Have you ever hired an employee who insisted on staying an independent contractor instead of being officially on your payroll? Perhaps you now feel the need to hire a few independent contractors to work on a specific project. No matter the reason you want to hire an independent contractor, there are some things you have to keep in mind.
While hiring contractors can bring you some cost-saving benefits, it can also come with legal issues. You should talk to an employment lawyer before moving forward. To avoid any potential legal issue, you should consider drafting the contracts of your independent contractors with the help of a lawyer. It will help you ensure that everything is in order, and it will start your work relationship with each of your contractors on the right foot.
Here is an overview of what employers need to know when hiring independent contractors.
What is an independent contractor?
Before you hire an independent contractor, you need to be clear on who can qualify as one. Any individual you hire to work on your behalf, but not as an employee, is an independent contractor.
Any company that you hire to do some work for you is also seen as an independent contractor. Therefore, you can hire a freelance writer, a website editor, a cleaning service, or an accounting firm as independent contractors. You pay independent contractors for the result of their work, but you have no control over how they will work.
Independent contractors are self-employed
Independent contractors are self-employed, whether they work on their own or are the owners of their business. They get to set their own rules and their own rate. Their work schedule is flexible, and they can work from home.
Being self-employed means they are responsible for reporting their income and for paying their taxes. You will not have to provide them with any benefits. You also won’t pay unemployment insurance or withhold income taxes for them.
Hiring independent contractors allows you to save money
Hiring a new employee costs money. You need to pay for their training, the office space where they will work, and the equipment they will use. You also need to provide them with benefits, such as health insurance, unemployment insurance, and paid time off.
When you hire an independent contractor, you can forget all these expenses. You will hire them based on their expertise so that no training will be necessary. They will have their own space to work, as well as their personal equipment. Hiring independent contractors will allow you to save money, even if you have to pay them a higher salary than your regular employees.
Independent contractors give you access to diverse skill sets
Even though hiring independent contractors allows you to save money, it shouldn’t be your primary motivation. Independent contractors can fulfill different needs, so it can be convenient to hire them for specific projects. For example, if you need to update the copy of your entire website, you could hire a freelance writer for a few months.
Hiring an independent contractor might be a suitable alternative instead of asking one of your employees to come up with the right words for this job. Independent contractors make it possible for you to benefit from diverse skill sets without offering them full employment.
You could have some legal issues if you’re not careful
When you hire independent contractors, you don’t have the same control over their work as regular employees. The work created by your employees automatically becomes the property of your company. When you have contractors working for you, you have to make sure you have legal documents stating that the work they do for you belongs to you. If you don’t, you could end up with some nasty surprises regarding copyright.
Hiring independent contractors can come with other types of legal issues. Unfortunately, some dishonest contractors can file a wrongful dismissal claim against their employer when their contract ends. If the court rules in their favour, they will enjoy the financial benefits of working as an independent contractor. They will receive compensation for unpaid vacation time and overtime, like employees who are on the payroll. As an employer, you have to be careful if you want to avoid this type of situation.
You should keep a file on each of your independent contractors
If you hire more than one contractor, you should keep a file for each of them. In each file, keep their contract, their resume and contact information, their tax form, and any other document that seems necessary. You can also keep notes about them and feedback on their work, so it will be easier for you to decide if you want to hire them again in the future.