What is a statement of work? (example and downloadable template included)

A statement of work (sometimes shortened to SoW or SOW) is a document that defines project scope, deliverables, timelines, responsibilities and acceptance criteria. It is commonly used between a client and a contractor, consultant, freelancer or supplier to make sure both parties understand what has been agreed. 

For contractors and small businesses, a clear statement of work can help reduce misunderstandings and scope creep, while providing a framework for managing client expectations. 

Our guide below, created in collaboration with Markel Law and Markel Tax, explores the benefits of a statement of work, what it should include, a free downloadable template and mistakes to avoid when creating one. 

What is a statement of work? 

A statement of work is a formal document that explains the specific outcomes a supplier or contractor is expected to deliver for a client. Rather than simply describing a job role, it focuses on the work itself, including the project objectives, deliverables, milestones, deadlines and payment terms. 

The document generally answers important questions such as: 

• What work needs to be completed? 

• What deliverables are expected? 

• Who is responsible for each part of the project? 

• When will the work be completed? 

• How will success be measured? 

• What happens if the scope changes? 

Without a clear statement of work, it can be difficult to determine whether a project has been delivered as agreed. 

Why is a statement of work important? 

Many disputes between clients and suppliers occur because expectations were never properly documented. A statement of work helps reduce that risk by providing a shared understanding of what has been agreed. As a key factor in successful project management, a well drafted statement of work can play an important role in defining scope, reducing the risk of disputes and supporting effective project delivery. 

Benefits of a statement of work: 

• Clearer expectations: Both parties understand what is included within the project and what falls outside the agreed scope. 
• Better project management: A statement of work creates clear milestones and deliverables, making it easier to track progress. 
• Reduced scope creep: Scope creep occurs when the scope of a project gradually expands beyond the original agreement, typically through informal or uncontrolled additions, without corresponding adjustments to budgets, timelines or resources. A detailed SoW makes it easier to identify when new work falls outside the original agreement. 
• Improved accountability: Roles and responsibilities are clearly documented, helping avoid confusion later. 
• Clearer commercial record: While a statement of work is often used alongside a wider contract, it can provide valuable evidence of what was agreed if disagreements arise. The evidential value of a statement of work will depend on how it is drafted and whether it is properly incorporated into the wider contractual framework. 

While a statement of work can improve clarity and project management, it is not a substitute for a properly drafted contract and does not eliminate legal, commercial or tax risks. 

What should a statement of work include? 

The exact content will vary depending on the project, but most statements of work contain several core sections. The following sections are widely regarded as key components. 

Statement of work template 

Project overview 

A brief summary of the project, including its purpose and objectives. 

Scope of work 

A detailed explanation of the work that will be carried out. This section should also define what is out of scope, as being explicit about exclusions is essential. 

Deliverables 

A list of the outputs the client will receive. 

Timeline and milestones 

Key dates, project phases and deadlines. 

Roles and responsibilities 

Clear information about who is responsible for completing specific tasks. 

Acceptance criteria 

The standards that must be met before the work is signed off as complete. 

Payment terms 

Details of fees, invoicing arrangements and payment schedules. 

Statement of work vs scope of work 

People often use these terms interchangeably, but they are not always referring to the same thing. 

A scope of work generally describes the specific tasks and activities that will be completed and is usually one section within the wider statement of work. 

A statement of work is broader because it typically includes the scope of work alongside timelines, deliverables, responsibilities, milestones and payment terms. 

Example of a statement of work 

The statement of work example below demonstrates what the document may include for a contractor hired to redesign a company’s website. 

Project objective: Redesign company website to improve user experience and mobile performance. 

Deliverables: 

• New homepage design 
• Five service pages 
• Contact form integration 
• Mobile-responsive functionality 

Timeline: 

• Design phase: 1 October to 15 October 
• Development phase: 16 October to 15 November 
• Testing and launch: 16 November to 30 November 

Acceptance criteria: 

• Website passes agreed functionality tests 
• Mobile responsiveness confirmed 
• Client approval received 

Payment terms: 

• 50% upfront 
• 50% on project completion 

What are the different types of statements of work? 

