Hiring independent contractors provides business owners with staffing flexibility and reduces costs compared to hiring full-time employees. However, managing independent contractors effectively is important to ensure they deliver the highest quality work possible.
An ironclad contract specifying the scope of work, delivery dates, milestones, intellectual property ownership, privacy requirements, payment terms, and billing procedures is essential.
Know What You Need
Depending on the project, employing contractors in Canada can be more cost-efficient than hiring a full-time employee. This is especially true for projects that require specialized skills that aren’t readily available within the company.
For example, a company that needs help with web development can hire a freelancer with that skill set rather than paying to train someone internally. Hiring independent contractors also allows businesses to scale up or down as needed without worrying about the financial impact of layoffs and severance packages.
Since independents are their business entities, they operate independently and determine how, when, and where they complete the work outlined in their contracts. Therefore, it’s important to establish the contract relationship up front and be clear about expectations. This helps avoid misclassification issues, as the IRS and FLSA have strict guidelines for determining worker status. It also makes the process more efficient and helps avoid costly mistakes.
Be Clear About Your Expectations
Unlike your full-time employees, independent contractors are self-employed and pay their taxes. They also need to receive the employee benefits you may offer your staff members.
When interviewing candidates, be clear about what you expect from them and how they will work with your company. This will help to avoid miscommunication, confusion, or misunderstandings down the road.
For example, discuss how you will communicate with the contractor and establish a plan of action for check-ins on their progress. This could be through email, phone calls, or a project management tool.
Also, remember that a contractor’s resume and work history will look different than a regular employee’s.
For this reason, it is important to review the candidate’s work samples and determine if they are recent and up-to-date. If the samples are older than a few years, consider looking for another candidate. This can be a red flag that the candidate may need to work harder for your business or is using outdated samples to get the job.
Have a Written Contract
It’s important to have a formal contract when working with independent contractors. This will help ensure both parties are on the same page and protect your business in case of any dispute.
The contract should describe the project, responsibilities, milestones, and deadlines. It should also address key issues such as rates, payment terms, intellectual property, and other fees or requirements.
Be sure to discuss how you will communicate throughout the project as well. Depending on the type of work, some contractors prefer regular phone calls or text messages, while others may prefer to meet in person weekly or more frequently. This will ensure you have clear lines of communication and can give feedback as needed.
Be Prepared to Pay
While hiring independent contractors can help with business growth, it is important to be prepared to pay them as agreed upon. This includes establishing whether you will pay an hourly rate or a flat fee based on the scope of work and estimated completion date. Setting up a payment schedule is also good – a common practice is weekly, bi-weekly, or monthly payments.
In addition, it is helpful to provide a W-9 form for them to fill out to identify themselves for tax reporting purposes, as well as establish invoice submission guidelines and payment terms in the contract. Finally, you must be ready to pay your independent contractors promptly once they submit a valid invoice. Ensure you have the resources to process these payments, such as through a payroll service that allows online payments. This can help reduce the time you spend managing your independent contractor relationships and paperwork.
