What is a contractor agreement?
A contractor agreement is a document to define the business relationship between the business and the contractor. A contractor agreement clearly defines the financials and services covered as part of the contract. This protects both the client as well as the contractor from potential conflicts.
When do you need a contractor agreement?
A contractor agreement applies to all forms of services between a business and a contractor.
If your business requires services on a short-term basis or specialized services which might not require a full-time employee, a contract role can help businesses access the services at a lower total cost. By entering into a contractor relationship, businesses avoid costs like paid leaves, severance and insurance benefits which they’d normally be required to pay to full-time roles.
A well-written contractor agreement will include:
- A description of the services offered or to be delivered.
- Pay rates for the contractor.
- Expenses covered and not covered by the business.
- Length of the contract.
- Penalties and terms for conflict resolution.
- Ownership of work product.
Careful consideration is necessary when determining whether to enter into a contract or full time employee relationship. It is important that the contractor agreement is reviewed periodically by an employment lawyer to avoid misclassifications and to properly capture legislative changes.
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