Hiring An Independent Contractor: What You Need To Do

Last Updated:
August 20, 2023
Kay Nicole

hiring an independent contractor

As a small business owner, you’ll have quite a bit of work to do. There might be too much for one person to handle, but you mightn’t have the resources to hire proper employees. That doesn’t mean you’re out of options, as you can consider hiring an independent contractor.

Outside of being more affordable than traditional employees, they’re just as effective and make sure they get their work done. They’re the more cost-effective option to go with, making them great options when you’re on a tight budget.

You can even work with them only when you need to, saving you money when you don’t need their help. You’ll have to keep a few things in mind when hiring an independent contractor, some of which mightn’t be obvious.

It’s worth going through what these are, starting with what you need to get out of the way before hiring them.

What To Do Before Hiring An Independent Contractor

1. Get An EIN

Before you can hire anyone, you’ll need to make sure your company is actually registered and legally allowed to hire someone. As part of that, you’ll need to get an employer identification number (EIN). You’ll need this in almost every circumstance where you want to hire an employee or contractor.

The only exception to this is if you’re working by yourself and run a sole proprietorship. Outside of that, you’ll need an EIN, and you should get this before you start looking to hire anybody. It might take a little while to get this, so it’s worth getting out of the way before you start looking for somebody to hire.

2. Create The Agreement

Before you work with anyone, you’ll need to have some form of agreement in place with them. This usually comes in the form of a contract, and you’ll need to come up with this before you hire an independent contractor. You’ll have to outline various parts of your relationship with them going forward, including:

  • Ownership rights
  • Project timeline and requirements
  • Payment terms
  • Termination clause
  • Confidentiality agreements

Once you’ve a contract drawn up, you’re in a better position to go forward with hiring someone. Make sure you’re as in-depth as possible with it.

3. Define The Relationship

Before hiring an independent contractor, you’ll have to figure out what kind of relationship you want with them. You’ll obviously be their employer, but you might want to define everything more specifically than that. Get into the weeds with it and put the effort into defining everything you can.

While you can’t dictate how and when an independent contractor works, you could come to an agreement with them from the outset. Putting everything you want and need in the job description when you’re looking for someone helps with this. The more defined everything is ahead of time, the better it’ll be long-term when hiring an independent contractor.

At a minimum, you’ll find someone that meets your exact requirements, and you can start everything off on the right foot.

Now you’ve hired an independent contractor, you might think you’ve done all the hard work. That isn’t the case, though, and there are a few other areas you’ll need to master and sort through now you’re working with them.

What To Do After Hiring An Independent Contractor

1. Get Scheduling Right

Unlike traditional employees, independent contractors mightn’t just work for you. They could have a few other companies they’re working with, and they’ll carefully balance their time with each of their employers. There are more than a few ways to make it easier for everyone involved.

Using a field service software or similar tool lets you schedule out when they’re working for you and keep an eye on them when they’re working. Figure out what you’d like to know about when they’re working, and you shouldn’t have a problem finding the right tool to help you manage it.

Use it to schedule out when they’re working exclusively on your company.

2. Follow Best Practices

There’s no specific way to work with an independent contractor, and how it goes depends on you and them, as well as the relationship you’ve built with them. That doesn’t mean there aren’t some best practices you could follow when you’re working with them. You’ll be better off by following them as much as possible.

Some of the more notable best practices when hiring an independent contractor include:

  • Get invoices from them before making any payments
  • Keep a record of everything you ask them to do and they complete
  • Communicate with the regularly
  • Be clear with what you’re asking them to do and how they should do it

These should help to make sure everything goes as smoothly as possible.

3. Get Through Legalities

You’ll already have gotten a few legalities sorted when you’re hiring an independent contractor, like your EIN and contractor agreement. There are a few others you’ll need to sort out now you’ve actually hired them, though. Get these done as early as possible so you don’t have anything to worry about.

While these can vary depending on where your business is based, there are still a few areas to focus on. If you’re in the United States, for example, you’ll need to get the contractor to fill out a W-9 or W8-BEN to keep you legally covered. Then there’s the 1099-NEC and other forms to fill out. Know what documents you need to file and actually file them.

Hiring An Independent Contractor: Wrapping Up

Hiring an independent contractor makes a lot of sense for small business owners. They’ll get work done to a high standard and will be much more affordable than traditional employees. There’s no reason not to consider them when you’re on a tight budget but need some extra help.

You’ll have to get through a few things before and after you hire them to make sure everything’s above board, though. While they’ll take a little bit of work, it’ll be more than worth the effort. You’ll have the help you need without needing to spend too much money on it.

Why not consider it?

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