Converting a contractor to an employee

A business that has been working with a contractor for a while and wants them on the payroll has a transition to manage: ending the consultancy agreement cleanly, settling what is owed under it, putting an employment contract in place with the particulars the law requires, and dealing with the IP, the confidentiality and the covenants that run across the two documents. It also has to think about what the previous period looked like, because a contractor who was in truth an employee all along may have claims and the business may have tax to account for. This page explains the steps and the documents. I draft the documents that end the consultancy and bridge to employment for a fixed fee of £595, delivered in five working days; the employment contract is a separate service.

Who this is for

Business owners and managers in England and Wales moving a contractor or consultant onto an employment contract, and contractors offered employment who want the transition done properly.

What matters in converting a contractor to an employee

Why businesses convert and the risk of the period before

Businesses convert because the role has become continuing, because the client's determination under the off-payroll rules in Chapter 10 of Part 2 of the Income Tax (Earnings and Pensions) Act 2003 put the engagement inside, or because the person asked; whatever the reason, the conversion invites the question whether the person was an employee or a worker during the contractor period, with claims for holiday pay under the Working Time Regulations 1998 and continuity of employment under the Employment Rights Act 1996 running from the start of the engagement if they were. The documents should deal with that period as it was rather than paper over it.

Ending the consultancy agreement and settling what is owed

The consultancy agreement should be terminated by agreement on a stated date, with the final invoice for work done, outstanding expenses and any notice period dealt with, the IP in all work under the agreement confirmed as assigned under section 90 of the Copyright, Designs and Patents Act 1988, and the surviving clauses (confidentiality, covenants) either preserved or replaced by the employment contract's; where the contractor worked through a limited company, the company's engagement ends and the individual is employed, and the company may need to be wound down or kept for other work.

The employment contract and the written particulars

Employment starts on the agreed date under a contract that contains the written statement of particulars section 1 of the Employment Rights Act 1996 requires from the first day (job title, pay, hours, holiday, notice, place of work, probation and the rest), with salary set by reference to the previous rate less the employer's costs that now apply, holiday under the Working Time Regulations 1998, auto-enrolment under the Pensions Act 2008, and the business's policies; the contract is a different document from the consultancy agreement and should be drafted as one rather than by amending the old agreement.

Continuity, probation and the terms that carry over

If the contractor was in truth an employee, continuity of employment runs from the start of the engagement and a probation period cannot reset it; if the contractor was self-employed, continuity starts with the employment and probation can be used, and the business should decide which position it takes with its eyes open, because stating a start date for continuity is a statement about the past. Restrictive covenants in the consultancy agreement should be replaced by covenants drafted for employment, which are tested more strictly, and the confidentiality obligations should continue without a gap.

Intellectual property and the gap between the two documents

Work created during the contractor period belongs to the contractor unless assigned, work created in employment belongs to the employer under section 11 of the Copyright, Designs and Patents Act 1988, and the day between the two is where rights fall through: the termination documents should contain a confirmatory assignment of everything created under the consultancy agreement, including work in progress, with moral rights waived, and the employment contract should contain its own IP clause for inventions and works outside the ordinary course; a business converting a developer, designer or writer should treat the assignment as the main point of the exercise.

The tax position and HMRC

Where the engagement was inside the off-payroll rules and was treated as outside, or the person was an employee treated as self-employed, the business may have PAYE and national insurance to account for with interest and penalties, and the conversion should be accompanied by advice from the accountants on disclosure and settlement; where the engagement was outside the rules, the conversion is simply a change of arrangement from the start date and should be documented as such. The documents should not contain admissions about the previous period that the business has not taken advice on, and should not contain denials it cannot support.

What it costs

Consultancy or contractor agreement, £595. Drafted for your business. Five working days.

Template set for repeat use, £895. One master agreement plus a short-form schedule you can reuse for every engagement. Five working days.

Buying online forms the engagement on payment. The scope is what the consultancy and contractor agreements page describes, you accept the Terms of Service at checkout, and I email you within four working hours to get started. If you would rather ask something first, email me.

What you get

• A clear, express assignment of intellectual property to your business
• Confidentiality provisions that protect your business information
• Restrictive covenants drafted at a scope a court will uphold
• Clear treatment of status, so the arrangement is not accidentally something else
• Payment, deliverables and termination provisions that match how you work
• A reusable structure, so the next engagement costs you nothing

What is not included

• Employment status determinations and off-payroll working assessments, which need your accountant
• Tax advice
• Disputes with a contractor you have already engaged
• Immigration and right to work compliance

Questions I am often asked

Our contractor has worked for us for three years. If we employ them, does their continuity start now?

If they were in truth self-employed, yes. If they were an employee in all but name, continuity runs from the start, with the rights that follow. The business should decide which it believes before the documents state a date.

Can we just amend the consultancy agreement to say employee?

It cannot be done that way. An employment contract has required particulars and different terms; the consultancy agreement should be terminated and a proper contract put in place, with the IP confirmed across the gap.

Do we have to tell HMRC?

If tax should have been deducted during the contractor period, disclosure and settlement need the accountants' advice. If the engagement was outside the rules, the conversion is a change from the start date and nothing more.

Related guidance and services

• Consultancy and contractor agreements, £595, the service this page describes
• Employment contracts and handbooks, £595
• Contract review, £495
• Consultancy agreement versus employment contract: which one you need
• Intellectual property in a consultancy agreement

This page is general guidance for businesses in England and Wales, not advice on your own circumstances. Last reviewed: October 2026. Email geoffrey@caesar.co.uk.