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What to Look for in an Independent Contractor Agreement

Are you a business owner looking to hire contract workers for your business🤨? Or are you a freelancer looking for independent contracts? Either way, cool🤩! Hiring independent contractors have helped a lot of businesses achieve their goals and objectives without having to worry about the costs of full-time workers👷‍♀️. For workers, independent contracts offer flexibility and the ability to operate as a business with many different clients.

To avoid disputes and legal labor complications, it is of utmost importance to sign an independent contractor agreement, regardless of which side of the transaction you’re on. But what is an independent contractor agreement, and what does it entail🤨? This article will provide answers to those questions and more. 

Who Is an Independent Contractor?

Independent contractors or 1099 employees, commonly known as freelancers, are becoming very common in the corporate world. An independent contractor is a self-employed individual. Businesses hire independent contractors to perform certain duties or provide certain services for a period of time in exchange for compensation. In other words, they’re free agents who come in to perform a specific job. 

Independent contractors are nonemployees. As such, they are not entitled to employment benefits, health insurance benefits, and other benefits afforded to full-time employees. They also have to pay their own federal income taxes, other federal taxes, and self-employment tax (social security and Medicare) to the internal revenue service thereby cutting down employment costs for the business owner. Do you now see why they are in such high demand from businesses🤨?

Why in the world would a freelancer agree to this? If you’re a freelancer, you probably know that freelancing comes with less of a safety net, but with that comes far more freedom. You can be your own boss, work the projects you want to work on, and even “fire” clients you don’t like. Your schedule is flexible, and you can take time off whenever you want. So, there are benefits for both the employer and the contractor in this arrangement. 

What’s an Independent Contractor Agreement?

As stated earlier in this article, it is important that you have you sign an independent contractor agreement to avoid legal labor complications. This agreement, also known as a freelance contract agreement, is a legal document that both company and the contract worker must sign.

The agreement gives an outline of the project and provides a distinction of employee status between the contract workers and the full-timers. It also defines the employer-employee relationship, sets out their roles in the organization, and details their work description. We’ll get into more details in a moment, but first, let’s explore the purpose of an independent contractor agreement. 

Purpose of an Independent Contractor Agreement

An independent contractor agreement will help you to set a lot of things straight between the company and the contract worker. Here are some of the various purposes of this agreement:

  • Stipulates the freelancer’s work obligations (so the company gets exactly what they paid for, no more, no less)
  • Formalizes the independent contractor status
  • Eliminates misunderstanding of employee status between company and contract worker
  • Stipulates remuneration amount and schedule
  • Stipulates work or service duration

In essence, an independent contractor agreement establishes all the details of a relationship between an organization and the freelance worker. It ensures a smooth run of the contract in which both parties are protected and treated fairly.

Is an Independent Contractor Agreement Legally Binding? 

Since an independent contractor agreement is only between the company and the freelance worker, usually with no legal representative present for the signing, it is very easy to mistake it for an irrelevant document. Don’t make this mistake! Both contractor and company must strictly adhere to the stipulations of an independent contractor agreement. It’s a legal document that is legally binding for both parties.

Contractor and company must follow this document to the letter once it’s signed. Any breach of contract or failure to stick to the entire agreement can result in a legal conflict. If needed, both parties can agree to make an amendment to the original agreement. However, everyone involved has to be in agreement on the amendment.

What Should an Independent Contractor Agreement Include?

Preparing a comprehensive and adequate independent contractor agreement document is vital for a healthy business relationship. When you’re preparing an independent contractor agreement, there are a few clauses you absolutely must include. You may choose to include other clauses as well depending on the arrangement. Here are some of the more common clauses in an independent contractor agreement.

Introduction

The first paragraph of your independent contractor agreement must introduce the basics. That means the contract worker, the company hiring the contract worker, and the type of service the worker will provide to the company should be outlined here.

Terms of Service

This is the description of the work or contracted services which the contract worker will provide to the organization. The company and the contract worker must agree on the various services to be rendered to the organization so there’s no ambiguity as to what’s involved in the job. 

Remuneration

This is the amount the company will pay for the services rendered by the contract worker. The agreement has to stipulate the amount of money the contract worker will receive in exchange for the work done as well as how and when the contractor will receive the payment.

Time Frame

This outlines when the contract will take effect as well as when the commencement of services and completion of services will take place.

Benefits

This section clarifies that the contract worker is not an employee hence is not entitled to any employee benefits. The exception to this might be coverage by liability insurance or another policy of insurance for the duration of work. This is especially true if that work is physically risky. 

Confidentiality

This clause stipulates any information of a confidential nature and can serve as a non-disclosure agreement. 

Non-Compete Clause

In this optional clause, the freelancer must agree to abstain from working for a business’ competitors for a particular period. Keep in mind that many freelancers will not agree to this. 

Intellectual Property Rights Clause

This stipulates whether the products or content provided by the freelancer is the sole property of the company.

Indemnification Clause

This clause protects the business and its owners from the liability of the contract worker’s actions

Non-Solicitation Clause

This is an optional clause. It stipulates that the contractor can’t solicit business directly with your clients for a certain period after their contract ends.

Keep in mind that everyone involved (the company and the worker) must sign the contract for it to be valid. These respective signatures seal the contract and make it legally binding.

Write Your Independent Contractor Agreement

Consider yourself familiar with all the elements you should include in your independent contractor agreement! Are you ready to confidently prepare a comprehensive agreement to foster a good relationship between contract worker and company? Don’t worry; we’ve got an independent contractor agreement template prepared by legal experts that you can use.

Should you need any further help, feel free to reach out to us to obtain your independent contractor agreement at an affordable price. We are dedicated to protecting your brand and helping you navigate the wide world of internet work 🙂!