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Entrepreneurs often find themselves juggling multiple tasks, seeking ways to scale operations while reducing costs. Independent contractors provide a solution; they bring specialized skills, contribute to projects, and allow you to scale up your business efficiently.

Hiring independent contractors offers many benefits, from accessing niche expertise to scaling without the commitment and cost of hiring full-time employees. 

It is a great way for small business owners to get more help without breaking the bank. However, not everyone is familiar with the process of hiring independent contractors. 

This guide will help you successfully hire independent contractors and grow your business efficiently.

How to Hire Independent Contractors

Here is a step-by-step guide to hiring the right independent contractors for your business:

Setting clear expectations

Before hiring an independent contractor, list your project requirements, objectives, and expectations and communicate them with your potential hires.

What are the deadlines? What task do you need them to perform? These expectations are essential in preventing misunderstandings later on in your work together.

Creating an independent contractor agreement

Create a comprehensive independent contractor agreement outlining the terms and conditions of employment, including the payment term, project scope, confidentiality clause, and intellectual property rights.

Make sure both parties sign the agreement before commencing the project work to prevent conflicts during the employment period. You can download an independent contractor agreement template in the Coaches & Company contract shop to help you create your contract.

Verifying compliance

Familiarize yourself with the legal requirements for government employment of independent contractors. To avoid potential risk, ensure compliance with IRS guidelines, state regulations, and labor laws. Check that your contractor complies with legal requirements.

Verify contractor status by requesting necessary documents such as a Taxpayer Identification Number (TIN) and completing a Form W-9. This ensures proper tax reporting for income tax, social securities, and Medicare taxes.

Organizing tax information

Keep accurate records of payments, expenses, etc., to support tax filings and audits.

Familiarize yourself with state-specific requirements and obtain a Taxpayer Identification Number (TIN), W-9 forms, and other tax-required documents to ensure accurate reporting and compliance with tax obligations.

Questions to Ask An Independent Contractor Before Hiring

With so many independent contractors available for hire, finding one can be an arduous task. 

Here are some key questions to help narrow your options and ensure you choose the right fit for your business. 

  • What relevant experience do you have? Can you provide samples of similar projects?
  • Can you provide references or testimonials from previous clients?
  • How do you handle deadlines?
  • What is your availability and preferred method of communication?
  • What is your ideal client relationship? Do you like being micromanaged? Do you prefer autonomy? Make sure their answer matches your preference as well.
  • Do you have the right tools to get the job done?
  • What is your capacity? How many hours can you work in a day? See if his work capacity matches your business’ needs.
  • Has a client ever ended a working relationship with you before the contract time was up? If yes, why?
  • How can you help me solve or optimize the tasks that are laid out?

5 Independent Contractor Red Flags to Avoid

Here are some red flags to look out for when interviewing independent contractors. 

1. Reluctance to sign a written contract or provide references

Reluctance to share references or testimonials from previous clients may mean the contractor has a questionable or non-existent track record and raises doubts concerning his or her credibility.

When hiring a contractor, always pay attention to their level of experience and the quality of their previous work. If a contractor is reluctant to provide references for his work, proceed with caution. Also, approach with caution if a contractor is unwilling to sign a written contract.

A contract serves as the source of trust between the parties involved since it is legally binding. It can help protect the interests of both parties and help mitigate potential disputes during the period of employment.

Shop Coaches & Company’s lawyer-created Independent Contractor Agreement Template here.

2. Poor communication

If a contractor is unresponsive, fails to meet deadlines, or provides vague, inconsistent updates, it may be a result of a lack of professionalism or poor communication skills, which could hinder the project.

It is important to clarify communication expectations and ensure that the contractor has the necessary communication skills required. Regular check-ins and updates help ensure the projects stay on track.

3. Inconsistencies in tax documentation

Failure to comply with tax reporting requirements can create legal and financial liabilities for your business.

Be wary of contractors who are not willing to provide the necessary tax documentation or don’t have the documentation, such as a Taxpayer Identification Number (TIN) or Form W-9.

4. Missed deadlines or subpar work

When employing a contractor, you want someone who can help you with high-quality work while also meeting deadlines.

If a contractor consistently misses the specified deadline or delivers subpar work, it can negatively impact your business’s reputation. When employing, be sure to set clear expectations and hold contractors accountable for meeting the requirements.

5. Misclassification

Misclassifying workers as independent contractors when they should be classified as employees, unless you can prove otherwise, can have serious legal and financial consequences for businesses.

Always ensure your contractor truly qualifies as an independent contractor and not an employee. It is important to understand the criteria used to determine worker classification and ensure that contractors are properly classified to avoid problems.

Additional Resources

To ensure your journey in employing an independent contractor is successful, here are some other tips:

Legal Consultation

If you have legal questions or concerns regarding hiring a contractor, consider seeking guidance from a qualified legal practitioner licensed in your jurisdiction and specializing in employment law or business contracts.

Consider Freelance Platforms:

On freelance platforms like Upwork, you have access to a wider range of contractors, meaning you are more likely to find a contractor that will satisfy your needs.

Ensuring Compliance and Reducing Risk When Hiring Independent Contractors

Hiring an independent contractor has a lot of pros, but it also has its associated cons, particularly in terms of compliance with tax and labor laws. Some considerations to keep in mind are:

Tax obligations

As a business owner, it’s important to understand your tax obligations when hiring independent contractors. Contractors are responsible for paying their taxes, such as income tax, self-employment tax, etc.

Still, the business might have certain tax-related responsibilities, such as employment tax, income tax, social security and Medicare tax, tax forms, and tax withholding obligations.

Compliance with labor laws

In addition to tax considerations, businesses must also ensure compliance with relevant labor laws when hiring independent contractors.

This means adhering to minimum wage laws, overtime pay requirements, and workplace safety regulations. While these laws may not cover independent contractors, businesses should still ensure that basic working conditions meet the required standards of safety and fairness in order to avoid potential harm to the contractors and your business.

Intellectual property rights

Protecting intellectual property rights helps businesses safeguard their content and assets from unauthorized use or exploitation by others.

It encompasses different legal protections, including copyrights, trademarks, and trade secrets. These rights grant businesses exclusive control over their creations and provide avenues for recourse in case of infringement.

Intellectual property rights include:

Copyrights:

This protects original works of authorship, such as books, music, software, and artistic creations. 

Trademarks:

Symbols, names, or designs used to recognize a brand from another. Registering trademarks helps businesses establish brand recognition and prevent competitors from using similar images that may confuse consumers.

If you are hiring an independent contractor to support content creation, ensure that your contract with them specifies who owns the content created within the project and your work together.

Under US copyright law, the independent contractor owns the rights by default, unless the parties agree otherwise in writing to transfer ownership of the IP rights.

Wrapping Up

When done right, hiring an independent contractor can be a positive game-changer for small business owners. 

It is important to understand and comply with federal employer and workers’ compensation regulations, as well as income tax, tax withholding, and employment tax requirements. By following these guidelines, you can build a reliable team that will contribute to your success!


Check out our ready-to-use, lawyer-approved, plug-and-play legal contract templates, so you can upgrade your client contract while staying Protected & Profitable™✨

Not sure where to begin? We’ve got you. Grab our FREE Legally Launch Guide to get the legal lowdown on everything in entrepreneurship, without the confusing mumbo jumbo. We’re serving it up straight and to the point. (Heads up: It’ll forever transform the way you view your client relationships!) Grab your copy now!

*The information presented in this blog post is for educational & informational purposes only. This should not be a substitute for customized legal advice from a licensed professional in a private setting. If you need legal advice, please consult with an attorney. This is not a law firm.

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