As an entrepreneur, it’s important to keep your business running smoothly and efficiently. A self employed contractor agreement can help you do that by setting out the rules of your relationship with your contracted worker (the contractor). This way, you know exactly what the contractor expects from you, and what you expect from him or her in return. Here are tips to keep in mind when writing one for yourself.
- KNOW WHAT YOU’RE BUYING
A contractor agreement is a legally binding contract. It clearly sets out what you expect from a contractor (payment, timeline, etc.) and what the contractor expects from you. You need to know exactly what you are agreeing to before putting your signature on the dotted line.
- DRAFT IT YOURSELF
You should make sure this contract is primarily drafted by you, not the contractor. This way, you have more control over what is in it, and can better protect your rights.
- BE CLEAR ABOUT DEADLINES
You should be clear about when the work is due to be completed. This includes making sure the contractor understands any checkpoints along the way and what they mean (such as a draft, final copy, etc.). It also helps to set a deadline for completion. This makes it harder for a contractor to ignore deadlines and gives you a better idea of how things are progressing if something isn’t quite on schedule. Also, remember that even though you both agree on a start date, there may be delays caused by circumstances out of your control (such as bad weather).
- STIPULATE PAYMENT TERMS
You can have the contractor pay you any way that suits you. One common method is simply to agree on a schedule of payments and indicate how much you are willing to pay the contractor at each stage or milestone. You can also specify a fixed amount (such as $1,000) that they should pay upon completion of each stage of the job, or by when they invoice you for it. You may want to include a financial penalty if they don’t meet their timelines for payment (such as having half their payment withheld if it’s late).
- PUT AN END DATE ON THE CONTRACT
You can include an end date for the contract in the agreement. This way, if the contractor is late at a certain stage of work, you know when you can terminate the agreement (usually the last day of a certain stage). It may also be useful to state that if there are delays beyond your control, you will extend the timeframe for completion. However, note that this does not allow you to prolong payment of invoices beyond their stated terms.
- SPECIFY WHO’S RESPONSIBLE FOR TAXES
A contractor should pay taxes on payments made to you under this agreement. The contractor should handle all tax returns and any required business licenses or permits resulting from their work.
- DON’T FORGET CONTRACTOR’S LIABILITY INSURANCE
If you agree to hire a contractor, make sure he or she has liability insurance. This protects you in the event of property damage, bodily injury, or other accidents related to the work they do for you. Your contract should clearly state that if there is an accident on site that causes damage to anyone or anything, it is the contractor’s responsibility. Also, ensure that your insurance covers the contractor’s work.
A contractor agreement is an important tool to help you manage your relationship with a contractor without the need for endless phone calls, emails and discussions. It keeps things clear, and protects you in case something goes wrong. Remember to keep the details brief and to the point so it’s easy to read and understand. And if you’re not sure how to write it, here are some sample contracts that can help you get started.