5 Crucial Tips for Effective and Legal Agreements for Independent Contractors
Independent contractors are often hired when businesses need help with tasks. This may be due to an increased workload, multiple employees taking time off, or something else entirely. Whatever the case may be, you need to develop an independent contractor agreement for you and the contractor to sign. This agreement will outline the specifics of their role as a contractor to your company. Here are five tips for ensuring your agreement is as airtight and legal as possible:
1. Make Their Classification Clear.
In the agreement, you must make sure that you make the classification of your workers as contractors very clear. This is not only for your benefit and your contractor's benefit, but for tax purposes as well. Therefore, it is crucial that you classify workers as independent contractors in the agreement and even lay out a few ground rules in regard to the contractor relationship. This could include anything from scope of control to behavioral factors.
2. Clearly Define the Scope of Work.
In an independent contractor agreement, you need to make sure that the scope of work that the contractor will be performing is clearly defined. This is to distinguish the person from a typical employee. The scope of work should describe in as much detail as possible the type of work and services that will be rendered to you by the independent contractor. Deadlines should also be included, if necessary.
3. Be Very Detailed Regarding Payment.
In the agreement, you also need to make payment terms clear. With independent contractors, you usually don't pay a set hourly, weekly, or monthly salary. Instead, you will pay a straight commission or by the project or job. If the project will be split into milestones with a payment provided at each milestone, make this clear in the agreement. If the payment will be made in full at the completion and approval of the job, make it clear.
4. Clearly Specify Who Is Paying for Expenses.
With many jobs for which independent contractors are hired, there are expenses to be paid. Whether this is material or fuel costs, make sure that your agreement specifies who will pay for what. As a general rule, independent contractors will pay for their own supplies and any purchases that are necessary to complete the job. However, there are instances when you may be willing to pay for a certain percentage. Whatever the case may be, it needs to be outlined in the agreement so there are no disputes later.
5. Make It Clear There Are No Employee Benefits.
Unlike regular employees, independent contractors are not eligible for benefits. This includes disability insurance, health insurance, workers' compensation, and even unemployment compensation. However, it needs to be specified in the agreement.
The line between an independent contactor and an employee can get a bit blurry. Therefore, a legally binding agreement is crucial to avoiding problems in the future and keeping contractors in line. For help drafting a proper agreement, contact a business lawyer in your local area, such as one from Robert L Lilley Co Lpa.