Contract for an Independent HR Contractor and the Importance of Having A Contract - Research Paper Example

CONTRACT FOR AN INDEPENDENT HR CONTRACTOR Contract For An Independent HR Contractor And The Importance Of Having A Contract There are instances when an employer will be in need of independent contractors, who are also referred to as consultants or freelancers. The usual reason for this need is basically for cost-cutting measures, in view of the fact that utilizing independent contractors can help management save 30% off from employee’s compensation (Coleman, J. 2010), such as medical insurance benefits, profit sharing schemes and more importantly, unemployment insurance benefits. Moreover, the company will be saved from the hassle of withholding taxes from the employee and remit the same to the federal government. A company who will commission an agency to supply them with independent manpower, or perhaps hire a freelancer, is a company who needs to increase its workforce on a seasonal basis only or when there are jobs to be done that cannot be routinely assigned to its regular employees. When a company employs independent contractors, it has to be categorically established that there is no “employer-employee relationship” between the worker and the company, and the better way to make this clear-cut is by entering into a contract that may be called, Independent Contractor’s Agreement. It is very essential that a contract should be executed, wherein all the terms and conditions should be clearly stated that could strengthen what had been verbally agreed upon by the employer and the independent contractor. In reality, when there is a contract, it could easily prevent the misclassification of the other regular employees. A contract would easily differentiate the independent contractor from the regular employee. CONTRACT FOR AN INDEPENDENT HR CONTRACTOR 2 All contracts should start by declaring the identities of the parties who will be the signatories in the contract, and they are the independent contractor, who could be the freelancer or the agency who will supply contingent workers, and the company who will be hiring the independent contractor/s. This should be followed by the establishment of what the independent contractor can do, and what he is equipped with, and it is at this point that it should be mentioned whether the contractor possesses a license or not, when it is specifically required, and that the company is desirous of engaging the independent contractor’s skills or expertise. The most important data that should be contained in the agreement are the scope of work that is expected to be delivered, specifying the manner as to how and when the services are to be delivered, and the compensation for the compliance of such services. If the description of the scope of work can be simplified, then it can be incorporated within the contract, but if not, an exhibit may be annexed for the purpose. One of the advantages of utilizing an independent contractor, is that there is lesser imposition of control by management over how much time a freelancer should devote, as long as the services contracted with, will be delivered. Under a section to be entitled “Compensation,” it will not only be the rate or the fee that will be paid to the independent contractor, but it should also specify that benefits will not be granted and whenever reimbursement will be necessary, the contract should state what items may be allowable for reimbursement, as suggested by Wallingford (2009). The provision to be included in the Agreement may depend on the terms and conditions arrived at by the two parties concerned, but further suggestions were made by Wallingford (2009), to include several key points in the contract, such as assurance of services and independent contractor relationship. CONTRACT FOR AN INDEPENDENT HR CONTRACTOR 3 As independent contractors, they should employ their own resources and tools and not to expect permission to use the equipment of the company, granting that the company can be lenient about this. However, in the process of working towards compliance of the company’s demands, all materials and finished products or services that the independent contractor can accomplish becomes the property of the employer, and this again should be clearly stated under the section “Proprietary Rights,” in addition to the other provisions found in the sample contract of Wallingford (2009), such as confidentiality, warranties and indemnification which basically dictates on both parties of the contract that no laws will be violated, terms and terminations, damages and remedies and general terms. The independent contractors may have the opportunity of discovering relevant information while under contract with a company. When this happens, they are bound to secrecy that will be covered by the confidentiality clause, that extends to the prohibition of using the name of the client/company, particularly for advertising purposes. Like any other contract which is short term in nature, a termination clause will have to be agreed upon or the expiration of the validity of the contract must be stated. When all other conditions that had been conferred by and between the independent contractors and the employer/company cannot be covered by the normal terms as mandated by law, they can be included under general terms. When a contract is finalized, the best and proper thing to do is to have the contract reviewed by a licensed lawyer, as the aim of executing a contract is to protect the independent contractors and the company who is hiring them. CONTRACT FOR AN INDEPENDENT HR CONTRACTOR 4 There are numerous benefits that can be generated by utilizing contingent workforce. However, the management of a company, through its internal auditor, should be on the look-out for misclassification of regular employees as independent contractors, because if proven that there is deliberate misclassification, the company will be at risk of incurring penalties, damages and underpayment of employee’s taxes and benefits in the prior years. Although many internal auditors are aware that misclassification might result in increased tax liabilities, what they may not know is that tax liabilities are likely to be only the tip of the iceberg. Liabilities for unpaid benefits and a host of other related problems can be daunting (Mister, Rose, Rowe, and Widener, (2001)). References Coleman, J. (2010, March 5) Determining Independent Contractor Status: 5 Resources for Employers. Retrieved from http://hr.blr.com/HR-news/Compensation/Independent- Contractors/ Mister, W. G., Rose, D. M., Rowe, B. J., Widener, S. K. (2001, April) The Contingent Work- force-independent contractor or temporary workers. Internal Auditor. Retrieved from http://findarticles.com/p/articles/mi_m4153/is_2_58/ai_73750453/?tag=content; col1 Wallingford, A. (2009, Feb. 5) Contingent Workforce Mgt US and Intl Payrolling 1099 Com- pliance. Retrieved from http://www.aw-wrdsmth.com/FAQ/indep-contr-agreement.html Read More