Typical Fears Related to Hiring Independent Contractors

Lynn Martelli
Lynn Martelli September 15, 2023
Updated 2023/09/15 at 4:25 AM
Typical Fears Related to Hiring Independent Contractors

Independent contractors are an excellent solution for managing fluctuations in business workload. They are usually less expensive than employees because you don’t have to pay them benefits, withhold payroll taxes, or provide health insurance. However, it’s important to ensure you adhere to local employment laws when engaging independent talent. It can prevent misclassification risk, which can lead to costly legal problems.


The initial cost of hiring an independent contractor can be higher than a regular employee. Still, they are typically more experienced in their field and will work quickly to complete the work. You don’t have to worry about paying them overtime, employment taxes, or workers’ compensation. Because they are their own business, independent contractors typically have their own tools and office space from Roll by ADP, which can save you money. They also don’t need to go through the onboarding and training process that employees do, making them a quicker resource for completing your project and paying them. However, the turnover rate for contractors can be high as they seek new assignments and various projects to complete. It could cause delays in output and cause you to produce less consistently over time. In addition, because they don’t have a long-term relationship with your company, they may not feel the same sense of loyalty that you would expect from a full-time employee. Additionally, they might not consider your intellectual property their own unless you include language in the contract indicating copyright ownership.


Hiring contractors is a great option when your company needs specialized expertise quickly. However, completing the hiring process and finding the right candidates can take time. It is true if you’re looking for workers with specific credentials like degrees or licenses. Another factor to consider is onboarding. It is orienting and training new employees to work effectively in your company. Independent contractors don’t typically need the same level of onboarding, so they can get to work more quickly. Finally, you’ll also need to research labor laws in your country and countries where your contractor is. These regulations govern a wide range of topics, including whether you can hire a person as an independent contractor and how much tax you must deduct from their pay.


Independent contractors operate as small businesses and can work on multiple projects simultaneously. They are responsible for overhead costs, including equipment, supplies and workspace. They also pay FICA taxes. It can lower the cost of hiring compared to employing an employee. However, the contractor may not be as loyal to your company as an employee would be. When the contract ends, they can decide not to continue working with you or may find another client. Many companies use independent contractors for specialized skills they may not have in-house or to alleviate heavy workloads, while full-time employees focus on core functions. However, this can cause a lack of consistency and may disrupt workflow. Reviewing labor laws in the countries you are doing business in is important when hiring contractors. Misclassifying employees as contractors can lead to fines and penalties for the company. In addition, it’s essential to communicate clearly with the contractor about how work will be managed and the timelines. It will avoid misunderstandings and disagreements.


Independent contractors aren’t covered by workers’ compensation, which can leave the company vulnerable to lawsuits. It is especially true if the contractor is uninsured and has an accident. Adding insurance requirements to contracts and ensuring that independent contractors are bonded is one way to reduce this risk. Iit’s important not to interfere with the contractor’s work because this could create an impression that they are employees and result in misclassification. It could include attempting to dictate how and when they perform their work or providing access to company equipment and facilities.

Additionally, it’s important to establish an agreement with contractors that outlines their responsibilities and the project details, including deliverables, prices, and deadlines. This contract is also a good place to include nondisclosure agreements, intellectual property declarations, and other necessary documentation. Regarding project completion, you may add a clause requiring a 90-day review of network activity and attestations for the return of devices and documentation. It can help prevent misuse of personal information or stolen data by a former employee.


Having a contract that includes the project description, expectations, payment rates and terms, insurance, indemnity, copyright ownership, and intellectual property rights. It will provide you and the contractor with a transaction record in case of disagreements. To ensure the work is completed promptly, set a specific timeline with the contractor. It may include key milestones and deadlines. It is important because contractors may be working on other projects simultaneously, and they might only sometimes be available to meet your preferred timelines. Make it clear to the contractor that they are not a company employee. It could be using different badges for contractors, not including them on company email signatures, or keeping contractor files separate from employee files. Clear boundaries will also help avoid misclassification risks when a business treats an independent contractor like an employee. It can lead to tax penalties and fines from the authorities.

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