There are quite a few steps that should be considered before providing a potential contractor with an engagement contract and sealing the deal. Whether you're hiring for a couple of hours, or several months, the impact of a poorly executed engagement can result in misfortune later! 

When engaging a contract worker it is important to make the working relationship very clear. The distinctions between independent contractor, and employee, can sometimes be fuzzy and hence there are risks, as your organization could be liable for significant costs and penalties. 

Here’s how to reduce this risk.

When hiring a contract worker, taking these steps to clarify the business relationship is the best way to move forward. You can develop a written agreement when you hire a contract worker that sets out the details of your “contract for services." Adding weight to the “contract for services” relationship is making sure your service provider’s business is incorporated. 

A Statement of Work (SOW) is usually provided to the engagement officer (hiring manager) with the following details: name of the contractor, contact information, rate, start date and end date of the engagement.

Have both an Independent Contractor Agreement and an Employment Agreement available and ensure that both have been carefully established and approved by your legal counsel, based on the classification the worker is electing to engage with.

Communicate with the contractor. Review the statement of work and establish whether they will be processed as an Independent contractor or employee.  The onboarding package you will provide to the contractor and the checklist you need to use is different depending on the workers classification status. 

Below are examples of items you need to include on an independent contractor checklist as part of your contract management process. Items may vary based on federal, state/provincial tax and labor laws, but the basics are here.   

EMPLOYEE (T4/W2) CHECKLIST

• Job description
• Employment Agreement w/ resume     
• Federal, State/Provincial Tax Forms
• Corporate Employee Handbook
• Copy of Policies and Procedures
• Payroll Forms/Direct Deposit
• Background Check Authorization
• Expense Reimbursement Forms
• Time Sheet/Entry Instructions
• etc.

INDEPENDENT CONTRACTOR CHECKLIST

• Statement of Work (SOW)
• Independent Contractor Agreement
• Articles of Incorporation or Business Registration
• Proof of Various Insurances
• Payment information for business bank account
• Expense Reimbursement Forms
• Invoicing Procedures
• etc.

As you can see there are quite a few things to consider. Building the process, actualizing the agreements, validation, distribution and collection of the forms, ongoing compliance, etc.  You also need to factor in the cost and time you will need to invest before you even get to the final go-ahead.

Need more information on how to effectively implement a contingent workforce solution? Contact a Contingent Workforce Advisor to set up an executive briefing.

Looking for more information about further ways to reduce the risks, costs and complexity of your contingent workforce?  Download our latest ebook.

About HCMWorks

We are a contingent workforce service provider helping organizations gain better access to talent through the use of independent contractors, consultants, temporary workers, freelancers and other non-payrolled employees. We provide the expertise, the technology, and processes to help you reduce your workforce costs, mitigate against misclassification and co-employment risks, and increase the efficiency and timeliness of your contingent recruitment process. Read more about what our clients say about us here.