8 Mistakes You Might Be Making When Working with Independent Contractors

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  without needing to train them on all the nitty-gritty details. If that’s the case, independent contractors are a great option.

However, the IRS and Department of Labor have a lot to say about  what an independent contractor is vs. an employee, so tread carefully. To ensure you know how to work with an independent contractor, keep reading. We’re covering 8 of the most common independent contractor mistakes that businesses make below!

What’s an independent contractor? 

First things first: It helps to know what you’re dealing with when you work with an independent contractor. An independent contractor is someone who provides services to a business under a contract (a written one!). Independent contractors do not typically work regularly for the business but only when there is available work. 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. 

So… what independent contractor mistakes might you be making?

Working with independent contractors can be a benefit to your business. However, you want to ensure you’re not making these mistakes.

Mistake 1: Not having an independent contractor agreement

If you’re working with an independent contractor, you need to have an independent 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.

Mistake 2: Not having an independent contractor policy

Within your own business, you should know how you treat and interact with independent contractors. This is important long-term so that you have a clear understanding of how independent contractors come into the picture— and treat them all similarly.

Every business’s IC policy will be different but a good policy should include some clear explanations of 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.

Mistake 3: Treating independent contractors as employees

A business  cannot control how or when tasks gets 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 the independent contractor as you would an employee, that’s where the water gets muddy.

Treating an independent contractor as an employee can have some serious tax repercussions for your business (as in, you might have to payback taxes for the whole time you’ve been working with someone in an employee capacity). That’s why it’s so important to be clear and straightforward with contractors’ role in your organization, and to understand the rules so you don’t break them.

Mistake 4: Not setting goals or schedules

While you can’t control how the work gets completed, you can set timelines and due dates. This is incredibly important for your company and, likely, 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 or a clear timeline of when the work needs to be done and check in frequently with a contractor if you’re not seeing movement. You don’t want to get to launch day and be missing something.

Mistake 5: Not scheduling regular meetings or check-ins

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! 

Mistake 6: Requiring contractors to submit a weekly report

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. 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, and let them do the rest. 

Mistake 7: Not being transparent with employees about expectations and the goals of independent contractors

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 help 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.

Mistake 8: Requiring a non-compete instead of a confidentiality agreement

We’ve talked to you before about why we choose not to sell non-competes. Non-competes don’t bring the protection you’re thinking 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’.

Don't let these mistakes affect your work (or team)

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 don’t already use an independent contractor agreement, start. 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. 

Already got this down? *high five* We’re so proud of you! Make sure you’re staying up to date with the recent changes re: independent contractors as well!