Companies must have a good form of agreement when hiring independent contractors. A good agreement covers the following:
- Services to be performed. This part of the contract should carefully spell out the services to be performed. Make sure you have spelled out all of the things you expect the independent contractor to accomplish for his or her compensation, but not how he or she should perform the work.
- Timing. The contract should spell out when the services are to be performed. Also consider a late-penalty fee if the services are not performed on time, or a bonus if finished early.
- Payment. The payment clause of the contract should address the amount to be paid, the manner payment is to be paid (e.g hourly or project basis), and when payments would be due. From the company’s perspective, it will want to ensure that it is reasonably satisfied with the quality and scope of services rendered by the contractor before being obligated to pay the entire amount.
- Reporting. The contract can also address how often the contractor needs to report on his progress, and who to report to. But be careful here — excessive control over the activities of the contractor might result in him being deemed a company employee for tax purposes.
- Confidentiality obligations. The contract should make clear that the contractor must keep proprietary information it learns about the company confidential, and not use such information other than for the benefit of the company.
- Work for hire. The contract should typically provide that the work or product developed by the contractor for the company will be deemed “work for hire” under the copyright laws and owned solely by the company.
- Warranties. Make sure to spell out any warranties from the contractor, such as the contractor warranty that the services will be performed in a high quality, professional and timely manner.
- Subcontractors. If the contractor expects to use any subcontractors, consider providing that you have approval over these subcontractors and that they execute an appropriate agreement with you.