Independent Contractor Agreements 101

What to know about the independent contractor agreement

Working with independent contractors is a bit different from hiring employees on a full-time basis, and so are the corresponding agreements. In this piece we’ll explain the basics of the independent contractor agreement and how you can ensure your business is secure the next time you bring someone on as a contractor.

What is the difference between an independent contractor and an employee?

As we have previously discussed here, independent contractors are self-employed. These individuals can provide services to multiple businesses, and they invoice for services rendered. Employees work for your business with a designated time commitment and perform duties controlled by you.

What is an independent contractor agreement?

If you’re going to hire an independent contractor rather than take on a new employee, you’ll need an independent contractor agreement. This agreement sets out the detail of the project, including the who, what, when, where, and how much.

What should be included in the independent contractor agreement?

Here are a few things that you should cover in your agreement with an independent contractor.

  • Ownership: Do you own the finished product, or does the contractor?
  • Scope of work: Clearly define what it is the contractor will be responsible for doing.
  • Timeline: When should this work be completed?
  • Revisions: If you think this is a project that will undergo multiple revisions, outline those in the agreement. Otherwise, the contractor is not obligated to complete any revisions outside of the original scope of work.
  • Payment: Include a description of how much you will pay and when you will pay it, whether it’s a fixed fee after completion or an hourly payment. Also include how you will pay the contractor (check, direct deposit, etc.).
  • Expenses: If the work requires expenses, who will pay them?
  • Materials: Who will provide any materials, office space, or equipment needed?
  • Licensing: A statement that assures the independent contractor has any proper licensing required to do the work.
  • Taxes: A statement that covers taxes, and assures the contractor will pay both federal and income taxes on their own.
  • Benefits: A signature from the contractor acknowledging that they do not receive employee benefits.

What other information do you need to work with an independent contractor?

To keep yourself safe in the case of a government audit, collect some forms of identification. Things like business cards, copies of invoices, and copies of professional licenses if possible. These will prove that the contractor works independently of you, and is not an employee. Remember, independent contractors must submit invoices to be compensated and deemed an independent contractor, so make sure to only compensate them upon receipt of an invoice.

Cover these bases in all independent contractor agreements, to keep your business safe while working with new team members who aren’t full-time employees. Next up, put together that agreement and refer to our resource on how to whip up an airtight contract. Have more questions or want to make sure you have your legal business matters in line? We’re here to help.

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