Whether you have just launched a business or want to hire resources for a specific project, recruiting a contractor is cost-efficient. They are flexible resources that can help scale up your business and share the workload without demanding a significant investment. Hiring an independent contractor can be more advantageous than a full-time employee, especially when your business is still evolving.
But how do you hire a contract employee?
Here is a handy guide detailing the process of hiring contractors and screening them efficiently.
Hiring and Screening Independent Contractors
1. Know the difference between salaried and contract employees
This is crucial to avoid paying tax penalties due to employee misclassification. According to the IRS, an independent contractor is accountable for the final result and not the process involved in accomplishing it.
For instance, an individual specializing in a niche domain offers their service at a fixed rate to clients and uses their personal equipment to deliver the work is an independent contractor. In contrast, a salaried employee works according to the terms and conditions set by the employer.
You must be mindful of different tax regulations and associated employer costs. Contract employees are accountable for paying their taxes. Employers do not withhold their income taxes on their behalf. Moreover, contractual employees are not eligible for employee benefits like healthcare, paid vacation, and minimum wage.
2. Determine your requirements
Hiring full-time employees can be a massive investment, especially if you’re new in the industry, since it can lead to a cash flow crunch in the early stages. However, you can consider hiring independent contractors if you’re in one of the situations given below:
You don’t have a steady revenue flow
You don’t have the capacity for bookkeeping, paperwork, or daily financials
Your company’s growth is stagnant
You need a skilled resource for specific tasks
Thus, you must evaluate your business’ position before making concrete hiring decisions. After determining your business requirements, you can plan carefully to align your hiring decisions accordingly. Without proper planning, you might invest more in human resources than what you earn presently.
3. Understand the pros & cons of hiring a contractor
Independent contractors have the upper hand over full-time employees in certain aspects. Some of the biggest advantages of contractors are:
- Access to a specialized and broader talent pool
- Cost and time-efficient
However, they come with a fair share of disadvantages, such as:
- Inconsistent or total lack of support post-delivery
- Inconsistent business hours
- Inability to meet short deadlines
4. Create a precise job description
Once you are sure that hiring independent contractors is the ideal option for you, it is time to create a detailed and clear job description. It must cover all relevant task-specific details, including the job title, responsibilities, expectations, skills, qualifications, etc. Make sure to attract the suitable candidates by using appropriate job titles, like:
- Contract basis
- Independent contractor
- (Role name) Contract
- Independent contract
Such to-the-point job titles and a well-structured description will ensure only befitting candidates reach out to you for the job at hand.
5. Choose the suitable candidate for the task
Once the job description is finalized and posted, the most tedious part of hiring begins – selecting and screening potential candidates. However, you can streamline the screening process by implementing the following tips:
- Match the credentials of the candidate with the skills you want
- Schedule a short 10-15 minute video interview
- Review their social media profiles
- Ask for previous employer references or work portfolio
- Conduct an in-person interview for the top few candidates
Performing a thorough background check ensures that you pick the best candidate.
6. Draft a legal contract
After you’ve selected the candidate, you must draft a work contract. This is legally binding on both parties (you and the contractor) and must include:
- Details of the tasks and requirements
- The project timeline and deadline
- Information about pay rates and billing terms
- Nondisclosure and confidentiality sections
- Enforcing law (i.e., the location where it will be enforced)
- Termination clause
7. Ready the necessary paperwork
As for salaried employees, you must prepare a few necessary documents for independent contractors. The standard paperwork requirements are:
- A signed agreement
- Professional qualifications and required certificates
- Taxpayer Identification Number
- Contractor’s insurance (if applicable)
8. Decide the payment mode
Typically, paying a contract employee is easier than paying a full-time employee. For independent contractors, you need not withhold payroll taxes like income tax, Social Security tax, or Medicare tax. Contractors must take care of these taxes on their end since they fall in the self-employed category.
Also, you can pay contractors by the hour or per project or after job completion. However, before initiating their payment, ask for an invoice. Invoices act as a record of services performed, making it easier to track expenses. Here are four standard options for paying independent contractors:
- Direct deposits
- Payroll software for contractors
- Online payment platforms
Once you’ve hired an independent contractor, your job does not end there. To ensure a smooth workflow, it is vital to maintain clear communication to get project updates and resolve issues in real-time.
When you find reliable contractors, establishing a good professional relationship with them will help you in the long run. For instance, having a network of trustworthy contractors will ensure that your contractors offer the requisite support for issue resolution even after project delivery.
Overall, taking a structured approach to hiring helps you make sound business decisions and creates a better experience for everyone involved in a project.