Updated November 25, 2020:

An independent contractor agreement in Utah formalizes the relationship between an employer and a contractor. This agreement protects both parties and helps both the employer and the contractor understand their responsibilities.

Basics of Independent Contractor Agreements

When an independent contractor agrees to provide services to a business entity or an individual, an independent contractor agreement makes the arrangement legally binding. An important thing to understand about independent contractors is that they are not employees, so they won't receive benefits that normal employees would enjoy.

Using an independent contractor agreement is the best way to outline what services the contractor will provide and any terms and conditions that apply while they are rendering services. Without an independent contractor agreement, the contractor may have a hard time determining what work they should perform, the compensation they will receive, or the terms with which they must comply.

Contractor agreements are especially beneficial to the business or individual that needs to hire the contractor. The independent contractor agreement proves that the contractor is not actually an employee and will also make it easier to terminate the relationship with the contractor if something goes wrong.

When writing an independent contractor agreement in Utah, it is important to include clauses that:

  1. Identify all parties in the contract.
  2. Outline the services the contractor will offer.
  3. Define the length or term of the agreement.
  4. State what the contractor will get paid.
  5. Discuss what expenses the contractor must pay and what the covered expenses will be.
  6. State that the contractor is not an employee and is not entitled to the benefits of an employee.
  7. Outline how to end the contract early.
  8. Prevent the contractor from revealing any information they learn about the business during the term of the agreement.

Should You Hire an Independent Contractor or an Employee?

As your business grows, you will need help keeping up with your daily workload. While you could give up some equity in your company to get help, the better idea is to hire either an independent contractor or an employee.

On the surface, it may seem like there's no difference between independent contractors and employees. Take a closer look, however, and you'll see that there are some major differences between the two. Understanding these differences will help you decide which you should hire.

Security is the biggest benefit of hiring an employee. A formal employer-employee relationship will provide you with much more protection than you might receive with an independent contractor agreement. The reason for this is that a variety of laws at both the federal and state levels apply to employees.

With an employee, you'll also have a lot more control over how and when work is done. Your relationship with your employee is legally binding and allows you, the employer, to oversee how your employee performs their duties.

The drawback of hiring employees, however, is that the hiring process is much more complex and lengthy. With an employee, you'll need to review applications and arrange interviews. Once you've found someone to hire, you'll also need to gather a variety of information about your employee so that you can properly pay taxes.

Hiring an employee also requires you to include several different factors, including:

  1. Wage requirements.
  2. Workers compensation.
  3. Employee benefits such as insurance and pensions.

When you hire an independent contractor, on the other hand, the relationship will be much less formal, even if you draft an independent contractor agreement. The agreement between you and the contractor only applies to a specific project, meaning you wouldn't be able to force them to do additional work the way you would with an employee.

While you won't have as much control over your contractor, you will receive tax-related benefits. You are only required to issue a contractor a 1099 form if you pay them more than $600. So, if the job is limited, you probably won't have to worry about taxes. Minimum wage requirements do not apply to independent contractors, and you also won't have to worry about providing benefits.

If you decide to use an independent contractor, be aware that your relationship only lasts for the duration of the contractor agreement. After the agreement ends, the contractor holds no responsibility to you or your business, so you shouldn't use a contractor for your most important business tasks.

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