you, then you should approach this cautiously and protect yourself.

No matter how good a contract you write, if a dispute arises and they owe you money it can be very expensive to take them to court to collect. A rule I have always followed when doing work is to not allow any client, no matter how attractive, to have an outstanding balance that is more than I can afford to write off.

When doing fixed price work, I generally ask for 1/3 up front before work starts. If the client does not agree, I do not do the project.

Another thing you can do to protect yourself is to make clear that if the client is to get source code, you will not turn it over until after the bill is fully paid. This provides you with excellent leverage should they start pulling stunts like "the check is in the mail" etc.

Finally don't do this on the cheap, your hourly rate should probably be at least double what you made as an employee. If you are billing by the hour (rather than fixed price) you could ask that they pay the first week in advance and make further payments weekly; always in advance, that way you will always have at least as much money in your pocket as you earned. If they are ever late on a payment, stop work and tell them that you will resume work once the check has cleared.

First off the contract needs to be explicit as to exactly the work you are doing and how you are going to be paid.

Second, you have two options with regards to payment: fixed price or hourly. Personally I find fixed price to be easier on everyone; however, if you are unsure as to how long something is really going to take or it has a lot of unknowns then hourly is a better way to go.

For fixed price I ask for between 25% and 50% up front. It depends on the size of the contract (smaller deals = more upfront), amount of my own money I'll have to expend (servers, tools such as compilers, etc) and the amount of risk I think there is for non-payment.

If it's a small project then it is balance billed at the end along with customer acceptance. Once paid I deliver the source NOT before then. If it's a larger project then there are deliverables along the way in which they release a certain percentage of the funds with the balance done at the end.

For hourly, I'm usually on site. This may not be an option for you. However, be prepared that they may argue the actual number of hours you worked off site when you bill them. Regardless, you need to have established, in the contract, how often you bill and how often you get paid. Some companies like NET 30.. meaning you send a bill and they pay you 30 days later. This may or may not be acceptable and is certainly negotiable.

Each task should have a time estimate involved. If for some reason you believe the task will take longer, discuss it with them immediately. Preferably BEFORE you get to the point of spending 8 hours on a 1 hour item. The key here is that you do not want to surprise them. Each task should have time for coding, testing, discussing and deploying that piece of code. Sometimes this means a 30 minute thing will have 4 hours assigned to it. In the event you are able to complete the task in less time allowed be sure they know of it and bill for the smaller time.

Now, onto the work you want to do versus that you don't. This needs to be clear. From a fixed price perspective the contract must clearly define the exact scope of project. Any deviation should be handled through change requests along with the cost of the change, again requiring management signature.

With hourly, you can be a little more vague but be prepared to be asked to do things outside of scope. Bearing in mind that if you decline to do the additional work they may decline to continuing using your services.

With expected payments there should be a bit about what happens if they are late paying you. You need to think about this situation. Is work going to come to a complete stop? How does it escalate? Are late fees attached after a certain time period? Do you offer a discount if paid earlier or on time? As a contractor, this is a tough situation however it is a little easier if it is thought through and spelled out before hand.

There are very few situations in a fixed price bid that I would consider deploying code without payment. I've had even long term customers screw me over by renegotiating after the fact. Regardless, you should NEVER consider putting time bombs or engaging in any practice that might disrupt their business in the event of non-payment. That could land you in a world of legal hurt. There are legal means of getting the customer to pay you and those are the only ones to consider.

Finally, communication is an absolute must. Build this time into any proposal you have. Don't go a week without talking to them. People want to know what's going on, even if it's just an email or phone call saying X, Y and Z tasks complete, working on A and B now.