Today in America, there’s an estimated 42 million independent contractors. In fact, the Freelancer’s Union states that as many as 1 out of 3 of employed individuals are presently working as contractors. So if you’ve been considering whether or not to hire a contractor to complete work for you or your business, there is definitely a qualified pool from which to choose from. However before you hire a contractor, there are several factors for you to consider in terms of whom to work with, where to find qualified candidates, and what personal and legal steps you should take in order to protect your business, and foster a solid working relationship with your contractor.
What’s the difference between an independent contractor and an employee?
For many reasons, hiring a contractor may be a favorable option for your business instead of hiring a full-time or even part-time employee. Although contractors tend to charge more per hour, they can save you money in the long run because contractors do not earn benefits such as sick leave, 401K and paid time off. However, the U.S. federal government has recently been cracking down on companies that hire workers as contractors for wage, insurance, and tax benefit purposes, but treat them as employees when it comes to work duties. Under the federal tax and labor laws, contractors must have greater independence than employees. Therefore, you should always exercise caution when deciding what you want a relationship with a worker to be.
If you need someone to work designated hours for you on pre-determined days; if you require specific on-the-job training; or if the position demands a good deal of oversight or management, then what you need is an employee. If you need to be able to tell the worker when and where the work needs to be completed, then this also means you need an employee.
However if you can hire someone to complete a specific task or tasks without conducting training; if the work can be completed on the worker’s own scheduling terms and with his or her own equipment; and/or if the worker invoices you on his or her own terms (hourly or per project), then you need an independent contractor. An independent contractor brings his or her own experience to your business to complete a specific task or set of tasks, and he or she will also work under his or her own business name. You are not the worker’s employee, but are rather the worker’s client. The contractor will have other clients, and you should expect to be prioritized equally among these other clients.
The bottom line is: Do not hire a contractor simply because you cannot afford to hire an employee. Hire a contractor if the job truly can be done on his or her terms, without training him or her to use a new skill, and when you want to contractor to bring his or her own expertise to your business.
How do I know when to hire a contractor?
There are many different situations in which it’s appropriate to hire a contractor for your business, and many different reasons why the work of a contractor may be the right fit for you at a given moment. For example, if you have a specific task to be completed that is not within your skill set such as a weekly blog or a new website design, hiring a contractor is the perfect option for you. Maybe you need an extra hand on a project, or have an impending deadline that needs some added resources? Either way, these are all great examples that it’s a great time to hire a contractor.
Like many things in life, knowing when to hire a contractor often comes down to the age-old issue of time versus money. If you are in a position where you, as a business owner, are being forced to turn clients or customers away, then it is definitely time for you to hire a contractor. Even though you may be concerned about the initial monetary investment in a contractor, it will pay off in the long run by allowing you to delegate specific work tasks to someone else, therefore allowing you to manage your work time more efficiently.
10 tips to consider when hiring a contractor
- Don’t hire based on price alone: It’s important to find a contractor whose work will fit your budget. It’s also important to understand that just like with employees, contractors cannot be expected to work for less than minimum wage. So if you find a contractor who is dramatically lower in price than several others, you may want to consider that he or she is overcommitted or may rush through your work. Ideally, you should look for someone who fits your budget and will do the work for what you think is a fair, and suitable price. Keep in mind that a little bit of extra money out of pocket can equal drastically increased experience levels, and therefore a superior product. If you fall in love with the work of a contractor you can’t afford, consider negotiating a trade agreement.
- Use a hiring shortcut: With 42 million independent contractors in the country, how do you know where to find the best ones who are qualified for your position? Take advantage of the ease of the marketplace at Job Stock to find the best contractor for your job. It’s free to post a job, and qualified candidates will have the opportunity to contact you in regards to their qualifications and pricing. Job Stock makes it easy for contractors all over the world to find your job, and can save you a tremendous amount of time by connecting you with those individuals. There are more than 250 categories in which you can post your job, which serve to help contractors from all around the globe to find work in their areas of expertise.