While formats vary, statements of work are commonly categorised into three broad types: 

Design statement of work 

Focuses on how work will be completed and the technical approach required. 

Performance statement of work 

Focuses on outcomes and results rather than specifying how the work should be delivered. 

Functional statement of work 

Defines what the finished product or service needs to achieve from a functional perspective. A functional statement of work is similar to a performance statement of work, but places greater emphasis on the specific functional requirements and capabilities the end product or service must possess. 

Contractors and consultants may use performance-based statements of work where the engagement focuses on agreed outcomes. These categories are not formally defined in English law and are used primarily as practical classifications in project management and procurement. 

Why can a statement of work be relevant to IR35? 

A statement of work is often discussed alongside IR35 because it can help demonstrate that a contractor is engaged to deliver a specific piece of work or project rather than simply undertaking business as usual work like a typical client employee. 

However, it is important to be clear about what a statement of work can and cannot do. 

A statement of work does not automatically place a contractor outside IR35 as HMRC typically considers the overall contractual arrangement and the reality of the working practices.  

That said, a well-structured statement of work can support an outside IR35 position where it demonstrates factors such as: 

• Clearly defined project outcomes 
• Specific deliverables 
• Milestone-based payments 
• Defined project end dates 
• Responsibility for delivering agreed results rather than carrying out an ongoing role 

When assessing IR35 status, the nature of the engagement and the actual working practices are generally considered alongside the written terms. 

Important note: IR35 status depends on the full contractual relationship and working practices. A statement of work should not be relied upon as evidence that an engagement is automatically outside IR35. 

Common mistakes when creating a statement of work 

• Being too vague: Statements such as “provide marketing support” or “deliver IT services” leave room for interpretation and can cause disputes later. 
• Failing to define deliverables: The more specific the deliverables, the easier it becomes to determine whether the work has been completed successfully. 
• Ignoring change requests: Projects evolve. A process for approving additional work can help prevent disagreements about costs and deadlines. 
• Not defining acceptance criteria: Clients and suppliers may have different views about when work is complete. Acceptance criteria help remove ambiguity. 
• Forgetting exclusions: Clearly documenting what is not included in a project can help prevent misunderstandings, disputes and scope creep. 

Frequently asked questions about a statement of work 

What is the purpose of a statement of work? 

A statement of work helps define project scope, deliverables, responsibilities, timelines and payment terms before work begins. 

Is a statement of work legally binding? 

A statement of work can form part of a wider contractual agreement, or it may itself constitute a legally binding contract. Whether it is legally binding should be assessed on a case-by-case basis and will depend on specific facts, its terms and how it is drafted, in particular, whether the essential elements of a valid contract are present (such as offer, acceptance, consideration and an intention to create legal relations) and whether the terms are sufficiently certain. 

What is the difference between a statement of work and a contract? 

A contract is a legally binding agreement between parties. A statement of work may form part of a broader contract (such as a master services agreement) or may itself constitute a standalone contract. Where used alongside a wider agreement, the statement of work typically defines the specific project or services being delivered under that arrangement. 

Who creates a statement of work? 

A statement of work may be produced by the client, the contractor or supplier, or developed collaboratively, depending on the nature of the engagement and the procurement process involved. 

Can a statement of work help with IR35 compliance? 

A statement of work may support an outside IR35 position where it reflects a genuine project-based engagement, but it will not determine IR35 status on its own. 

Discover our knowledge centre for more help and guidance or read more about Caunce O’Hara’s contractor insurance. 

Please note: This article provides guidance for information purposes only and is accurate at the time of production. It should not be relied upon wholly when making or taking important business decisions – always seek the services of an appropriately qualified professional for personalised tax or legal advice. The views expressed by websites referenced are limited to those of the websites, and do not necessarily reflect the views of Caunce O’Hara. Caunce O’Hara is not affiliated with any of the brands, companies or websites mentioned in this article.