How To Hire an Independent Contractor
Many companies and small business owners have achieved incredible success by leveraging the services of independent contractors. These individuals bring numerous benefits to business owners, including in-demand skills and cost-saving opportunities.
So, who are they? Independent contractors are people or firms hired to provide specific services to organizations but as non-employees.
When hiring independent contractors, consider their skills, knowledge, pay rates, and availability. These factors can affect your project’s progress and completion. Pick contractors who align with your requirements to ensure a successful outcome.
This article will help you learn about independent contractors, their benefits, and how to attract and hire the best talent.
What is an independent contractor?
An independent contractor is a person or business that enters into a contract with an organization to provide specific services ranging from IT support, content development, and customer service to more physically intensive tasks, such as plumbing and painting. However, they’re not classified as an employee of that entity.
All independent contractors’ responsibilities and work are spelled out in a written contract—including project timelines, deadlines, pay rates, and payment methods.
Why hire an independent contractor?
Apart from tight deadlines with limited human resources, some reasons working with independent contractors may be a better fit over hiring employees include:
- Specialized expertise. You can hire independent contractors to access in-demand skills and knowledge quickly.
- Cost benefits. Independent contractors can help you save money since they aren’t entitled to employee benefits, such as paid time off, retirement perks, and health insurance. You also don’t have to pay Social Security and Medicare taxes or engage in tax withholding since independent contractors handle their own self-employment taxes or income tax.
- No training needed. Independent contractors have the skills and knowledge to perform their work, so you don’t have to spend money on training and onboarding.
- Minimal supervision. Since independent contractors are self-employed, they have a high degree of control over their work. This can help ease the pressure by allowing you to focus on other priorities.
- Staffing flexibility. Working with independent contractors allows you to scale up or down your business without experiencing major performance issues.
- Low overhead costs. Hiring independent contractors reduces overhead costs compared to recruiting full-time employees.
What to look for in an independent contractor
When hiring independent contractors, consider their skills and knowledge plus the following aspects:
- The contractor’s time zone and working hours
- Visa and work permit requirements
- Preferred currency and supported payment methods
How to hire an independent contractor in 6 steps
Are you looking to hire a contractor? We cover the basic steps to follow.
1. Find the best independent contractor for you
You need a clear project description and performance expectations when looking for an independent contractor. You should highlight the skills and qualifications you’re looking for to help applicants determine their suitability for the job.
Once you have a clear project description, post the job on various platforms where people can see it. A great place to search for the right contractor is Upwork, the world’s largest work marketplace.
You may receive hundreds of proposals on Upwork from people willing to work with you. Go through these proposals and shortlist those who match your requirements. Interview those you think are a good fit for the job to understand them better before hiring.
2. Create an independent contractor agreement
Once you’ve found a suitable candidate, draft an agreement stating the work the independent contractor will do with deliverables, timeline, and communication processes.
In the contract, clarify if they may use subcontractors, whether a nondisclosure agreement is needed, and who owns the rights to the intellectual property.
The contract should also cover your payment schedule, terms, and currency. Before finalizing the agreement, you may need a background check on the contractor.
3. Verify compliance with local laws of the contractor
You can hire contractors from different countries and states if preferred. However, national and federal laws applicable in these areas may differ from those in your area.
Apart from rules set by the Department of Labor (Fair Labor Standards Act), states across the U.S. have different requirements and labor laws regarding new hire and independent contractor reporting. To avoid legal issues, check and adhere to local employment laws.
4. Organize the appropriate tax information
As you work with independent contractors, use relevant tax forms to collect the appropriate information relating to employment taxes and submit it to the required agency.
When in a contractor relationship, check if the party has a valid employer identification number or taxpayer identification number (ID number) for tax purposes.
For contractors in the U.S., you may have to fill out federal tax form 1099-NEC or form 1099-MISC to report nonemployee compensation and form W-9 to collect specific tax information, such as their Social Security number (SSN). Independent contractors outside the U.S. have to fill out W-8 BEN.
You can find more tax and revenue information by visiting the Internal Revenue Service (IRS) or the websites of official tax collection agencies in the countries where your contractors are located.
Note that the misclassification of employees as contractors may attract fines and penalties. Take time to sort these issues out or seek legal advice from tax experts.
If you’ve misclassified an independent contractor, fill out form SS-8 to determine the worker’s status for federal employment taxes and withholding.
Learn more about worker classification between employees and independent contractors.
5. Coordinate work with the independent contractor
As you work with contractors, set clear expectations to ensure they perform the work in the contractor agreement. At the same time, give them the freedom to do their tasks rather than micromanaging.
Independent contractors can work under minimal supervision—so you don’t have to keep looking over their shoulders, worrying about the quality of their work.
Once you receive the deliverables, go through them and provide feedback to the contractor. If any areas require change, work with the contractor to implement them until the terms of the contract have been met to each party’s satisfaction.
6. Pay the independent contractor
After the contractor completes their work, pay them as agreed in the contract. Many independent contractors will ask for a part of the fee upfront. This gives them the security they need to commit time and materials to the project. Once the work is complete, payment should be made in full.
When working with independent contractors on Upwork, you can pay an hourly wage or a fixed price for the entire project or by milestone. To give parties peace of mind, payments can be kept in escrow until the project has been completed. Learn more about freelancer payment rates on Upwork.
Independent contractor FAQs
How long does it take and what does it cost to hire independent contractors? Learn more about these factors in the following sections.
How much does it cost to hire an independent contractor?
The cost of hiring an independent contractor depends on the following factors:
- Project requirements. Depending on your project’s complexity, you may have to pay more or less to hire a contractor.
- Location. Contractors in certain regions may charge higher rates than those in other areas.
- Skills. Contractors charge different pay rates depending on their skills and areas of practice.
Most independent contractors have flexible rates, meaning the total cost of hiring may depend on your negotiations. However, freelance companies may set minimum wage or pay rates.
For example, the minimum hourly pay is $3, while the fixed price for projects is $5 on Upwork.
How long does it take to hire an independent contractor?
Technology has made meeting and working with people easier. You can find freelancers selling their services on job sites like Upwork.
That said, the time to hire an independent contractor depends on your priorities and the project’s urgency. You can hire a contractor a few hours after advertising the job, or you can take longer to review their profile before hiring.
If you post a job on Upwork, you can receive hundreds of proposals from qualified freelancers. This makes Upwork one of the best places to hire contractors quickly.
Hire the best independent contractors on Upwork
Independent contractors bring many benefits, including lowering project costs and fast service delivery. They can also work under minimal supervision, allowing you to focus your time on other things. Plus, contractors don’t require major training since they have the industry skills and knowledge you need.
If you’re looking for a potential contractor to take on your projects, consider searching Upwork. Many experts are willing and ready to work with you, including web developers, graphic designers, writers, marketing strategists, and financial specialists.
This article is intended for educational purposes and should not be viewed as legal or tax advice. Please consult a professional to find the solution that best fits your situation.