5 Independent Contractor Agreement Mistakes You Can Easily Avoid

With so many responsibilities as a business owner, it’s easy to overlook the importance of having a proper independent contractor agreement. Below are five common — and easily avoidable — mistakes to avoid when drawing up a work-for-hire contract.

Mistake #1: Not Including a Description of the Project

The project description details the scope of work to be performed. Not including a clear description can lead to misunderstandings between you and the contractor about the specifics of the project. A proper project description will include, in as much detail as possible:

• A description of the work to be completed by the contractor
• Details about where and when the work will be undertaken
• Specific outcomes of the work performed

The project description should also specify any changes that would require an amendment to the contract — such as a change in work location, a change in responsibilities, or a change in compensation.

Mistake #2: Not Specifying the Length of the Contract

Every independent contractor agreement should specify the length of the business relationship. If you con’t have a specific project completion date, provide an estimated end date (i.e. “Estimated time to completion is 30 to 45 days”). An alternative is to provide a set of dates to mark phases, or “milestones”, of job completion.

Mistake #3: Failing to Outline Roles and Responsibilities

In general, independent contractors are responsible for their own health insurance, insurance, and taxes. You’ll want to ensure that your independent contractor agreement clearly absolves you of all responsibility with respect to tax withholding, tax reporting and insurance liability.

Mistake#4: Not Defining End-of-Contract Terms

Each independent contractor agreement should specify the conditions under which the contract can be terminated. These conditions can include:

• By performance – The work has been completed as laid out in the contract.
• By mutual agreement – Both parties agree to terminate the contract before the project is complete.
• Due to breach of contract – One of the parties fails to meet the basic terms of the contract.

Mistake #5: Not Including a Confidentiality Agreement

Whether you’re an international software firm or a small local shop, you need to protect the trade secrets of your business. One of the best ways to do this is with a confidentiality agreement, or non-disclosure agreement. Not only does a non-disclosure agreement prohibit the contractor from discussing your company’s proprietary information with anyone outside of the company during the project, but you can also request ongoing confidentiality after the business relationship has ended.