How to Hire a Contractor (Update 2021)
Hiring a contractor can be a good option if you have a short or set project to deal with. Here’s how to hire a contractor.
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In today’s economy, not every person helping you meet your business needs is necessarily a full-time employee. Indeed, contractors, consultants, and freelancers are commonplace for many businesses. Here we discuss the pros and cons of hiring a contractor.
- Contractors are specialists in their field
- They are a great option for companies that need projects to be completed within certain time frames
- Contractors do not have the same rights as full-time employees
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Benefits of hiring a contractor
Here are some of the key benefits of hiring a contractor.
Contractors often receive a higher hourly rate than full-time employees. However, unlike full-time workers, contractors do not have benefits such as paid sick leave, vacation leave, retirement benefits, office space, equipment, or training costs.
Contractors often have flexible schedules and do not require office space. This flexibility can be useful for your business, and there is also no long-term commitment to contractors. Contractors are usually experts in their field. This can reduce the resources required to train employees and lower monitoring costs.
Reducing the risk of legal action
Full-time employees are protected under Commonwealth and State laws and regulations and can take legal action against your company if they believe that their employees’ needs are not being met. This does not apply to contractors who do not fall under these regulations.
Realizing your business needs and savings opportunities with contractors is a worthwhile discussion in management. It’s also possible that when you hire a contractor, you open new doors to other opportunities, or even offer a good candidate a full-time position in the future.
Disadvantages of hiring a contractor
Hiring a contractor for your company can also have some downsides as, as explained above, they charge higher rates as they consider themselves self-employed and are excluded from employee benefits. Businesses must also take a careful line so that an agreement or contract with a contractor does not become the need for government-required services.
Lack of control
Contractors are essentially self-employed – they work on their own time and can work away from the office. Unlike your employees, who can be monitored, contractors have some freedom and are largely independent, which prohibits close monitoring. Contractors may also have some employment opportunities, so sometimes your business needs may not be a priority.
Lack of continuity
Contractors come and go regularly. Unlike full-time employees, you can hire contractors to carry out short-term, long-term, or large-scale projects. One risk with hiring a contractor is that your contractor will abandon your project if one of their clients takes precedence over you. If your company needs someone on a long-term project, it might be best to hire someone full-time.
It is important to discuss the salary or payment before you and your contractor sign the agreement. As mentioned above, contractors do not perform and leave the same as full-time workers. As a result, contractors can cost more to your business.
Since contractors don’t work full-time, the work they produce may have copyright issues and it may not belong to your company either. For this reason, it is important to remember the golden rule: write it down in writing. Suppose you need to do some work on your IT systems or software and you ask a contractor for help. If you don’t have a clear, written assignment of copyright to the work the contractor is doing for you, you will not own the copyright to their work even though you paid for it. This is because copyright law requires that all copyright transfers be in writing.
As mentioned above, make sure that the relationship with your contractor is employer-contractor character. If the government reviews your company and your relationship with your contractor matches that of your full-time employees, the contractor may be able to receive benefits, employee compensation, and other regulations or intellectual property rights.
What to include in your contractual agreement
After your company decides to hire a contractor, it is important to decide what will be included in the agreement and answer these questions. What does your contractor have to do and what do you expect from the agreement? What productivity do you expect?
Since verbal agreements are subjective, it is important that you sign a written agreement that clearly defines each party’s relationship and expectations:
Below are some important aspects of your future contractor relationship that you should consider in your written agreement.
- Description of the services required;
- Description of the compensation or remuneration for the work required (this can be a fixed fee or monetary compensation based on time frames) and a payment schedule;
- Make it clear who the contractor will respond to.
- Description of who bears the costs;
- Description of the contract period;
- Make it clear that full-time employee benefits will not be extended to independent contractors.
- Description of how disputes within the company will be resolved;
- Declaration or confirmation that the contractor has taken out liability insurance;
- Description of the circumstances under which you or the contractor can terminate the contract;
- The importance of nondisclosure agreements.
A nondisclosure agreement ensures that the information disclosed between both parties remains confidential. It is important to use this type of agreement early in the hiring process so that you can speak freely with potential contractors.
Finally, make sure that the expectations of both parties are clearly set out in writing in the agreement. Additionally, it is important to avoid misunderstandings so that your company can benefit from hiring an independent contractor.