For small businesses, using independent contractors is a smart way to hire skilled workers without all the costs of a full-time employee. Even larger companies often use contractors to help with temporary work projects.
Hiring an independent contractor allows you to avoid many of the complications and costs of an employee. However, do not just hire someone and put him or her to work. Before you start working with a contractor, draw up an agreement that lays out the terms of employment. Here are some things you may want to include in an independent contractor agreement.
Define the work and their status
Maybe you have a specific project you want the contractor to work on, or maybe he or she is completing a series of tasks for your company. Outline the work you expect to be completed along with time expectations. Provide as many specifics as you can. You will also want to include languages that outlines the worker’s status as an independent contractor. That way there will be no confusion on this point.
One of the upsides of hiring independent contractors is you do not have to give them benefits. However, clarify this in the agreement. Explain your company will not provide health insurance, retirement benefits or any paid time off.
How taxes work
Most businesses that hire contractors leave it up to the contractors to pay their taxes. Be extremely clear on this point, however. When you include payment terms, state that it is up to the contractor to pay his or her own income taxes from the wages paid.
Length of contract
Many contractors are hired for a specific time frame. Some contractors are hired for the length of a project. Stipulate that in your agreement. However, since the worker is an independent contractor, you do not have to abide by the same employment rules as with an employee. Your agreement should also include language that specifies that either party can terminate the contract whenever they see fit.
Non-compete or non-disclosure
Even though the contractor is not an employee, you may provide him or her with confidential information about your company. To protect your company, an agreement should state that a contractor is not allowed to disclose confidential information after he or she leaves. You may also consider including a non-compete clause that prevents the contractor from starting a business similar to yours after he or she leaves.
You can find templates for independent contractor agreements online. However, if you want to ensure your agreement is legal and binding, you should contact an experienced business law attorney to create an agreement for your company.