Independent Contractor Agreement Template
Independent contractor agreements are for freelance work, which means you are hired by a customer to do a job. You are not an employee of the company and you do not work for them. You are wealthy because you are selling your time and expertise.
Hiring a freelancer is excellent way to take advantage of their skills and experience. But before you approach someone for a job, you have to be certain that you are going to hire an independent contractor. Knowing who is an independent contractor and who is an employee is such a crucial issue then it is important to make sure you understand who is an independent contractor. Download the free independent contractor agreement template and read it very carefully.
Playing the Game the Same Way
The most important thing to pay attention to in the free independent contractor agreement template is how the game is played. The game is just the same way for independent contractor as it is for employee. You need to know when you have to stop working because you are done. If you are an independent contractor and you believe that you are being treated like an employee, you have the right to decide that you want to leave.
The good thing is that freelancers can sign their as independent contractor.
What to Include in an Independent Contractor Agreement
Independent contractors (ICs) are hired by companies or individuals to perform services for them without having to hire employees. Instead of having to pay for employees, it’s more cost effective and tax friendly to hire individuals as independent contractors since they are not bound to any particular salary regardless of how much work they do. However, as a result, ICs are not protected by most U.S. labor laws and have to provide their services and be paid solely based on their own criteria.
Here is an independent contractor agreement template to use in hiring individuals as independent contractors.
Terms
Responsibilities & Deliverables
Don’t forget about what you’re legally responsible to deliver.
Your contract should include a brief description of the project. If you’re hiring an independent contractor to do the work, you should lay out the details of what that means. For example, a reasonably detailed description of work to be performed, the timeline for completion of the work, and a budget. Also, make sure everyone is clear on the deliverables.
Also keep in mind that your agreement should specify the timeframe for handing over the responsibilities to your contractor. For example, when you’re hiring an independent contractor for web design and development, it’s common to let the contractor design their own mockups and present them to you for your approval. Once you’re sure they’ve nailed it, you need to pass on the design and move on to the coding (and perhaps testing).
Compensation & Payment Criteria
The main criteria for compensation is what results you generate. In this respect, product is king. You can judge a product based on sales and other metrics. Therefore, it is common practice to use a projected sales and profit-based compensation and payment plan. Emphasize the importance of productivity. If you can’t achieve the profit goals, then you should pay the independent contractor what you need to break even. This would be considered a bonus.
Here’s a bonus structure for a product-based project:
First: payment for the product and/or service
Second: 30 percent bonus (you get paid for what you produce)
Third: 25 percent bonus (you get paid for what you produce)
Any of the above bonus payments should be offered and paid before services begin. This way it is clear that you are not being paid for the service and that all profit goals have not been achieved or met.
The most important thing is satisfaction. Give them a job they love that pays great money, and you are set. Make it a weekly or monthly payment plan with progress milestones that they must accomplish every week. This is better for them as they can see the progress of their pay.
Confidentiality & Noncompete Agreements
When companies are mixing confidential information with non-compete clauses and signing independent contractors agreements (ICAs), their chance of success drops significantly.
Although it is common for companies to protect their confidential information, it is incredibly easy for employees to view confidential information on their computer at home. If your company doesn’t take the time or spend the money to make sure you’re not violating your noncompete clause, you could lose your business.
On the other hand, if you have a well-written, enforceable confidentiality and noncompete agreement, you can protect your business and keep your clients from acting “in bad faith” and finding their own way out of the agreement, by requesting a monetary fee.
Additionally, since some state officials are pushing to make noncompete agreements illegal, it’s important to be prepared. ICAs can also contain confidentiality agreements, anti-retaliation clauses and non-solicitation provisions.
When you have a confidentiality and noncompete agreement, it’s easier to protect your business and make sure loyal clients don’t get their own way out of the agreement.
Severability
As an independent contractor, you won’t have a relationship with the company it contracts you to work for ” you’ll just be an employee for a portion of the year. However, that means they can cancel any moment, leaving you with no job. Here’s an example of what that would look like from the company’s perspective: If they decide that they want another employee for the next season, they can transfer you without terminating your employment contract. From your perspective, you’ll still be working for them, but they don’t have to pay you for the remainder of the season. And they’ll try to make your life as difficult as possible for the remainder of your employment term.
Integration
Of an independent contractor agreement into your Workforce Management System is a great way to standardize these contracts, and to also have workers fill out a contract each time that they decide to take on a new assignment.
Choice of Law
Holding certain documents and contracts in escrow at your own bank account is a good way to reduce your risk of being sued in the unfortunate event that a lawsuit arises. However, you’ll want to be sure the bank isn’t going to charge you a lot for this service. You might even want to consider opening your own bank account for this purpose. In the end, it all comes down to cost, convenience, and whether the banking institution is a good fit for your business.
If you choose to hold certain owner documents or contracts at your bank account, you might consider using an Independent Contractor Agreement provided by the escrow service to make sure the bank isn’t acting as your agent when administering the account.
If your Small Business Insurance policies are held in an owner bank account, it is critically important that all of your operating documentation (including your owner contracts and independent contractor agreement) be kept in a separate bank account and not part of the owner bank account.
If you don’t do this, and the owner statement on your insurance policy is a lien on the other bank account, your insurance company can use the insurance payoff money to cover its financial obligations. If it can’t do this, it can’t release an insurance claim check.
