Independent Contractor Agreements: Top 5 Things They Can Do for You

With more businesses choosing to employ independent contractors versus full-time employees, the all-important line between employee and contractor has been in the news. How do you know how to clarify your responsibilities to self-employed individuals like freelancers versus your full-time employees so that you don’t get in a bind? One way is by using an independent contractor agreement.

What Is an Independent Contractor?

The first question is what is an independent contractor? They are individuals who are self-employed and work for other people in a short-term capacity. Why do people choose independent contracting? They like the freedom of being their own boss and being able to work on short-term projects that interest them. Maybe they have a specific skill set that can help different businesses without having the work schedule of a traditional employee. Independent contractors have to handle their own taxes and pay self-employment taxes.

Hiring Independent Contractors

Companies like hiring independent contractors because they do not have to pay employee benefits like a retirement plan or health insurance. This is a huge cost-saving way for a business to meet both staffing and general business needs. You also have a large talent pool of people with specialized skills to choose from. But a misclassification by the employer can cause potential issues with labor laws and the IRS, so you have to make sure everything is clear from the start.

One good way to do this is to put an independent contractor agreement in place. Here are five key things an independent contractor agreement can do to help you.

1. Clearly state that the worker and you agree regarding their status as an independent contractor. Outline any onboarding process or other things that will be completed prior to work beginning.
2. Specify the work to be performed, the amount of time (part-time, full-time, or a specific number of hours) along with the rate to be paid (minimum wage, hourly wage, a set amount), and details about how and when payment will be made.
3. Specify who will pay expenses and provide supplies. (Typically, expenses and supplies are provided by the independent contractor but for specific projects, the business may provide a laptop, office space, or other needed items.)
4. Specify that the independent contractor has any necessary licenses or permits and has their own liability insurance.
5. Clarify how the agreement may be terminated and specify how any disputes will be resolved (in arbitration for example).

As with the wide variety of work an independent contractor can perform, the agreement can be shaped to your needs. In coming up with the details, keep in mind the hallmarks of an employee versus contractor relationship and the possible benefits of hiring a contractor for your next project. If you have any questions about how best to put together your independent contractor agreement make sure to reach out to a local attorney familiar with employment laws in your area.

Related Resources:

• How New Independent Contractor Rules Affect Gig Workers (FindLaw’s Law and Daily Life)
• Independent Contractors: Should You Form an LLC? (FindLaw’s Learn About the Law)
• Being an Independent Contractor vs. Employee (FindLaw’s Learn About the Law)