Protect Your Business: Working With Contractors

Working with contractors
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The gig economy can be a beautiful thing, but like any healthy relationship, it takes mutual trust and respect to make it work. Whether you’re a solopreneur, coach, course creator, small business owner or budding CEO, working with contractors might be an inevitable part of your growth process. 

An independent contract worker is an individual who might perform part-time, temporary work, or complete a one-time project for you. This includes hiring someone to design a logo, help out with web design or pitch in with a copywriting project. 

Contractors aren’t considered employees, but that doesn’t make this professional relationship any less official. Sealing the deal with an Independent Contractor Agreement will protect you and your business from liability, fees and penalties. Keep reading for the rundown.    

The Legal Godfairy makes obtaining lawyer-drafted contracts easy as pie. Customize our contract templates in minutes and get back to doing what you do best, sis. Questions? Reach out to TLG here.   

Independent contractors

Contract Workers vs. Employees

First things first: we need to make an important distinction. Contractors are NOT considered as employees. That means the hiring party is not responsible for offering benefits or paying taxes on the worker’s behalf. It’s crucial for the nature of your professional relationship to be crystal clear to all parties involved. 

If you hire a professional under the wrong impression — and without the right legal language in place — you open yourself up to a world of pain. You don’t have time for that noise.  

Without an independent contractor agreement in place, the line between “contract worker” and “employee” can get fuzzy. Firstly, if the terms of your working relationship aren’t clear, you might blink and find yourself liable for back taxes, penalties, interest and paying out for employee benefits that you failed to provide.   

For the sake of clarity, a contractor is someone who:

  • Is self-employed and may be a sole proprietor or small business owner operating their business as an LLC or a corporation
  • Takes on a project for your business
  • Independently provides/procures the tools and equipment required to get the job done
  •  Has greater flexibility over when, where and how they work
  • Is responsible for paying their own taxes and insurance, as well as securing their own benefits (like health insurance)

When it comes to official employees, the hiring party is responsible for withholding income taxes and paying employment taxes on wages. Employees tend to have set schedules and are subject to a greater degree of oversight and control. The hiring party is typically responsible for providing the equipment, tools and facilities necessary to perform the job. 

The Benefits of Hiring a Contractor

Working with contractors opens up a wonderland of possibilities. By outsourcing business-related tasks like scheduling, product photography or web design to an expert contract worker, you’ll get professional results, and as a result, free yourself up to grow that entrepreneurial garden like you do, queen. 

The benefits of working with a contractor include:    

  • Keeping payroll and fringe benefit costs down
  • Ability to complete small projects that don’t require full-time work
  • Ability to complete projects that require temporary help from an expert
  • Reducing office and supply costs
  • There is minimal training required

It’s easy to see how working with contractors offers flexibility and efficiency, all while keeping costs down. Pretty cool, right?

Maintaining Independent Contractor Relationships

Even with a solid contractor agreement in place, it’s important to honor the idiosyncrasies of this unique business relationship. In the event that your agreement is questioned, or if you failed to put a contract in place at all (girl, this better not be you), you’ll want to ensure you maintain a clear distinction between contract workers and employees.  

Keep those boundaries firm by clarifying the terms of your working relationship in an independent contractor agreement (we bet you knew we were going to say that). Allowing greater flexibility over how, when and where a contractor does their work is important. This means you’ll have less day-to-day oversight than you do with your employees. 

A savvy boss like you will also want to maintain well-organized records of contractor information. This includes details like their taxpayer ID number, contact information, and wherever possible, proof of self-employment. This might include evidence such as business cards, invoices or advertisements for their services.  

And keep in mind, you’ll need to send contractors and the IRS Form-1099 showing non-employee income if you paid a contract worker over $600 throughout the year. 

Indepent Contractor Agreement

The Ins and Outs of an Independent Contractor Agreement

If we haven’t made this clear by now, an independent contractor agreement is where the party’s at. We’re serious about this one. 

This type of contract serves as an official, legal agreement between the hiring party and the independent contractor. With the terms and expectations of the working relationship clearly defined in black and white, you’ll protect yourself and your business from legal and financial ramifications, not to mention any sensitive content your contractors have access to. 

Consider including the following terms and clauses in your independent contractor agreement.

Terms & Clauses

  • Scope of Work — Clearly define the scope of required work and duties performed by the independent contractor
  • Compensation — Lay out in writing how, when and exactly how much you will pay in exchange for work performed
  • Timeline for Deliverables — Include a timeline for completion, stipulating due dates and any expected milestones along the way
  • Contractor Status — Clearly state that the individual is an independent contractor
  • Termination Clause — A termination clause might contain information like a required period of notice from either party, the rights of each party and the conditions or behaviors that could lead to termination
  • Dispute Resolution — Drafting guidelines for dispute resolution can help provide a roadmap in the event that your working relationship turns sour 
  • Communication — Include expectations for frequency and method of communication, as well as the time frame during which a contractor must respond    
  • Tax Responsibilities — Clearly state that you are not responsible for withholding or paying taxes to ensure that contractors understand their tax obligations
  • Confidentiality Clause — A confidentiality clause bars contractors from leaking or sharing confidential business information. This type of clause can go both ways and works for business partnerships that require an exchange of sensitive information between two or more parties  
  • Non-Solicitation Clause — If contractors have access to your client list or clients, a non-solicitation clause prevents them from trying to snag those clients away from you, for instance

The terms and clauses that will best protect your magic might depend on your business, industry and unique professional needs. As a result, be sure to customize your contracts to serve you well, sis. You deserve it.

Non-Disclosure Agreement

A non-disclosure agreement (NDA) can serve as a separate document or you can fold it into your independent contractor agreement. An NDA is similar to a confidentiality agreement and can be unilateral (referring to a one-way exchange of information) or mutual (referring to a two-way exchange of information). 

A unilateral NDA is typically applies in scenarios where there is a one-way flow of sensitive information. This might include unreleased content, release dates or confidential sources and information, for instance.  

In partnerships where both parties exchange sensitive information, a confidentiality agreement applies, although an NDA can also be mutual. The type of contract best suited to your needs will depend on the specifics of your situation.  

An NDA protects your secret sauce, which is a huge deal. For this exact reason, our lawyer-drafted Independent Contractor Agreement includes airtight confidentiality language that works hand-in-hand with our NDA to provide robust protection for you and your business. 

The Legal Godfairy: Hire With Confidence 

A sound independent contractor agreement allows you to hire contract workers with confidence, mitigate risk and nurture healthy professional relationships. Crush those specialty projects and stay efficient like you do, sis. We are here for it.

The Legal Godfairy has your back with expert contract templates, CEO coaching and in-depth legal education when you enter The Legal Legacy Lounge™

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*Disclaimer: This blog post has been prepared solely for general information and educational purposes. It is not intended to provide, nor should it be relied on for, legal advice. Should you require advice regarding a specific matter, appropriate legal or other professional advice should be obtained.

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