Employing Independent Contractors - 10 Guidelines For Avoiding Problems

If one engages independent contractors or independent agents, the best way to prevent a problem is to ensure that your relationship with them is a professional and well documented one.

Remember, an independent contractor is just that - independent. The standards you apply to dealing with other non-employees should apply with independent contractors as well. For that reason, such relationships should be carefully reviewed.

Here are ten HR guidelines you might like to consider that can help you avoid potential problems in the future.

1. Avoid calling a meeting of independent contractors that can indicate "employment". Instead, meet with them one-on-one. Also, keep proper separation from regular company staff meetings.
2. Keep corporate logos, insignia or signs off independent contractor's trucks and at the job site.
3. Provide materials to independent contractors at a bona fide price that reflects, at a minimum, the cost of the material and overhead. Furnish an invoice for these materials.
4. Do not have a policy that prevents an independent contractor from working for other customers, including competitors, unless there are trade secret or other compelling reasons.
5. Require each contractor to submit an invoice prior to payment.
6. Issue payments to independent contractors on the same schedule as other vendors.
7. Remember, independent contractors hire their own assistants.
8. Require proof of liability insurance from contractors.
9. When communicating with independent contractors, do not use the same types of communications you send to employees.
10. Do not hand out employee work rules or employee handbooks or manuals to independent contractors. If there are certain workplace rules or policies you wish to apply to contractors, incorporate them into the contract or replublish them as contractor policies.

It is also recommended that businesses maintain separate files for each independent contractor they contract with. These files should contain a copy of the contractual agreement, copies of 1099 forms, certificates of insurance and any other pertinant documents.

For more information about independent contractors, you might like to read one of our earlier articles on the IRS Common Law Test. In addition, morebusiness.com has a great article on How To Tell The Difference Between Independent Contractors and Employees that is worth reading.

Comments

[stephen]

okay

[Charlotte Hobbes]

Stephen,

That’s a good and elaborate list you have. But how do we actually maintain those good relations?

I work for a medium sized corporation and we deal a lot with contractors. About a year ago, we had, for some reason or other an unprecedented amount of issues arising with contractors. Mainly, from lack of good organisation from our part. It was then that we switched to a new PM software programme to track and communicate with all our contractors simultaneously. It allowed them to update their progress as it happened so that it could be monitored closely. This method of communication not only was efficient on their part, but it allowed us, the employer, to become more organised in our dealings with them, as we were constantly up to date and in the know. Although this may not be relevant to all employers, this kind of network based PM software can be highly beneficial. I am not sure if every PM software has this feature, but it’s a good one to look out for. The one we are using is Project123 if anyone was interested. But the point is this method of management is the most technology savy and resourceful way to maintain those good relations with contractors.

Charlotte

[Angela Stringfellow]

Employers can also avoid some of the potential misclassification hassle by utilizing independent contractors who are working through a portable employer of record organization. The contractor then is legally an employee of another company, and it's a business-to-business transaction, rather than a business-to-IC transaction. These portable employer of record companies are becoming quite popular among independent contractors, because they have access to a number of group benefits that they might get working for a corporation.