Contracting basics

Independent contractors can be engaged directly by your company or through staffing agencies. These arrangements offer increased flexibility and a lower commitment. To determine if working with an independent contractor is the right decision for your business, it helps to understand how employer-contractor arrangements work. When you hire an independent contractor, you can set some expectations:

• Time frame: It’s common to negotiate a deadline for finished work. You may also elect to set deadlines for different phases of a project.
• Compensation:Pay is traditionally negotiated before work starts, which can help you with setting a budget. Some businesses pay by project, hour or other appropriate measurements for the work.
• Project specifications:Be as specific as possible. Contracts should explicitly state expectations for the work and deadlines. If your project will potentially require revisions, include that expectation, along with a set number of “rounds” for rework.

Major benefits for independent contractors can include flexibility as well as their choice of work environment and methods of working. Elements you may not be able to stipulate when hiring an independent contractor include:

• How they work: An independent contractor can generally choose their preferred working method. Although it’s common to request specific end products or results, how a contractor does the work is generally up to them, provided they still meet agreed requirements.
• When they work: Some businesses ask that contractors are available during certain work hours, in case there are questions or updates that can change ongoing work. Deadlines are also part of most contracts. When contractors work, however, is generally up to them.
• Where they work:Contractors decide where they work, provided the job isn’t site-specific.

By weighing the pros and cons, you can determine if a contractor is right for your project and business.

Top benefits of hiring contractors

Independent contractors are ideally suited to working on short-term projects or filling gaps in your staff’s skill set. Some of the top benefits of hiring an independent contractor include:

• Flexibility:You can hire contractors when you have extra work or special projects, and scale back when they’re not needed.
• Filling gaps:Sometimes a business has one-off or infrequent needs that regular staff can’t handle. A contractor who specializes in the required task is the perfect solution.
• Limiting liability:Contractors provide significant liability protection, as it’s considered the contractor’s responsibility to behave and perform work in a safe and ethical manner.
• Trial placement:Contract work can serve as a paid trial. It provides an employer time to evaluate the contractor’s work while the contractor benefits from paid work and the potential for a full-time opportunity.

Contracting FAQs

It’s common for businesses that are new to working with independent contractors to have some questions:

Where do you find independent contractors?

Companies source independent contractors through various channels. The most direct route is to post job listings on employment sites. Other popular methods include word-of-mouth recommendations or using agencies that represent independent workers. Reviews and recommendations are highly valuable. Referrals from trusted sources or other clients are also ideal.

Read more:How to Hire an Independent Contractor

How are independent contractors paid?

Generally, payment terms are set prior to starting projects or work. You may decide to pay a lump sum, either upfront or upon delivery, or to pay in installments throughout the work. A business has fewer withholding and tax responsibilities with independent contractors. Employers should ensure that any worker classified as an independent contractor is truly independent and not an employee, as they may be subject to fines.

What are some tips for managing contracting agreements?

Contractors can provide tremendous value as long as agreements are clear and fair. Always double-check contracts to ensure terms are precise. Maintain regular communication and answer questions promptly to ensure that work is going well and will meet your needs.

It’s also important to properly report contractor compensation for tax purposes. Finally, ensure you understand current labor regulations and state laws regarding worker classifications.