October 12, 2021
Is your business growing but you’re not quite ready to hire employees? Want to work with someone who can step in and help you take on a big project withoutneeding to train them on all the nitty-gritty details? If that’s the case, independent contractors are a great option.
To ensure you know how to work with an independent contractor, keep reading. We’re covering eight of the most common independent contractor mistakes that businesses make below!
An independent contractor is someone who provides services to a business under a contract. Independent contractors do not work regularly for a business, but only when there is available work.
Plus, the business only has control over the end product, but not when or how it’s completed. An independent contractor pays their own taxes, whereas employees generally share the tax burden with their employer.
Oh, and the IRS and Department of Labor have a lot to say about what an independent contractor is vs. an employee, so make sure you understand the difference before you start hiring.
If you’re working with an independent contractor, you need to have anindependent contractor agreement. Period. If you do not have a written agreement, there is a chance that there could be some confusion between yourself, the independent contractor, and even the IRS.
This may not sound like a huge deal at first, but when tax time rolls around and you are claiming that someone is an independent contractor while they claim they are an employee, that can get sticky fast.
Within your own business, you should have rules on how you treat and interact with independent contractors. An independent contractor policy gives you a clear understanding of how independent contractors come into the picture, and guidelines so you can treat them all similarly and fairly.
Every business’s policy will be different, but a good policy should explain the difference between an employee and an independent contractor, and the requirements for your business to hire an independent contractor. This might include what types of projects you send to an independent contractor and what level of support you can legally provide.
You cannot control how or when tasks get done by an independent contractor. Sure, you can set a deadline for an independent contractor, but you can’t demand that they are online at a certain time or deliver the project in a certain way.
When you start directing an independent contractor as you would an employee, that’s where the trouble starts.
Treating an independent contractor as an employee can have some serious tax repercussions for your business. For starters, you might have to pay back taxes for the whole time you’ve been treating one as an employee). That’s why it’s so important to be clear and straightforward with a contractor’s role in your organization, and to understand the rules so you don’t break them.
While you can’t control how the work gets completed, you canset timelines and due dates. This is incredibly important for both your company and for the contractor.
Say you are working with an independent contractor for a big launch happening at the end of the month. You’ll want to set deadlines way before then, and a clear timeline so you both know what work needs to be done and when. Make sure you take into account your contractor’s availability — you can’t demand that something gets done outside of their availability. Work together to find due dates that are mutually feasible.
Also, check in frequently with a contractor if you’re not seeing work happening on their end, so you have time to find other help if needed.
This goes hand-in-hand with setting timelines. You want to make sure your independent contractor is on track and has all of the tools necessary to succeed at the task you’ve given them. So make sure to schedule some time each week for an update!
We know we just told you to check in with your independent contractor(s), but that doesn’t mean you can get a status report from them.
Requiring a weekly report of where the independent contractor is with their work might seem like you’re trying to have control over their work, and it further muddies the waters between independent contractor and employee. Set clear and reasonable deadlines, check-in every week to see how they’re feeling/what their capacity is, and let them do the rest.
Do you have employees within your business who will be working with independent contractors? Set up clear expectations for your employees regarding how they’ll work with independent contractors, including when, how, and why you work with them.
This can ensure everyone is on the same page and it’ll save you an awkward conversation about why your employee is outsourcing all their work! Kidding. Kinda.
We’ve explained why we choose not to sell non-competes on the blog before. Non-competes don’t give the protection you think it does, and you can’t legally ask an independent contractor to sign one! (That’s because, as an independent contractor, they’re an agent of the free market. Only employees can enter non-competes because they’re technically taken “off the market.”)
The reality is, even if you work closely with an independent contractor, you do not have an employment relationship with them. A confidentiality clause, on the other hand, can ensure the independent contractors aren’t using anything they learned from you with others — and this is already baked into our independent contractor agreement. Just sayin’.
If you’re already working with independent contractors and you’re worried you’re making some of these mistakes, it’s not too late to fix them!
If you don’t already have a policy in place, make one. If you’re worried your independent contractors don’t understand the difference between their role and being an employee, sit down and have that conversation with them.
If you don’t already use an independent contractor agreement, startnow. We’ve said it before in this blog, but it definitely bears repeating. If you make one change to how you’re treating your independent contractors, it should be this one. Use an independent contractor agreement!