One of the first steps in hiring an independent contractor is creating an independent contractor agreement. This document lays out how contractors will be hired and managed, regardless of their responsibilities and location.
Whether you routinely hire contractors or only consider it on an as-needed basis, you don’t want to rush to create an agreement every time you plan to hire. Having a template in place allows you to proceed with speed and efficiency.
What is an independent contractor agreement?
An independent contractor agreement defines the terms and conditions of an independent contractor’s work. In its most basic form, it covers the contractor’s responsibilities, scope of work, deadlines, and payment terms.
Without an independent contractor agreement, your entire arrangement is based solely on individual conversations. And that means there’s a greater chance of a disagreement or misinterpretation that could affect your working relationship.
What does an independent contractor agreement cover?
Overview
Every independent contractor agreement should begin with a brief outline stating the name of the client and the name of the service provider. This is also the best place to include the date and each party’s contact information, including their physical address, email address, and phone number.
Scope of work
The scope of work section should include a clear description of the services to be provided, the duration of the relationship, and a timeline for deliverables. Providing this level of detail minimizes the risk of misunderstandings and ensures that both parties are working toward a common goal.
It’s also important to include a clause detailing your expectations regarding the speed and quality of work. By clearly specifying your expectations, you can help ensure that the services are delivered to the highest standards.
Compensation
Clearly outline how the contractor will be paid, payment frequency, and invoicing procedures. For example, will you pay the contractor per project or by the hour? Will you pay after each project, once a week, or once a month? How do you want to receive and pay invoices?
A clear, detailed compensation section can help prevent payment disputes later.
Termination
Even if you have a good business relationship with an independent contractor, your engagement may come to an end at some point. Use the termination section of your agreement to address:
- A project completion date
- Unforeseen circumstances that could result in early termination
- How a notice of early termination should be provided (by either party)
It can be awkward to move on from an independent contractor, but a well-constructed termination section in your agreement can help clarify the situation.
Intellectual property and ownership
Independent contractors often work with multiple clients in a specific industry. Protecting proprietary information and work produced during your contractual relationship needs to be a priority. The agreement needs to address intellectual property ownership, particularly who has the rights to work created during the working relationship. It's important to include clear expectations to prevent any confusion. Not clearly defining this matter can lead to lengthy and costly legal disputes.
Furthermore, an intellectual property disagreement can be even more complex when dealing with an international contractor because laws vary from country to country.
Do you need an independent contractor agreement?
There’s no shortage of excuses for not creating an independent contractor agreement, but skipping it is an unnecessary risk. Even if a project is of short duration or only a small part of your budget, it’s better to be safe than sorry. Request every independent contractor to sign an agreement to ensure that everyone involved in a project is on the same page. If they’re unwilling to do so, it’s best to find another candidate.
Are independent contractor agreements the same in every country?
The rationale for an agreement is the same, no matter where you and your independent contractor reside. However, there are two things that can differ across countries:
- Content: This is the information included in the agreement, such as the scope of work and compensation.
- Requirements: Some countries have laws for what an independent contractor agreement must include. This is important to keep in mind because employee misclassification rules vary between countries. You need to know what your contractor’s country of residence requires in its contract labor agreements.
Oyster makes it simple to hire contractors in over 180 countries worldwide. We take care of legal compliance in every country, so you can have peace of mind when working with contractors, regardless of location.
About Oyster
Oyster is a global employment platform designed to enable visionary HR leaders to find, hire, pay, manage, develop, and take care of a thriving distributed workforce. Oyster lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.
Oyster enables hiring anywhere in the world—with reliable, compliant payroll, and great local benefits and perks.
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