When you need assistance or expertise, using an independent contractor often makes more sense than hiring an employee. There's less paperwork and no need to pay employment taxes. When the independent contractor you hire doesn't provide a contract for you to sign, it's still important for you to put the requirements of the job in writing. Beverley Williams, president of the American Association of Home-Based Businesses, was hired as an independent contractor a few years back to produce a quarterly newsletter for teachers in her county. At the time, Williams' business included desktop publishing, but not writing or photography. She subcontracted with a reporter and a photographer to cover school district events. "I wrote their contracts and had my attorney look at them; he suggested some changes in the wording," she says. "It was fairly simple."
Williams reports her primary goal was making sure the contract met IRS guidelines, so she wouldn't be found to have employees. Accordingly, the contracts stated the subcontractors would set their own hours, provide their own supplies and equipment, and be responsible for paying their own taxes. The contracts also included expectations for the format of the work produced, such as providing negatives with contact sheets.
Jan Caldwell, a homebased small-business attorney in Bethesda, Maryland, advises business owners to address control issues in the contract. In addition to specifying that contractors use their own equipment and set their own hours, the contract should address where the work is to be done. To avoid the appearance of having an employee, the work should normally be done on the contractor's own premises, unless the nature of the project requires having the contractor at your home office. Also include how often the contractor must report to you, as well as the terms of payment.
"If you hire an independent contractor and need to do a lot of supervising," says Caldwell, "you may need to bite the bullet and hire a part-time employee."
Jeffrey L. Braff, c/o Cozen and O'Conner, 1900 Market St., Philadelphia, PA 19103
Caroline Hyman Brooks, 109 Forest Ave., Narberth, PA 19072, (610) 664-3630
Jan Caldwell, firstname.lastname@example.org
Home Office & Business Opportunity Association, 92 Corporate Park, Ste. C250, Irvine, CA 92606, fax: (949) 589-1311
JANUS Environmental Management Inc., P.O. Box 217, Lavalette, NJ 08735, (732) 929-3500
Roxborough, Pomerance & Gallegos LLP, (310) 470-1869, http://www.rpglaw.com