Contractor Contracts Sample: Everything You Need to Know
Contractor contracts samples, or Independent Contractor Agreements, are when two parties form a written agreement about a certain project or service.3 min read
Contractor contracts samples, or Independent Contractor Agreements, are when two parties form a written agreement about a certain project or service. A person or company is hiring another to help them with a task temporarily. This is different from an employment agreement, as the contract defines why the hired party is not an employee. This is for tax and legal purposes.
What to Include
No matter what the task is, the Independent Contractor Agreement ensures both parties are protected. The document contains the following parts:
- Hiring company (the entity or person who needs the services).
- Contractor (the person or entity getting hired for the task).
- Services (a detailed description of the work product that will be delivered or task that will be performed).
- Compensation (how often and how much the contractor will be paid).
- Effective date (when the agreement goes into place and the job starts).
- Termination (if the hiring company can end the relationship when they wish and how much written notice is needed).
The contract should also include fringe benefits, which means the contract can't participate in the employee's sick pay, pension, unemployment benefits, vacation pay, or health. Contracts can hire assistants but will be in charge of their expenses, such as Medicare and Social Security taxes. An employment agreement is used when hiring an employee for a longer duration.
The document should also include the following details:
- Assignment (neither party can transfer the right for the job to be completed to another party unless written permission is given).
- Binding effect (the agreement is valid even if another company or person takes over the contractor or company).
- Entire agreement (previous agreements aren't valid anymore and any changes made in the future must be in a written amendment).
- Expenses (every party is in charge of their own out-of-pocket costs unless the hiring company pre-approves specific costs and invoices are sent in).
Other Names for an Independent Contractor Agreement
There are other names an Independent Contractor Agreement may be known as. These include a Consultant Agreement, Subcontractor Agreement, Freelance Contract, Consulting Services Agreement, and General Contract Agreement.
Differences Between a Contractor and an Employee: Who Should You Hire?
An Independent Contractor Agreement is needed whenever a business or person is hired to perform a task that has a set start and end date. A contractor has more autonomy or control over how to finish the project. There are a certain set of skills a contractor has that's required for the task or project.
An independent contractor has the following qualities:
- In control of what's done and how.
- In charge of own injuries when working.
- Pays for their own health insurance.
- Responsible for their own taxes.
- Purchases their own equipment for work. Gets evaluated on end product or results.
An employee has the following qualities:
- Permanent or long-term basis.
- Covered by the company's work insurance.
- Works for someone else (an employer).
- Employer covers any injuries on the job.
- Employer tells them what to do and how.
- Company provides equipment and tools.
Why an Independent Contractor Agreement Isn't for Employees
There is a difference both logistically and legally between an employee and a contractor. Independent contract agreements should only be used for those who are considered contractors. Independent contractors have more control over how their work is done, but the employee also has fewer responsibilities to them compared to a full-time employee.
Do You Need an Employee or a Contractor?
There is no set answer for this, as it varies. There are specific characteristics to keep in mind when seeing who classifies as an employee or contractor. No matter which one gets hired, it will need to be put into writing with an Independent Contractor Agreement or an employee agreement.
There are certain situations where you'll need an independent contractor compared to a business. These include around the house services like pet sitting, repainting the house, landscaping services, plumbing needs, fixing the air conditioning, or hiring a contractor to look over general home improvement in someone's house. It can be easier and cheaper to hire an independent contractor as opposed to a larger company in cases like this.
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