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Understanding Independent Contractors

More and more employers involved in unconventional line of work prefer to hire individual contractors as some expenses associated with regular employees are not applied to these kinds of workers.

Determining Individual Contractor

There are instances when these people would be employed by a single company and would not be allowed to do work for other companies. This may present confusion and so the IRS has posted three issues which could determine whether or not they are employees or individual contractors.

- Financial Control

- Behavioral Control

- Relationship with Other Parties

Pros and Cons

Having control of your own expenses and the amount of work to be done may sound tempting. However, people should still think about the other advantages as well as the downside of being an individual contractor.

Advantages:

- They are free from rules and standards on how to operate efficiently.
- In some cases, they are able to acquire more than one client.
- They can reject or accept jobs from clients.
- They have the power over their expenses and income.

Disadvantages:

- They are the sole owner of their operation and so are responsible for bearing the cost of their production.
- Their income taxes are far more complicated than a regular employee.
- They would not be eligible for government’s financial aids, incentives, and other benefits.
- The person would have to deal with his personal insurance unlike employees who are at times offered as such.
- Individuals who are not employees are not protected by laws on employment and can be subjected to discrimination and other unfair treatments.

Involvement in a Tort

If the individual contractor is involved in a dispute while complying to his contract with his client, the client (or the employer) cannot be held liable. However, if the conditions below existed, he may be held partially liable for the occurrence:

- The injury / damage have been inflicted by the contractor in the employer’s property or place of business.

- The job to be done by the contractor is hazardous or involves high risks.

- The employer considers the individual contractor as if he’s an employee.

Good Individual Contract Agreement

In order to protect his best interest, it would be best if individual contractors would know what a good contract should basically contain. Here are some of them:

- What is the job to be done

- How long should the job be done

- How the compensation payment should be done

- How often should the contractor update his client on developments

- Confidentiality of the job

- The company would have the right over the result of the job

- Assurance from the contractor that the job will be done

Making these agreements can be too complicated especially for someone who does not have the knowledge needed to make an effective contract. However, there are lawyers who can draft contracts and make sure that each provision is lawful and fair to both parties.