What to Include in Your Independent Contractor Agreement

You finally landed that big contract. Now you need more people (with the right skills) to fulfill the job.  Should you sub out the work? 

Not without a solid Independent Contractor Agreement.

Subcontracting can be a smart business growth strategy.  Independent contractors typically work on a project basis.  Business owners and entrepreneurs who need new or more capabilities, can engage independent contractors without adding overhead.  However, it’s important to protect your business with a strong contract. 

Details vary, but four elements show up all legal agreements.  They cover (who) is entering into the agreement, (what) services will be provided, (when) the work will start / end and (how) compensation will be handled. 

If subcontracting is a part of your business growth plan, these steps can help you draft a simple contract to cover the fundamentals:

State Whose Hiring Who

State your contractor’s name and / or company name.  Many agreements include the word “contractor” in parentheses afterwards, so the relationship is clear.  Include your contractor’s physical address and telephone number or email address.  Next, list these same details for yourself.  (You can add the word “client”, in parenthesis, after your company name.)

Describe the Work

It’s a good idea to discuss the ins and outs of the project together with your contractor before drafting the agreement.  You can use information you gather to list the specific work she will complete.  This section is called the Statement of Work (SOW).  A clear, but comprehensive SOW can save you or your company in the event of a dispute. 

Another way to avoid a major headache? 

If the work is creative in nature, be sure to state who retains the rights to the work.  Countless battles have been fought over intellectual property rights.

Set End Date (and Definition)

List the start and agreed upon end date of the project.  This is also a good place to clarify what delivery means.  Project Managers call this the Definition of Done.  Take time now, to define how you (and your contractor) will know the work is complete.  It will save you from headaches down the road.

Outline Payment Terms

A vital component of any legal agreement are the terms and conditions of how payments are handled.  All contracts should include the exact amount of payment (or a payment schedule, if you will pay over time) and details on how payment is to be made.

Payment Factors to Consider:

  • Does the contractor require a deposit to start work?  If so, how much?
  • When is the earliest they can invoice you for payment?
  • Will you by check or credit card?  If paying electronically, will you pay via Cash App, PayPal or wire transfer?
  • What happens if work stops for some reason beyond your and / or the contractor’s control? how to handle contract cancellation or termination?

Hiring subcontractors can be a clever way to grow.  However, doing so may present its own challenges.  You can mitigate risk by having a solid agreement ready ahead of time.  Have your attorney review it and get it signed before starting work. 

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