Using an independent contractor to supplement your accounting firm's workforce can help you alleviate stress and get more accomplished, but there’s a lot to know before you hire one.
You must approach working with freelance individuals differently from working with employees and failure to do so could have legal implications for your practice.
So how exactly are independent contractors different from employees? Some of the ways are:
- They provide services on a contract basis for multiple businesses or individuals.
- They set their own hours and control when, where, and how they do the work.
- They issue invoices for their services rather than receiving compensation via a paycheck.
- They keep their own business records and are responsible for reporting and paying all taxes associated with their income (the payer does not withhold anything from their payments to independent contractors)
5 Tips for Preparing to Work with an Independent Contractor
You’ll want to address a few things to make sure you start on the right note and get the most from your investment in an independent contractor.
1. Identify the tasks that will make the most sense to delegate
Make a list of tasks that don't need to be done by you and you alone. Which are those that tend to pull you away from devoting time to your most important work? Which do you enjoy the least? Which can you easily explain to an independent contractor?
2. Identify the skills, knowledge, capabilities, and other necessary characteristics
After you know what tasks you’ll want delegate, look for a freelancer with the qualities needed to do the work. A LinkedIn search for virtual assistants and bookkeepers may help you find people with the necessary skills and qualifications. Keep in mind that if the types of tasks you plan to delegate can be done remotely, your pool of suitable candidates will be much larger than if you would need someone physically located in your area. Also, consider how prospective independent contractors will fit in with your company culture. Even though they won’t be employees, they will be a part of your team—more on that later!
3. Prepare an Independent Contractor Agreement
Sometimes called a "work for hire" agreement, an Independent Contractor Agreement is a legal contract between a business and a worker who will not be an employee of the company. Some freelancers have their own Independent Contractor Agreement that they present to clients while others might not. Consider creating one (with the help of an attorney) that you can use as a template for whenever your company decides to work with freelance professionals. If you choose to sign one that an independent contractor has presented to you, asking a lawyer to review it before you sign it will help ensure that none of the terms and conditions won't put your firm at risk.
Elements often within an Independent Contractor Agreement include:
- Statement of Relationship – Defining the role of the freelancer as a contractor and the company paying them as a client.
- Description of Project (or Work) – Describing the type of work the independent contractor will do under the agreement, including specific tasks and deliverables associated with that work.
- Payment and Billing Terms – Confirming the pricing the client has agreed to pay for the contractor’s services and net terms (for when payment is due after the contractor sends invoices).
- Responsibilities – Describing what the client and the independent contractor are responsible for. For example, this section might include details about communications expectations; what tools, software, equipment, etc., the contractor will supply and which the client will provide them to use; whether the contractor will carry their own insurance; and anything else that is vital to explaining what the client and the contractor are responsible for when working together.
- Deadlines or Project Timeline – Identifying when tasks or project deliverables are due. Depending on the work delegated to the independent contractor, some tasks might be daily, weekly, monthly or have specific due dates.
- Confidentiality – Stating that the contractor will keep the client’s confidential information private and not use it for any other purpose other than to perform the work they’ve been contracted to do.
- Term – Defining how long the agreement shall be in place. If no contract end date has been specified, then this section will often be open-ended, sharing that the agreement is in place until it is terminated.
- Termination – Describing when (e.g., immediately or with 30 days notice, etc.) and how (e.g., written notice) either party may terminate the agreement. This section might also include how and by when the contractor must return any equipment, files, or other firm assets after the agreement termination.
Your agreement with an independent contractor may have different or additional elements depending on what you need them to do and your attorney’s recommendations.
4. Ask for a W-9
Ask the independent contractor to complete and submit IRS Form W-9 (Request for Taxpayer Identification Number and Certification) form. This form ensures that you have their correct taxpayer identification information on file for when you issue them a 1099 form at the end of the tax year. Having a signed W-9 also serves to identify that the contractor is not an employee of your firm.
5. Treat them like part of the team
Just because an independent contractor isn't your employee doesn't mean you should treat that person as an outsider. Build camaraderie by asking for their feedback, keeping them in the loop about new developments that will affect their work, recognizing their hard work, and expressing your appreciation for their contributions. When you offer independent contractors a welcoming work environment—whether in-office or remotely— you build trust, enhance loyalty, and strengthen their commitment to doing their very best work for your firm.
About Nellie Akalp
Nellie is CEO and Founder of Corpnet.com, a resource for business incorporation, LLC Filings, and Corporate Compliance Services in all 50 states. CorpNet’s partner program is aimed at accountants who want to streamline the business incorporation and compliance process for their clients.