Additional Options
Independent contractors can use the independent contractor agreement to add some protection to your business relationship. But remember, it’s only as strong as the party signing the contract. So what you need to be careful of is to understand the person you’re hiring and contracting to.
If you have a good understanding of the person that you’re contracting to and are confident that they understand the terms of the agreement you are signing, then it can be beneficial. After all, you want to protect yourself from the person that you’re contracting with just as much as you want to protect yourself from them.
You may not want to use their services at all, or may need to have some aspects clarified on what they are doing. In either of those scenarios, you would want to have them sign an agreement that you feel comfortable with.
The agreement can be very long, so you may decide to contract out specific aspects where you know you don’t have the knowledge to do the work yourself.
The agreement can be a one- or two-page version that you as the entrepreneur can handle. Or, you can hire a professional to complete the agreement for you and have them handle the vendor relationship, so that you don’t have to.
What Not to Include in an Independent Contractor Agreement
When you work for a company as a contractor or an independent contractor, you’re very likely to have an Independent Contractor Agreement in place. Without a clear contract, your employer won’t be able to hold you accountable for anything.
When you’re writing your own independent contractor agreement make sure that you include these critical elements:
Who is responsible for providing insurance? Negotiating and agreeing to an insurance policy is a separate item to include in your agreement. Know what you’re responsible for and what your employer is obligated to provide you with – otherwise you’ll get overwhelmed.
Working hours and vacation days Do you always work the same number of hours or days per week? If you don’t know, this is a detail you need to determine. You will also need to discuss your vacation days and how they will be handled.
Rate of pay How much will you earn per hour, per project? If you’re doing hourly work, make sure that the rate is paid on a per hour basis – no matter which method is used. If you’re doing commission based work, you will need to discuss the fees that you will be paid.
Payment Schedule
; Non-Solicitation and Assignment Agreements.
Work as an Independent Contractor with Contractor or Freelancer?
It is important to understand the difference between an independent contractor versus an employee.
If you are a key part of an organization’s business and perform an integral role in its operation, it is better to work as a full-time employee. However, if you perform a specialized but temporary role, are self-employed, perform your own duties, are project based and have minimal impact on the operation of the company, you may be an independent contractor.
Employment Guarantee
The Dangers of Relying on It
Sometimes, the worst problems we face aren’t caused by the bad guys with evil intent. Sometimes, the biggest problems we face is the one we create by simply expecting something to be different, than it actually is.
The thing is, no matter what type of relationship you have with a contractor or freelancer, no matter how good your relationship is, there’s always going to be some point where you are not going to be on the same page.
Contracts aren’t always all about money. In truth, many times, contracts are about feeling control back in the hands of the owner of the home, business, or restaurant, or even the business owner who is not a home owner.
With that in mind, no matter what your relationship with an independent contractor is, there will potentially be some type of disagreement or potential disagreement. And, in the event of such a disagreement, even if you’re on the same page (a contingency plan can help ensure that you continue being on the same page) there’s always the possibility that neither party will be on the same page and a dispute could transpire.
With that said, one of the key requirements of a good contractor agreement should be an emergency contact and an independent contractor agreement template is just one way to include such a provision.
If You’re an Independent Contractor
Watch Out! Many employers give independent contractors by form of an Independent Contractor Agreement (ICA), but the relationship between the two can vary greatly. Independent contractors can be an asset to any organization they work with, and this may include file sharing on the internet. Unfortunately, there are many unscrupulous employers who can take advantage of independent contractors. As a result, independent contractors tend to be less protected than employees from certain types of abuses.
The most common type of independent contractor abuse involves independent contractors not receiving all of the compensation to which the employer is entitled by law. As a result, there is no requirement for employers to pay for the time the independent contractor spends on the employer’s business.
Employers use the independent contractor status as an excuse to avoid certain costs and to avoid providing minimum wage or overtime pay to independent contractors or employees under the Independent Contractor Act.
In these situations, employers will often choose to set up the independent contractor agreement with all of the terms for the independent contractor to follow.
Of course, employers can still choose to provide independent contractors with a form of a contract, but independent contractors would still be better protected if certain safeguards are put in place. Independent contractors should have:
An agreement that states that the employer is not allowed to use or discriminate against the independent contractor for certain reasons.
A contract that clearly states that the independent contractor is allowed to perform certain tasks for the business.
Deliverable Review & Approval Process
Dispute Resolution
The dispute resolution clause is vital to the success of an independent contractor agreement. This clause provides the terms for arbitration, and the option to end the relationship through reasonable resolution is very important as independent contractors may be hesitant to raise any issues. This also has the added benefit of not having to pay counsel fees as the agreement will be put through arbitration and there must be a victor. Make sure that the dispute resolution procedure was mutually agreed upon and that there is no chance the contractor will need to go to court.
Contractors also should be careful of language that outlines the amount of control that you have over the contractor’s day-to-day activities, e.g., drivers and process servers. This makes the contractor an employee.
The relationship with the contractor should be evident by the use of capital letters where the contractor is a party to the contract. The contractor’s name should also be followed by the word "in" (e.g., "Randy Breault In"), in order to distinguish an independent contractor from an employee. "I, [your name], agree with [contractor’s name] to the following terms and conditions related to this contract…" will clearly outline that the contractor is part of the agreement.