Becoming an Independent Contractor?
It’s a rewarding career, but what should you look out for?
Working as an independent contractor or consultant can be a very rewarding, lucrative and satisfying career. Beyond knowing the dynamics of your field, however, you also have to understand how to keep the business operating smoothly and how to protect yourself and your assets. What does being an independent contractor entail and what should you be cognizant of along the way?
First, an independent contractor is an individual who is self-employed and utilizes a contract agreement to provide service to a client in exchange for an agreed upon fee.
Below are some frequently asked questions and guidelines to help you better understand what consulting and independent contractor work involves.
Q. Who do independent contractors and consultants typically work for?
A. This is dependent on the industry that the independent contractor focuses on. It might include information technology, web development, consumer products, and manufacturing, to name a few. Businesses both large and small will often utilize the services of an independent contractor for a variety of jobs.
Q. How do independent contractors receive payment?
A. Typically, any credentialed organization will disclose payment terms and conditions in a written agreement. It is essential you have a signed agreement in place prior to starting any work. The agreement should specify whether the contractor is paid on an hourly or time and materials basis, or is paid a project fee based on deliverables.. It will also outline how and when payment will be made. Terms relating to pay structure should be clearly defined and everything should be put in writing then agreed to by all parties before work commences. If the organization you are working with does not supply the contract or agreement, you should have one ready to go. Contract templates for consultants are readily available through businesses that specialize in draft agreements, and can save you time and ensure all of the necessary elements are included.
Q. What, if any, risks and responsibilities are involved with working as an independent contractor?
A. Like anything, there are some risks and responsibilities associated with self-employment. These might include becoming responsible for tax obligations and personal benefits; managing billing and collections; and maintaining current and necessary licensing and insurance. You also have to consider legal responsibilities and the exposure associated with job performance.
Q. Are independent contractors protected by any employment laws?
A. While this varies by state, independent contractors and self-employed consultants typically are not protected by employment laws, making written agreements even more vital. Laws, such as workers’ compensation, which pertain to safe working environments, would not necessarily apply to independent contractors. The same is true of laws that address discrimination or harassment.
Q. If a client is unsatisfied with the quality of my performance, product or service, what are the ramifications?
A. As the contractor or consultant, you are usually responsible for satisfying specific performance expectations, which should be set in your agreement. The agreement should outline in as much detail as possible how dissatisfaction or a problem will be rectified. For instance, if it’s a product, will you allow returns for a refund, or for a service-related job, will you redo it until it is correct?
Q. What if a client asks me to sign an agreement immediately?
A. Any reputable organization should give you time to consider the agreement before asking you to sign it. If they don’t allow you adequate time to think it over or consult with others, that may be a red flag. Before signing a contract, a good rule of thumb is to give yourself at least 24 hours to review the opportunity and determine if it’s inline with your career goals, as well as discuss it with a trusted professional.
Contractual Agreements: A Necessary Part of Business
Contractual agreements are essential to maintaining mutually beneficial business relationships, especially for independent contractors and consultants. In today’s business climate, they are not only useful tools, but can also protect you, your business and your intellectual property.
If you aren’t familiar with agreements and what they should contain, there are businesses that offer contract template software and contract drafting software to help you get started. These software packages help you develop a contract specific to your needs, and will often include very specific guides such as contract templates for consultants.
There are several types of contracts to be aware of, many of which are bundled together within contract template software packages. Some include:
* Consulting Services Agreements: These specify the work to be performed and define the terms of the working agreements. It also determines the parameters of your responsibilities; the price and payment terms; protect intellectual property rights; establishes confidentiality agreements; and limits losses and liabilities.
* Employment Contracts: When hiring new employees, these will protect intellectual property rights and confidential information. It also establishes non-compete and non-hire provisions, which prevent employees from taking clients or workers from the company.
* Network Installation and Maintenance Agreements: These safeguard against financial and material loss when providing network services. It also sets price and payment terms as well as performance delivery obligations. These agreements will also apply a disclaimer that stability, safety and security of the network is not guaranteed, and will not hold you liable for loss of profit, revenue or data.
* Staffing and Placement Agreements: These set the parameters for the relationship of your personnel with the client as independent contractors. It prevents the client from soliciting or hiring away your employees, and sets a specific timeline in which a client can seek remedies for alleged deficiencies or discrepancies in the work or cost of that liability. These agreements will also determine specific locations in which the services are to be performed and names the client representatives for whom your personnel will perform the work for.
* Subcontractor / Independent Contractor Agreements: These detail the performance expectations of a subcontractor and set the scope of services, price and payment terms, and solutions should you become dissatisfied with the services provided. It will also protect intellectual property rights and confidential information, and give you authority to terminate the agreement.
Well-written, concise agreements will spare you from problems in the future and will help you build a strong, reputable company. To ensure you include all of the vital information, utilize contract drafting software and also seek advice from a professional if you still have questions.
