If you are an independent contractor or freelancer, you may be working for others without having a contract in place. Unfortunately, working without a written agreement makes you vulnerable to being taken advantage of. A contract is beneficial in many ways because it not only protects you legally, it also assists with scheduling issues and the overall relationship with your client because you both know what has been agreed upon and what should be expected.
Many freelancers start out believing they don’t need a contract, but most soon discover they were wrong when a client fails to pay or makes so many change requests that they don’t make any money on the job. Having a contract that allows you to charge for revisions helps ensure that you make a profit on your work.
Why are contracts so intimidating? For most people, it is the fear of the unknown. Having a contract attorney assist you with creating an agreement that works for your unique situation is important. Once you have the basic document drafted, you can use it with all of your clients, making revisions where needed to suit each job. Below are a few of the general areas you will want your contract to cover:
- Classification is key. It’s very important to classify your workers as contractors for tax purposes. An oversight on your end can lead to trouble with the IRS. Make sure you properly classify your worker as an independent contractor and lay out a few of the key factors that point to a contractor relationship (behavioral factors and scope of control, for example) in writing.
- Scope of work must be clearly defined. The work that your independent contractors will perform for your business should be confined to a certain scope, in order to properly differentiate them from an employee. This provision should therefore include a description of the services and work that your independent contractors will render for you.
- Be specific about payment. Payment details should be clearly stipulated in the agreement. While payment by the hour, week, or month usually indicates that a worker is an employee, payment that’s made based on a particular job, project, or that’s based on a straight commission tends to be more common when it comes to independent contractors.
- Explain who’s paying for expenses. It’s important that you specify who will pay for the expenses and take care of the supplies and other necessary purchases in the course of the work performed by the independent contractor. Usually, the supplies and expenses are covered by the independent contractor himself. But it’s best to have this in writing, just in case of a dispute.
- No entitlement to employee benefits. Independent contractors are not eligible for most of the benefits that employees qualify for. This includes unemployment compensation (an independent contractor is also far more free to leave whenever he or she wants to), worker’s compensation, health insurance, and disability insurance.
- Rate of pay. Your contract should clearly outline your rates and how the client will be charged. If you charge by the hour, you should include a minimum and maximum work-hour clause, which protects both you (in case you finish early) and your client (in case you take longer than expected).
- Payment schedule. Most independent contractors require an upfront payment, with the remainder being paid in installments as the job progresses. Whatever your preference is for your payment schedule, make sure it is clearly set forth in the contract. You should also state how you should get paid and whether there is a grace period after the due date.
- Point of contact. If you are dealing with a client that has several different individuals giving you feedback, it can get messy. Your contract should appoint a single point of contact that all communication should be funneled through. This prevents conflicts, confusion and double work for you.
- Cancellation fee. If the project you are working on gets cancelled, you want to make sure you get paid for the work you have performed. You may charge a flat fee or establish a cancellation fee schedule, but you want to make sure you get paid for the work you did even if it won’t be used by the client.
- Having a deadline protects both you and the client. The client needs to know when the project will be finished and you need to know how to schedule the work out. You also need a clause allowing an extension of your deadline if the client fails to provide the required information, feedback or approval in time.
To learn more about protecting yourself with an independent contractor or freelance contract, call Leslie S. Marell.