Why You Need A Written Independent Contractor Agreement

Due to the technological advancements in the economy, there arises the need to have written employment contracts to protect employers and employees’ legal rights. Many employers choose to work with independent contractors because of benefits such as flexibility, payment terms by projects, or not spending any dollar when work is not available. When it comes to hiring or firing an independent contractor, it requires one to have the right paperwork to curb any potential problems that may result in penalties. Any business that needs to hire or has already hired an independent contractor should know the important information to be included in a contract agreement.

What Constitutes An Independent Contractor Agreement?

 An independent contractor is a person or an entity that provides services for another person or a firm as a non-employee for a specific period.  For any working relationship, the IC must provide Form W-9. You should also have the right paperwork for audit and your own protection. Anyone who wants to save time and money by hiring an IC should justify their working relationship with a legal written agreement. If you want a standard employment contract in Australia for your IC, you should consider getting one drafted for you by a business lawyer to help you manage your working relationship legally. A valid written agreement should contain:

• Description of services to be provided by the IC
• The terms of the agreement either to be paid hourly, monthly or any appropriate method.
• A statement describing the relation between you and the IC and how it will be terminated
• Description of how and when the payment should be made. Total payments made to IC for each year should be made and reported to the IRS.
• A statement about non-disclosure and confidentiality
• What they have agreed to recover as payment for services renders
• What legal action to take if any dispute arises
• A statement describing how the IC will pay for the federal and state incomes taxes
• Information about whether the IC is entitled to any benefits provided to other employees
• The amount of liability insurance the IC carries

Though many draft independent contractor agreements themselves, it’s better to have an attorney help you enter into a favorable agreement. The agreement should be strictly legal. This helps to create a legal working independent contractor relationship. Remember that an independent contractor should not be treated like an employee to avoid classification problems. It’s difficult for any employer to know what the IRS will dictate how they treat their IC. IRS claims any worker to be an employee, not unless one proves otherwise.

Suppose you are considering having an independent contractor offer you services. In that case, you may choose to consult an experienced business lawyer to make sure your company doesn’t fall on the hands of the law due to misclassification.

Importance of Having A Written Employment Agreement

Hiring a business lawyer to help you draft an employment agreement helps to ensure you don’t put your business at risk.  Otherwise, you could face hefty penalties for breach of contract.  If disputes may arise, and there were no written agreements, the IC may argue out the case differently than what you said. The judge can be in a fix to determine liability given such a case. Any business in need of an independent contractor agreement should have one written. You should draft a contract agreement that doesn’t violate the law.  The written agreement should be:

• In accordance with the IRS requirements.
• Prevent any dispute or contain the law to be followed if any dispute arises
• Protect your confidential business information
• Conserves your intellectual property rights

You may also have unclear information on the people who work on your firm; you can request information from the IRS or contact a business lawyer to avoid payment of any fines or penalties. The IRS is mostly concerned with the working relationship rather than the official paperwork.  Again, it’s also known for its stringent laws when it comes to misclassification When hiring an independent contract, you want to treat them as independent business people. One of the common ways they use to determine this is the control you have over the IC, how and where work is performed.

Getting Help

Some working relationships are ambiguous. To avoid any legal issues, you can choose to involve an attorney or a tax expert in the initial steps to building up a working relationship with the IC. In addition, you should not exercise any control over the work schedule to minimize any risk of having your IC considered an employee. Also, you should have the right documentation in place; those documents setting forth the relationship having been signed by the IC. Your IC should also provide the information that they run an independent company.