How do I deal with independent contractors?

Depending on the nature of your business, you might have to deal with independent contractors. While in some ways, they function as other employees do, there are some key nuances that you should keep in mind. 

The first is how exactly the worker should be classified. There are specific guidelines for what constitutes a contractor versus an employee, and you should be aware of them as you foster business relationships. If there are strict rules about hours, you provide hands on training and you require on-site work to be done, the person is likely an employee. On the other hand, if the worker has multiple other clients, provides for expenses out of pocket and is performing a specialized service, they likely should be classified as an independent contractor.

Once you've determined which designation is applicable, it's important to get it in writing. Not only does it make sure both parties are on the same page in terms of start dates, end dates and work quality, it's an important signal that you will not be withholding federal taxes on their behalf. This can help everyone avoid sticky situations when it comes time to file. 

Finally, you'll want to discuss the matter of independent contractor insurance. While you are not legally obligated to extend benefits, you may choose to do so for a variety of reasons. In addition, you should speak with an advisor to determine whether they fall under coverage you already have: for example, if you have construction insurance, your policy may automatically include subcontractors and the structures that they build.




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