An independent contractor agreement or contract is an important part of engaging contingent workers. While your company and the contractors you work with want to get started quickly, skipping a contract can lead to problems in the future.
Three Reasons to Use an Independent Contractor Agreement
Establish legal protection
A written contract provides legal protection for your company and for the independent contractors you work with. It helps safeguard against the financial burden of a lawsuit, should something happen. While verbal agreements may be convenient, they don’t do a great job of providing proof or evidence of what was agreed upon.
Define worker status
An independent contractor agreement is also an opportunity to define worker classification status. This is a helpful piece of evidence if you ever need to prove worker status for legal purposes or inquiries. In your contract, include a section stating that you and the contractor agree to an independent contractor relationship. This helps to establish a business-to-business relationship.
Discuss project scope
Include a detailed scope of work that describes the work to be completed, a timeline, and other important details. This will serve as a good reference point to return to and help prevent missed deadlines and incomplete work. Consider outlining a plan for how to address scope creep as well, should additional requests come up during the project.
What to Include in an Independent Contractor Agreement
Here are eight things to consider including in your next independent contractor agreement. These items will help ensure that your company is protected and that the project scope is clearly defined.
1. Services to be completed
Outline the work you want completed in as much detail as possible. Being specific will work to your advantage. Don’t assume that details are mutually understood. To hold your contractor accountable, define what you want done.
2. Responsibilities of both parties
Not only is it important to define your roles as consultant and contractor, but it is also helpful to talk about what each person is responsible for during the project. Define what is expected from the contractor, and who is responsible for what on your team.
3. Clear language
As much as you can, avoid highly technical industry terms or jargon. If you need to include legal terms, make sure both you and the contractor are fully aware of the meaning behind them.
4. Change order process
Additions or changes to a project are common. These requests can quickly add up and lead to scope creep. Taking the time to define a change order process in your independent contractor agreement can help a change order process move along faster and easier.
5. Termination conditions
In a worst-case scenario, termination conditions will give you or the contractor the right to cancel an agreement. While not common, this could happen if there is a breach of contractor nonpayment.
6. Timeline for work
If possible, include concrete deadlines and deliverables for work. This will be helpful for the contractor to understand exactly what is expected of them and when. It is also helpful on your end, because you will know what you can expect to receive. If specific dates aren’t possible to define, include an approximate timeline.
7. Performance measurement
What means success for you on the project? Set actionable metrics that you and the contractor can measure. This will allow you to have productive conversations about how you are meeting your goals.
8. Payment terms
Include agreed-upon bill rate and terms. Be sure to also discuss and include how the contractor will bill you and what your net terms are (the amount of time you must send payment after receiving an invoice).
When it comes down to it, an independent contractor agreement or contract is simply a professional way to conduct business. Contracts can help build a strong, trusting relationship between your company and the independent contractors you engage. They protect you legally and clearly define the work you want done and how you will achieve your goals.