Nowadays, it is becoming a significant trend for companies to hire independent contractors. Most people perceive independent contractors as workers without the hassle of employees, such as unnecessary paperwork.
However, having an independent contractor in an organization isn’t as paperless as you might be thinking. Hiring a contractor requires proper documentation that includes an independent contractor agreement form.
You can find free templates of contract forms for hiring independent contractors available on our websites. These sample templates are written and approved by legal experts and are easy to edit, customize, and allow you to embed e-signatures on the go.
Getting into a contract is beneficial to protecting your company’s interests and that of the independent contractor. In this guide, we’ll discuss everything you need to know regarding independent contractors.
Who Is An Independent Contractor?
Independent contractors are also known as consultants or freelancers in many cases. The term independent contractor refers to a business owner who gets contracted to provide goods or services to another individual or company as a nonemployee.
In most scenarios, independent contractors deal with medical expenses, income tax, social security tax, self-employment tax, and other similar taxes on their own. They are to pay these taxes and manage things by themselves.
There are several differences between an employee and an independent contractor, and each type of work has its pros and cons. Generally, an employee can’t control how work gets done but offers the expected results while an independent contractor has direction over the work.
For an individual to be considered as an independent contractor, it is mandatory to be a registered taxpayer, work their own hours, run their own business, and be free to carry out work for more than one employer at the same time.
They should be able to invoice their employer each month for payment of services offered or products delivered. Independent contractors get paid accordingly and aren’t subject to employment matters like PAYE deductions, annual leave, sick leave, and many others.
When hiring an independent contractor, it is highly recommended to get a contractor agreement with both parties’ terms. The documents help to state and describe the terms and conditions of the business you are getting into.
What is an Independent Contractor Agreement?
An independent contractor agreement is a document detailing the terms under which a company hires an independent contractor. You can try this contractor’s agreement form online to understand what it entails.
The contract document should clearly state how an independent contractor isn’t an employee of the company that hired them. By that, a business gets exempted from any legal obligations to the independent contractor that might be due to a regular employee.
Others refer to independent contractor agreements as freelance contracts, subcontractor agreements, consulting service agreements, general contractor agreements, etc.
Who Can Use an Independent Contractor Agreement?
These contract documents are significant for any business looking to hire independent contractors. An independent contract agreement helps companies stay on the safe side of any legal obligations due to employees.
Other applications where an independent contractor agreement is required include consultants, freelancers, and contractors doing business with clients. The document clearly outlines the inclusions and exclusions of the services offered and other critical details.
What is Contained in an Independent Contractor Agreement?
An independent contractor agreement has different terms depending on the scenario. The following are the critical components for independent contractor agreements:
- Entity: The person or organization that’s hiring an independent contractor should clearly be stated. It is the entity that’s obligated to compensate the contractor for products or services provided.
- Contractor: The document should state the hired independent contractor.
- Service: It mentions all services the contractor provides to a company or individual.
- Compensation: Payment terms should be described, and the money paid to the contractor in place of their services is clearly stated.
- Timeline: This is the period during which both parties expect the project to be completed.
- Termination: It explains whether a hiring manager has the power to terminate the contract at will. Further, the document should state the prior notice needed to end the contract if any such information is agreed upon.
- Employee Benefits Exclusion: This clearly states that the freelance contractor isn’t eligible to enjoy the employee benefits. These employee perks include sick days, paid leaves, and healthcare.
- Governing Laws: Both parties should agree on which governing laws are applicable beforehand if they want to take their contract to court.
- Expenses: It states that independent contractors should bear their expenses and list expenses to be paid to the hiring company, provided there are invoices from the contractor.
- Severability: The clause states that if any part of the contract becomes invalid, the rest of the independent contractor agreement is still in effect.
Consequences of Failing to Use an Independent Contractor Agreement
If an individual or hiring organization fails to use an independent contract agreement, the freelance contractor may be seen as an employee of the firm. For certain businesses, the company hiring an independent contractor is liable to pay employee benefits.
However, the use of an independent contractor agreement guarantees the contractor of being exempted from any employee perks.
Conclusion
By now, you should know all about an independent contractor and realize the utter importance of having an independent contractor agreement. Therefore, it is advisable to go ahead and download your desired contract template form from CocoSign without second thoughts.
