Outsourcing – Legal and contractual issues; What should you consider?

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Outsourcing is a great way to engage highly specialized expertise at a lower price than engaging a full-time staffer. Membership associations have a number of outsourcing opportunities. These fit into 3 broad categories:

  1. Full service or hybrid services from an association management company (AMC): The full-service model outsources everything. The board of directors engages the AMC to deliver all back-stage and front-stage tasks, and the AMC provides an Executive Director who reports to the board. The hybrid model has one or more full-time employees (e.g. Executive Director) and the balance of the association management tasks are delegated to an AMC. The AMC reports to the Executive Director.
  2. Events: The association delegates the management of one or more events to an external service provider. This may or may not be an AMC.
  3. Contract Services: The association delegates stand-alone tasks such as:
  • Bookkeeping, audit/review
  • IT (managing hardware, software and technical support for in-house staff)
  • Webmaster (taking care of website updates)
  • Government Relations/Advocacy

This post focuses on what you should consider in terms of legal and contractual considerations. These are relevant regardless of the type of outsourcing.

The Contract

You should always have a contract with your service provider(s); regardless of whether it is a company or an individual. Your contract should include these provisions:

  • Clearly defined and measurable deliverables
  • Price (fixed annual price or hourly rate)
  • Process for engaging in non-contractual “extras” and out-of-pocket expenses (e.g. travel)
  • Service level agreement (SLA). This describes considerations such as response time and turnaround time for the deliverables.
  • Intellectual Property (IP). This clarifies who owns what. You own the IP that your association brings to the partnership and your service provider needs to make clear what of their IP you may use but not own, and terms under which you may or may not continue to use the supplier’s IP after the contract concludes.
  • Exit terms. What are the terms under which either party may terminate the contract? This should include a notice period even if the contract has a fixed end date.
  • The contract should include a provision that each party has the appropriate level of insurance (e.g. general liability, errors and omissions)
  • If your service provider is delivering services that require compliance on member privacy, anti-spam, labour and/or other legislation, spell this out in the contract.

Canada Revenue Agency (CRA)

If you’re engaging an individual, it may be appropriate to treat them as an “employee” for CRA purposes and make the standard payroll deductions from their compensation. This is to ensure that your association does not become liable for taxes they are responsible for remitting to the CRA. As a rule of thumb, if their major source of revenue is from your association, then treat them as an employee. Keep in mind, this partnership may mean that your association has the same obligation of notice for termination as if they were an employee.

Consider your options, choose what’s right for your association and protect yourself by taking a professional approach to your partnerships. For a more comprehensive view of your outsourcing opportunities watch our webinar on outsourcing here.

 

 

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Filed under Association Management, Association Management Issues, Event Planning, High Performance Organization, Leadership, Outsourcing, Sponsorship

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