What notice period is standard?

30-90 days is typical. Shorter (30 days) for newer relationships, longer (60-90 days) for established, integrated fractional executives. Balance flexibility with stability.

Do fractional executives need professional indemnity insurance?

Yes, it is expected. £1-2M coverage is typical. Protects both parties and is often required by larger clients. Cost is typically £500-1,500/year.

Contract Guide

Fractional Executive Contracts

Key terms and considerations for fractional agreements

Overview

Structuring Fractional Engagements

A well-structured contract protects both parties and sets clear expectations. Fractional executive contracts differ from employment contracts and standard consulting agreements. Understanding key terms helps ensure successful engagements.

Key Terms

Essential Contract Terms

Scope of Work

Define responsibilities clearly. Include what is in scope and explicitly exclude what is not. Avoid ambiguity.

💡 Be specific about deliverables and success metrics.

Time Commitment

Specify expected days per week/month. Define how time is tracked and reported.

💡 Include flexibility for intensive periods.

Day Rate / Retainer

State rate clearly. Define what constitutes a day. Address expenses and disbursements.

💡 Clarify if rate includes or excludes VAT.

Payment Terms

Monthly invoicing is standard. Net 14-30 days typical. Consider retainer vs arrears.

💡 Upfront retainer reduces payment risk.

Notice Period

30-90 days notice is typical. Allows both parties to plan transitions.

💡 Longer notice provides stability but reduces flexibility.

Confidentiality

Standard NDA provisions. Define what information is confidential and for how long.

💡 Essential for any executive role.

IP Assignment

Clarify ownership of work product. Usually assigned to client for work done for them.

💡 Fractional can retain rights to general methodologies.

Liability

Consider professional indemnity insurance requirements. Cap liability appropriately.

💡 PI insurance is expected for fractional executives.

Engagement Types

Common Engagement Structures

Day Rate

Pay for days worked. Most transparent. Variable monthly cost.

Best for: New relationships, variable needs

Monthly Retainer

Fixed monthly fee for agreed scope. Predictable for both parties.

Best for: Established relationships, consistent needs

Hybrid

Base retainer plus day rate for additional time. Balance of predictability and flexibility.

Best for: Roles with variable intensity

Equity

Equity Considerations

Some fractional engagements include equity, especially at early stages. If including equity: define vesting schedule, clarify cliff period, specify what happens on termination, and ensure proper legal documentation separate from service agreement.

FAQs

Frequently Asked Questions

Both work. Day rates offer transparency and flexibility. Retainers provide income predictability. Many start with day rates and transition to retainers once the relationship is established.

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