Your Independent Contractor Agreement Shouldn’t Be Virtual Even When Your Employees Are

You need to cut costs.

Sure, who doesn’t these days?

Layoffs and reduced staffing seem to be the order of the day.

But you still need to keep your customers happy and that means you can’t afford to cut back on services.  Like so many other small businesses, you’ve turned to the internet to find Independent Contractors to pick up the slack without inflating your personnel costs.

The “no frills” concept of hiring virtual employees as Independent Contractors is incredibly appealing and it should be.  Virtual employees are quickly becoming the wave of the future.  But don’t let the economic hiring environment cause you to skimp on documentation.  Your new employee may be virtual, but the agreement under which you work with them should not be.

The concept of a virtual employee, one that you never see and don’t directly supervise on a day to day basis, makes it easy to treat that independent contract employee less formally.  And that can be a potentially devastating mistake.  You need to take steps from the outset to ensure that your business is protected.  Virtual employees require less supervision but they are also less easily controlled and that can lead to serious problems.

Before the first assignment is given or the first check is cut, you need to make sure that everyone is on the same page as far as expectations and responsibilities. Make sure you have an Independent Contractor Agreement, signed, sealed and delivered that addresses these issues, at the very least:

1. Exactly What You’re Hiring Them To Do

Never assume that your Independent Contractor considers his/her duties to be the same that you expect them to be.  Spell out exactly what you’re hiring them to do, what their deadlines are, what their responsibilities will be on a daily, weekly or monthly basis and precisely what their reporting requirements will be.

2. How Much You Will Pay Them As Well As How and When You Will Pay Them

Describe in detail how much your Independent  Contractor will be paid and how that compensation will be structured (i.e., hourly rate, if they will be paid on completion of project on a per project basis, any retainer fees or down payments they will be paid, the details of any applicable performance bonuses, etc.)  And, very important, don’t forget to make sure they understand who will be responsible for paying their taxes.

3. How Long Will Your Independent Contractor Agreement Last?

What is the term of the agreement? Will the agreement be renegotiated every year? If one of you fails to perform as agreed, what do you need to do to terminate the agreement? All of these issues need to be spelled it out in your Independent Contractor Agreement.

4. Confidential Information

If your company will in any way provide access to confidential information to the Independent Contractor, make sure you have provisions in your agreement to protect that information and prevent it from being disclosed or used by anyone other than your company.  An Independent Contractor, just as much as an onsite employee, can be in a really good position to disclose, either accidentally or intentionally, information that could seriously damage your company or its reputation.  Address this issue in your agreement before it happens so you’ll know what your options are.

These are just a few of the issues you need to address when considering hiring an Independent Contractor.  Hiring these employees can open up a world of flexibility, both for you and the people you hire.  The cost savings alone make it an extremely attractive hiring option and as long as you take the proper steps to tack down the variables of the relationship from the very beginning, there is no reason for this working relationship to be anything but a win-win for everyone involved.

If you are currently using Independent Contractors in your business or would like to further explore the option by discussing what  terms you need to discuss prior to hiring one, contact us today to schedule your comprehensive Business Building Benchmark.  We can identify if there are any holes in the foundation of your business, including the agreements you need to have in place before you get started.  Normally, this session is $1250, but if you mention this article and we still have room on our calendar this month, we will waive that fee.

Integrated General Counsel
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