- Remember the legal paperwork: Even though a contractor is not your employee, there are still some legal considerations you need to take into account. First of all, you will need to issue a 1099 tax form to any independent contractor you work with. This is important for tax purposes, because a 1099 form is how the IRS tracks and taxes the income of freelance workers and independent contractors. A freelancer is obligated to calculate his or her own taxes based on his or her income. Secondly, if you have trade secrets that you wish to protect, it is appropriate to ask your contractor to sign a do-not-compete contract, or a confidentiality agreement. A do-not-compete agreement usually states that the contractor will not work for an industry competitor while working with you, or for a specified amount of time after your contractual agreement is completed. This period of time varies, and may range from 90 days to a full year.
- Expect to be invoiced by the hour or project: When you hire an independent contractor, you should expect to pay him or her by the hour or by the project. He or she will not receive a salary or a weekly wage as your employees may. The contractor should be responsible for invoicing you for his or her work. If you’re concerned about relinquishing control of this process, make sure to clearly establish what your pay rates are, and very importantly, establish how extensions to a project will be handled. For example, if you add to a project after a work contract has been written and agreed upon, how will this added work be assessed? Will it be billed at the same rate or a different one?
- Check the contractor’s references: There is nothing wrong with hiring a contractor because he or she was recommended by your friend. But you should still always ask for some references. Look not just at whom the contractor has worked for, but what kind of a relationship the contractor achieved and maintained with that client. Look for testimonials that demonstrate the contractor’s commitment to each job and expertise in his or her line of work. When speaking to a reference, a good, straight-forward question to ask is, “Would you hire this person again?” If the answer is “no,” consider that a red flag.
- Keep a detailed paper trail: According to NOLO Law for All, one of the most common mistakes that business owners make when hiring a contractor is omitting a written contract in favor of an oral agreement. The problem with an oral agreement is that there are no clear terms about who the owner of the completed work is, and what the two of you will do if a dispute arises in terms of pay or deadlines. A written contract does not have to be fancy or lengthy, but it does need to cover:
- A description of the services the contractor will perform.
- Deadlines and delivery dates.
- Payment totals, whether the pay will be hourly or per project, payment deadlines, and method of payment.
- Parameters for an extension to or addition to the agreed-upon services.
- Copyright/work ownership information.
- A statement specifying that the contractor is an independent freelancer, and will therefore pay his or her own taxes, and will not receive any benefits.
- Offer clear guidelines and feedback: It can make a huge difference in the long run if you establish clear guidelines for your contractor. For example, if you’re hiring someone to write your company blog for you, who is your target audience? Do you want an informal or formal tone? Do you want each blog to include a hyperlink to an outside source, or only internal links? Are you going to supply a list of topics to the contractor, or do you want him or her to come up with industry-relevant topics and titles? Establishing these kinds of job details from the start can help the contractor to achieve the results you are seeking. If possible, provide your contractor with a style guide. This can help to answer specific questions the contractor may have in regards to trademarked names, the pantone colors of your logo, and other important details.
- Arrange an interview: Chances are good that you will hire a contractor who does not live in your neighborhood. But thanks to today’s technology, it’s still easy to conduct a brief interview. Arrange a phone chat, or a Skype conversation, even if it is brief. This will help you to establish a connection with the contractor, as well as help you both to feel more comfortable with future correspondence. Plus, a quick conversation will give you a good idea of whether you can work with this individual. If someone is immediately unpleasant to deal with, it probably doesn’t matter how good his or her work is – you won’t enjoy working with him or her in the long run.
- Consider offering a test project: If you’re looking for a contractor to complete a very large project, such as a complete website overhaul, there’s nothing wrong with asking him or her to complete a smaller sample project first. (Don’t ask for a free sample, though. The sample project must be paid.) This can help to assuage any fears, on behalf of both the client and the contractor, in regards to the working relationship, and the quality of the work. If the contractor matches your style and delivers a great product, you know the two of you will work well together in the future. If you don’t think you’re a perfect fit, you can find another contractor for your large project. There’s no need to “fire” anyone, since the contractor is not your employee.
- Leave the lines of communication open: Don’t expect to be able to just hand a project to a contractor and walk away. To achieve the product that you desire, you’ll need to provide feedback, both in the form of positive comments and of constructive criticism. With long- term projects, consider creating benchmark dates on which the contractor will send completed work in increments, and you will need at these points to provide feedback. Another important aspect of communicating is to establish from the get-go, what your preferred method of communication is. Ask what the contractor’s business hours are, so that you know when it is appropriate to contact him or her.