MBO Partners shares three excellent reasons why every independent contractor agreement should be documented with a written agreement.
Here are three key reasons why you should consider using a written agreement in your next independent contractor engagement.
1. A Written Agreement Defines Project Details
When crafting a written agreement, take time to discuss the scope of work in detail. Include a description of the work to be completed as well as specific deliverables, what the final product will entail, and a timeline. Putting details in writing will help prevent missed deadlines and incomplete work. It’s also important to agree to and include a process to follow in the event of unforeseen changes that are outside of the original scope of work. Having a process for addressing scope creep can help you avoid difficult interactions or conversations down the road.
You’ll also want to include the agreed upon bill rate along with payment terms such as how and when you will pay the independent contractor, and how and when they will invoice you. Ensure that payment is interwoven with concrete deliverables and discuss any potential additional costs or expenses that may arise.
Lastly, you’ll want to include termination conditions—the rights of both parties to cancel a contract. In the event of a worse case scenario such as a breach of contract or nonpayment, this will be an important section to reference.
2. A Written Agreement Secures Legal Protection
A written contract is particularly important because it provides legal protection both for your company and for the independent contractor. In this regard, there are a few specific topics you’ll want to consider.
Independent contractors are responsible for providing their own insurance, but it is still smart to safeguard against the potential financial burden of a lawsuit. Include a clause that states you are not responsible for providing liability insurance and that the independent contractor is not covered by your company’s policies. Depending on the type of service the independent contractor is providing, you may consider requiring general business liability insurance or additional insurances as needed.
You’ll also want to discuss and include rules around ownership of intellectual property, and confidential information such as financial data, business plans, and trade secrets, if applicable to your business.
Lastly, an indemnity clause can help manage potential risk. Mutual indemnification will commit both you and the independent contractor to compensating each other for any harm, liability, or loss that may arise out of the contract.
3. A Written Agreement Establishes Classification Status
One of the biggest risks of engaging independent contractors is employee misclassification. However, a written agreement is a great way to help establish independent contractor status.
Read the full story at Three Reasons to Use a Written Independent Contractor Agreement | MBO Partners
