Although hiring an independent contractor sounds easy because you don’t have to fill out any complicated paperwork like you would when hiring an employee, that’s actually not the case.
Just as you would with any other business partnership, it is crucial to set the terms and conditions under which you and the contractor will work together in order to avoid conflict and potential lawsuits. Hence, both of you will need to sign an independent contractor agreement.
What Is A Contractor Agreement?
Also referred to as a Subcontractor Agreement or Independent Contractor Contract, an Independent Contractor Agreement is a contract between a company or customer and a self-employed independent contractor (IC) that spells out the details of their collaboration.
Usually, a simple contractor agreement should include the scope of work, deadlines, and remuneration, but it may also include provisions for insurance, indemnification, and confidentiality obligations.
What Should An Independent Contractor Agreement Include?
A contractor agreement should include the following sections:
- Statement Of Relationship
This section of the contract specifies that the contractor is a freelancer rather than a firm employee. This means that the contractor will be responsible for paying their own taxes, but also that they will be ineligible for employee benefits such as health insurance and will not enjoy legal protections afforded to employees.
In this part of the agreement, depending on the services provided by the independent contractor, you may want to require confirmation of liability insurance and to specify the details of any training the contractor will receive.
- Scope Of Work
This section of the contract is actually a project description and contains details regarding the nature of the work you will be doing. This will ensure that both the contractor and the company are on the same page regarding the project’s scope.
This part should include all tasks and deliverables, as well as a procedure for dealing with scope creep. In the event of a setback, having a backup plan in place will help guarantee that adjustments are authorized swiftly so that you can get the project back on schedule. The agreement should also clarify the schedule for the work, including when the final deliverables are expected and any important deadlines.
- Terms Of Payment
This section specifies when the contractor will be paid and how they’ll be paid. EOM (end-of-month) invoicing, which means the contractor will submit an invoice that is due within 30 days after receiving it, and Net 30, which implies the contractor will be paid within 30 days of presenting their invoice, are two common payment terms. Some contracts may require you to pay a deposit upfront and the remaining sum once the project is completed.
This clause should also explain who will be responsible for any costs incurred during the work, such as filing fees, equipment, raw supplies, and so on.
Considering the fact that this is an agreement with a freelancer rather than an employee, the legal document should stipulate that, depending on the circumstances, each one of the parties can end the contract with or without notice. Reasons for termination can include nonpayment or a breach of contract.
The final section of the agreement should explain how any disagreements about the agreement or the work it entails will be resolved.
It should also state which state’s laws will be used for the contract’s enforcement. This is usually the state where the client organization is located, however, if the organization has more than one location, it could be the state where the headquarters or home office is located rather than the location where the contractor is hired.
Signing an independent contractor agreement is an excellent way to build a strong working relationship between the contractor and the client. It ensures that the client’s demands are met while at the same time making sure the contractor understands what the client expects from them.
Ensure that your agreement covers every critical aspect of the job to guarantee timely and proper completion as well as protection for all parties involved. If you need assistance drafting a customized independent contractor agreement, see an experienced contract lawyer.