Independent contractor agreements are becoming increasingly popular as businesses continue to outsource more work. Use this free template to hire your next independent contractor.
Businesses are becoming increasingly reliant on independent contractors to meet demand and support on certain projects. But to hire these independent contractors, you need a contract in place.
With this in mind, we've covered everything you need to know about independent contractor agreements. From who's responsible for managing them and what should go in them to how they differ from ordinary employment contracts.
You also have access to our free independent contractor agreement template to help you get started.
An independent contractor agreement is a legally binding contract between a business (the client) and an individual or entity providing services (the contractor).
This legal document outlines the responsibilities and deliverables of the contractor. As well as the compensation, deadline, and terms of payment for each party.
An independent contractor agreement clarifies the working relationship, sets expectations and provides a layer of protection for both parties involved.
Like this template? Check out our other popular employment contract templates:
The main goal of an independent contractor agreement is to clearly define the nature of the relationship between the client and the contractor.
It clarifies that the contractor is not an employee of the business and therefore is responsible for their own taxes and benefits. It also provides a detailed outline of the services the contractor will provide, how and when payment will occur, and the confidentiality and intellectual property rights regarding the work produced.
By providing this clarity and certainty, both the business and independent contractor can trust that their interests will be protected, and that they'd have terms to fall back on and refer to if a contractual dispute arose. You can see an example of this in the independent contractor agreement sample above.
Typically, the responsibility for managing independent contractor agreements lies with a combination of parties:
However, in smaller companies, this task could be left to business owners or managers.
A well put together independent contractor agreement template should consider the following:
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This framework helps to establish solid foundations for the working relationship between the client and the contractor. It does so by addressing potential issues before they arise and ensuring both parties are on the same page.
Although independent contractor agreements and employment contracts serve similar purposes - defining the terms of a working relationship - there are some fundamental differences between them.
Let's run through the main differences in more detail.
An independent contractor agreement makes it clear that the contractor is not an employee, but a self-employed person. This means the contractor is responsible for their business expenses and must pay their taxes, including self-employment tax, for example.
Conversely, an employment contract establishes the worker as an employee of the company, with the employer responsible for withholding and paying income tax, social security, and certain other taxes on behalf of the employee.
Employees are typically eligible for certain benefits, like health insurance, retirement contributions, paid time off, and workers' compensation coverage.
They are also protected by labor and employment laws, such as minimum wage requirements and overtime pay, depending on the jurisdiction.
Independent contractors, on the other hand, don't receive these benefits from their clients and aren't covered by these protections.
An independent contractor agreement generally allows the contractor more control over how they complete their work. They can decide on their work schedule, tools, and methods, as long as they meet the terms of the agreement.
In contrast, an employment contract usually means the employer has a right to control when, where and how the employee performs their duties.
Employment contracts often envisage an ongoing, indefinite relationship, subject to termination clauses. Independent contractor agreements, however, usually have a fixed term that is based on the completion of a specific project or a defined period.
Employment contracts often stipulate that all work product created by an employee during their employment belongs to the employer. While this can also be the case in an independent contractor agreement, it's essential to clearly define intellectual property rights as they may not automatically default to the client.
These differences underline the importance of choosing the correct type of agreement to fit the nature of your working relationship. They also mean it's important to consult with legal counsel to ensure you're making the right choice and protecting your interests.
Traditionally, independent contractor agreements are drafted by the client's legal team, reviewed by the contractor (and their legal representation), revised if necessary and eventually signed by both parties.
The process is often manual, involving multiple iterations, email threads and numerous different tools. The most tiresome part of the process tends to be the contract drafting stage, though.
Each contract is drafted by the legal team from scratch or using parts of an existing contractor agreement template. The independent contractor agreement then needs to be populated manually before it can be shared for review and negotiation.
The traditional negotiation process isn't much better. The parties often jump back and forth between email threads and World files to agree the final terms of the partnership. This can be lengthy and time-consuming, delaying projects that require the independent contractor's services.
Once they've agreed on a set of terms, they'll need to move the final copy of the contract into an eSigning tool to get it signed. Post-signature, the agreement is uploaded to a shared file of some sort. In many cases, it's never looked at again, let alone tracked.
Fortunately, it's possible to automate independent contractor agreements and streamline the time-consuming contract admin that follows. It really is as easy as setting up an independent contractor agreement template in Juro.
Let's run through a quick overview of what the process of automating an independent contractor agreement looks like using contract management software.
When the business realizes it wants to onboard a new independent contractor, the project owner can quickly generate an independent contractor agreement using an automated contract template hosted in Juro.
This template will have been pre-approved and defined by the legal team, minimizing the need for review and approval later down the line.
The independent contractor agreement is then populated automatically, either using your responses to a simple Q&A form, or by pulling the data in from another business system via an integration. This eliminates the need for manual data entry and reduces the scope for errors.
The result? A watertight independent contractor agreement that:
1. Can be generated in seconds without legal expertise
2. Maintains with the terms and conditions set out by legal
3. Is ready to be shared with counterparties for review
But Juro isn't just great for automating contracts. Juro's collaborative contract management platform streamlines the entire contract workflow, allowing users to agree and manage contracts in one unified workspace. This means that they can:
If you're looking to move your independent contractor agreements out of Word, hit the button below.
Juro is the #1-rated contract platform globally for speed of implementation.
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