Hiring Independent Contractors for Your Business? Know the Pros and Cons

Decades ago, the norm was for students to graduate from high school or college and then seek a good full-time job in a solid career with prospects for the future and benefits. Today though, the dynamics have changed significantly in the workplace. Many individuals work from home part of the time, or every day, due to advances in technology and greater awareness of the benefits of telecommuting. Along with that, most corporations are realizing the benefits of hiring independent contractors for a wide range of projects—and in many cases, this type of arrangement is a win for all parties involved.

If you are a business owner, the first step is to make sure you are classifying everyone who works for you correctly. Full-time employees are normally afforded benefits and access to health insurance, along with having all the proper taxes withheld and payroll reports sent to them at the end of the year. Hiring independent contractors is significantly easier in terms of payroll and paperwork, as you are usually only responsible for sending them a 1099 form if they make over $600 working for you. Along with this, your company saves in not having to pay out for Social Security or Medicare, worker’s compensation, or having to offer a benefits package. Make sure you and your accounting team understand how classification works though, as that could mean the difference between smooth sailing, or finding yourself in violation of state and federal laws. Be aware also, that since an independent contractor is not covered under the worker’s compensation insurance that you pay for to cover regular employees, they could have an accident on the job and take legal action against you to pay for it.

Flexibility is often of mutual benefit to both you as the employer and the contractor as an independent entity. Neither of you are tied into permanency, but if you have an important project going on, make sure to create a thorough contract with the help of your experienced business attorney, providing a beginning and end date for the job. While you have the advantage of hiring someone who comes to work with specialized knowledge and no need for training, you also don’t have to worry about laying anyone off. And while the unfortunate need to fire an independent contractor early could still arise, with the expert legal advice and assistance of your business litigation attorney, you should be covered by your contract.

Legal issues regarding independent contractors have both pros and cons. While you may not have to worry about being hit with lawsuits regarding issues such as labor laws, discrimination other than race, and more, you may end up worrying a lot about the safety of your intellectual property. Unless specifically outlined in the contract signed initially, the independent contractor could potentially walk away with or share valuable information about something they created while working at your company. When working with independent contractors, you must always think ahead regarding copyrights and patents.

Creating and following a comprehensive independent contractor agreement should ensure you both enjoy a good working relationship with as little worry as possible.

Do you have questions about hiring an independent contractor, or another business matter? If so, contact Attorney Shane Coons. Our law office represents clients involved in a wide range of businesses and legal issues, and we would be glad to review your case and help you explore your options. Call now at 949-333-0900 or email us at Shane.Coons@seclawoffices.com.

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Hiring Independent Contractors for Your Business? Know the Pros and Cons

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