Independent Contractor Agreement

An independent contractor agreement, or freelance agreement is a legally binding contract between two parties for a particular project or service. An independent contractor agreement is typically presented before the project is to begin. An independent contractor usually has a specialized set of skills that makes them the ideal candidate for the project or desired service. An independent contractor agreement is sometimes paired with a confidentiality agreement or non-disclosure agreement (NDA). In some situations, an independent contractor may have to sign a separate non-compete agreement depending on the nature of the business and scope of work. This sample independent contractor agreement can be used as a guide when drafting your own for your company’s needs.

What is in the Independent Contractor Agreement Template?

• A freelancer agreement is used when an individual is hired to complete a specific task or service on a long or short-term basis.
• Space to clearly define the services to be performed and compensation guidelines.
• General provisions typically found in this type of agreement.
• Other names for an independent contractor agreement include Freelancer Agreement, Freelance Contractor, Service Agreement, Freelancer Contractor, or Contractor Agreement.

What is required in an Independent Contractor Agreement?

It is pertinent to identify and establish the who, what, when, where, why, and how of the independent contractor relationship.

• Who – The “who” to an independent contractor agreement identifies the specific parties to the contract. It should clearly state who is hiring the contractor and who the contractor is.
• What – The “what” to the contract defines precisely what services the independent contractor or freelancer is to provide to the client.
• When – the “when” lists the “effective date,” which is the date that the contract officially begins. The contract may include an end date, but some do not. If it does not include an end date, the agreement should have a termination clause that establishes how the agreement is to be terminated and if any notice is required.
• Where – Most of the time, an independent contractor works in a remote location. However, if they are required to work on a specific site, that should be mentioned in the contract.
• Why – There are a few distinct differences between independent contractors and employees. It is crucial that the independent contractor is not an employee and does not have the same benefits or rights that an employee is generally entitled to.
• How – The “how” of an independent contractor agreement establish how the independent contractor will be paid. The agreed-upon hourly or flat fee rate should be included in the contract.

Why do you need an Independent Contractor Agreement?

There are many situations when an independent contractor agreement may be needed. Most businesses utilize independent contractors for writing blogs, redesigning websites, software coding, research, and much more. Event planners also use independent contractor agreements such as wedding planners, photographers, catering services, and other events.

What Should be Covered in an Independent Contractor Agreement?

An independent contractor agreement may vary based on the client’s needs and project. However, here are a few essential pieces to an independent contractor agreement:

• Parties to the agreement (Client/Company and Independent Contractor)
• Effective Date
• Description of Services
• Completion Date / Termination policy and procedures
• Compensation / Payment Structure
• Indemnification provision

Common Mistakes to Avoid when Drafting an Independent Contractor Agreement

Legally binding contracts are the best way to ensure both parties are on the same page about the service or project. A few common mistakes include:

• An overly broad and vague description of services to be provided
• Inaccurate Information /misidentifying the parties
• Compensation
• Dates and project deadlines
• Failing to consult an attorney to obtain legal advice

Differences Between an Independent Contractor and Employee   

There are some major differences between an independent contractor and an employee. The differences mainly lie within the legal and tax purposes that an employee has that an independent contractor may not. Independent contractors are usually self-employed and use their own equipment. One significant distinction is that independent contractors are responsible for paying their own taxes, whereas, with an employee, the company is responsible for paying state and federal taxes (employment taxes, income taxes, social security). Freelancers are not granted vacation pay, sick pay, or workers’ compensation. Freelancers are also not entitled to unemployment compensation. Independent contractors are not usually entitled to employee benefits and are responsible for obtaining their own health insurance coverage. Most businesses offer employees insurance or other benefit packages. Misclassifying an independent contractor as an employee or vice versa could have serious legal and tax consequences.

How to Customize your Independent Contractor Agreement

An independent contractor agreement will vary depending on the scope of work, industry, and other related factors. Each state may have different state laws regarding what should and should not be included in an independent contractor agreement. It is a good practice to contact an experienced attorney to review your business contracts.

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