How To Hire An Independent Contractor? Choose The Right One

Independent contractors provide their professional services to clients as non-employees, typically on a project or time-limited basis.

They are self-employed and have significant autonomy regarding when and how they work. They are also responsible for paying self-employment taxes and do not receive employee benefits from their companies.

They often work for multiple companies on a part-time and short-term basis. However, this may vary in countries outside of the US. In the US, the IRS defines independent contractors as individuals who have the right to control or direct only the outcome of the work but not the means or methods of achieving it.

Independent Contractors And Regular Employees

Employment status

Independent contractors are not considered employees of the company they work for. Instead, they are self-employed and typically work on a project-based or fixed-term basis.

Control and direction

Independent contractors have a high degree of control over how and when they work, whereas employees are typically directed and controlled by their employer.

Taxes and benefits

Independent contractors are responsible for paying their self-employment taxes and do not receive statutory employee benefits such as health insurance, retirement plans, and paid time off.

Working for multiple companies

Independent contractors often work for various companies on a part-time or short-term basis, whereas employees typically work for one employer.

Legal and regulatory

Independent contractors are often subject to different legal and regulatory requirements than employees, such as other tax laws, labor laws, and immigration laws.

In the United States, the IRS asserts that independent contractors possess the authority only to produce the outcome of their work and not how it should be executed or the method of doing it.

IRS Common Laws regarding Independent Contractors

According to the IRS, when determining whether a worker is an employee or an independent contractor, businesses must consider three factors:

  • Behavioural
  • Financial
  • The type of relationship

Behavioural characteristics include the company’s control over the worker’s job duties and performance methods.

Financial elements include the business aspects of the worker’s job, such as payment and reimbursement.

The type of relationship factors consists of written contracts and employee benefits. It is essential to examine the entire relationship and the degree of control the company has over the worker and to document the factors used in making the determination.

It should be noted that no specific number of factors determines a worker’s status, and characteristics may vary in relevance depending on the situation.

Laws And Regulations for Hiring Independent Contractors in the US

In the United States, there are several laws and regulations that an owner needs to be aware of when hiring an independent contractor. These include:

The Fair Labor Standards Act (FLSA) –

This federal law sets minimum wage and overtime pay standards. Also, it establishes guidelines for determining whether a worker is an employee or an independent contractor.

Under the FLSA, an independent contractor is “free from control and direction in the performance of the service, both under his contract of service and in fact.”

The Internal Revenue Service (IRS) –

The IRS has guidelines for determining whether a worker is an employee or an independent contractor. The IRS considers several factors, including the employer’s control over the worker, the worker’s skill and expertise level, and the working relationship’s permanency.

State laws –

Some states have rules and regulations for determining whether a worker is an employee or an independent contractor. These laws may be more or less strict than the FLSA and IRS guidelines.

Workers’ compensation –

Independent contractors are not generally covered by workers’ compensation laws, which means that the employer is not responsible for paying for the contractor’s medical expenses if they are injured on the job.

However, some states may require employers to carry workers’ compensation insurance for independent contractors.

Unemployment insurance –

Independent contractors are not eligible for unemployment insurance, which means that the employer is not responsible for paying into the unemployment insurance system on behalf of the contractor.

Employment taxes –

Employers are not required to pay employment taxes on behalf of independent contractors. This includes Social Security and Medicare taxes and state and federal unemployment taxes.

It is crucial to note that the classification of a worker as an independent contractor or employee is only sometimes clear-cut and can be determined through a multi-factor test.

The employer should ensure that the worker is truly an independent contractor and not an employee by examining the control and direction the employer exercises over the worker, the worker’s opportunity for profit or loss, and the skill and expertise required for the work.

Step-by-Step Process For Hiring Independent Contractors

Hiring independent contractors can be a great way to bring specialised skills and expertise to your business without committing to a long-term employee. However, finding and hiring independent contractors can be overwhelming, especially if you need help figuring out where to start.

The step-by-step process of how to hire independent contractors, from identifying your needs to onboarding your new hires.

Step 1: Identify your needs

The first step in hiring independent contractors is to identify your needs. What specific skills or expertise do you need to help your business grow?

For example, are you looking for a designer to help with your branding, a writer to create content for your website, or a developer to build a new app? Once you have a proper idea of what you’re looking for, you can search for suitable candidates.

Step 2: Search for candidates

Once you know what you’re looking for, it’s time to search for candidates. There are various ways to accomplish this, for example:

  • Posting job listings on online job boards such as Upwork, Freelancer, and Fiverr.
  • Asking for referrals from your network of colleagues and contacts.
  • Searching for candidates on LinkedIn and other professional networking sites.
  • When searching for candidates, read their profiles and portfolios carefully to ensure they have the skills and experience you need.

Step 3: Interview candidates

Once you’ve found a few interested candidates, it’s time to interview them. This can be done over the phone, via video call, or in person, depending on your preference. During the interview, ask questions about their experience, skills, and availability, and ask for references from previous clients.

Step 4: Check references

After you’ve interviewed a few candidates, it’s essential to check their references to ensure they’re a good fit for your business. Contact the concerns they’ve provided and ask about their experience working with the candidate. Ask about the candidate’s strengths and weaknesses and whether they would recommend them for the job.

Step 5: Make an offer

Once an ideal candidate is identified, it is appropriate to extend an offer. Ensure to include details about the project, the pay rate, and the contract duration. Also, have other important information such as deadlines, deliverables, and payment terms.

Step 6: Onboard the contractor

Once the contractor has accepted your offer, it’s time to onboard them. This includes training, setting up the required systems and tools, and providing them access to any information they need to do their job.

Risk for Employers of Hiring Independent Contractors

Employers need to weigh these risks against the benefits of hiring independent contractors to have clear contracts outlining the terms of the agreement and ensure that both the employer and the contractor understand their responsibilities and obligations.

Employers should also consult with a lawyer or accountant to ensure that they comply with all laws and regulations regarding independent contractors.


If a worker is misclassified as an independent contractor when they should be classified as an employee, the employer may be liable for unpaid taxes, fines, and penalties, as well as back pay and benefits.


Independent contractors are not covered by the same liability protections as employees, which means that the employer may be liable for any injuries or accidents that occur while the contractor is on the job.

Legal disputes

Independent contractors are not protected by the same laws as employees and may not be covered by the same legal protections. This can make resolving disputes more difficult and lead to more legal and financial risks for the employer.

Lack of control

Independent contractors are under a different level of control than employees and may sometimes follow different rules and procedures. This can lead to problems with quality control, missed deadlines, and other issues that can harm the business.

Unemployment insurance

Independent contractors are not eligible for unemployment insurance, which means that the employer is not responsible for paying into the unemployment insurance system on behalf of the contractor.

Limited engagement

Independent contractors may not be willing or able to commit to long-term arrangements with a single employer, making it more difficult for the employer to plan for future projects.


Bringing on independent contractors can be a game-changer for your business. They bring specialized skills and expertise that can elevate your business to new heights. By following a structured process, you can confidently find and onboard the perfect candidates to your team.

Finding and hiring independent contractors can be overwhelming, especially if you need help figuring out where to start. But with the right approach, you can identify your needs, search for candidates, interview them, check references, make an offer, and onboard them effectively.

Also, it’s essential to stay up-to-date on local laws and regulations to ensure compliance. This will help avoid any legal disputes and penalties. Finally, with the right approach and contractors, your business can thrive with the added talents and knowledge that independent contractors bring. By having specialized skills and expertise on your team, you can take your business to new heights.

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