5 Tips for Hiring an Independent Contractor | Foundd Legal

5 Tips for Hiring an Independent Contractor

Find yourself in the exciting position of business growth? Too much to do and not enough time? We understand that as a small business owner, in the early days we often find ourselves doing pretty much everything on our own. Admin, marketing, socials...the whole working both ‘in’ and ‘on’ the biz. But if we’re fortunate, we eventually get to a place where we can’t do it alone. We need help! And help costs cashola. So, if you aren’t yet ready for an employee but could use assistance (maybe some socials genius, for example), hiring an independent contractor may be exactly what you need! 

Independent contractors play a crucial role in the growth and success of businesses. However, the process of hiring independent contractors comes with its own set of challenges, particularly when it comes to compliance with the law. Sounds fun, right? To ensure a smooth process, here are five tips for hiring independent contractors: 

1. Determine if the Contractor meets the criteria of an Independent Contractor

The first step in hiring an independent contractor is to determine if they meet the criteria of an independent contractor. In Australia, an independent contractor is a person who carries out work for another person or business, but is not an employee. They’re self-employed (ie their own boss) and operate their own business.  The ATO has a useful contractor decision tool to help you determine if they are an independent contractor.  Be wary of sham contracting where hiring someone as a contractor who should really be an employee as this carries heavy penalties and they typically occur when the relationship ends and the contractor believes they are owed entitlements. 

2. Clearly Define the scope of work and terms in a written contract and protect your Intellectual Property

Once you’ve determined that the individual is an independent contractor, the next step is to create a beautifully written contract. We happen to have an amazing Independent Contractor Agreement Template that helps to clearly define the scope of work and terms of the agreement. This contract should include the expected outcomes, timeline, and payment terms. And of course, clarify who owns the Intellectual Property. Having a written agreement in place helps to avoid misunderstandings and disputes later on. Stay protected, friends! 

3. Make sure they have the necessary insurances and pay their own tax

Independent contractors are responsible for obtaining their own insurance and paying their own tax. Ensure that the contractor you’re hiring has the necessary insurances in place, such as public liability insurance and workers’ compensation insurance, to protect both parties in case of any accidents or incidents.  In relation to superannuation, there may be some exemptions which means you are required to pay the superannuation!  The ATO provides an online test for you to determine whether you must pay superannuation entitlements.  It doesn’t matter if the contractor has their own ABN so do make sure before you proceed. 

4. Ensure compliance with applicable laws

The Independent Contractors Act 2006 (ICA) and the Fair Work Act apply to independent contractors. You should make sure that you are compliant with all relevant laws, including the Fair Work Act, and that your independent contractor is, too. This helps to protect both parties from legal issues down the line (starting to sound familiar?). 

5. Set clear payment terms and keep accurate records

Finally, it’s important to set clear payment terms and keep accurate records of all payments made to the independent contractor. This helps to ensure that the contractor is paid on time and that the business is able to keep track of its expenses. Clarity. Protection. Organisation. They’re biz life blood! 

To summarise!  Hiring independent contractors can be a great way to grow your business and access specialised skills and expertise. However, it’s important to take the time to properly assess, contract, and manage independent contractors to ensure compliance with the law and to avoid any misunderstandings or disputes. 

Let’s recap, friends! 

Key points: 

  1. Determine if they meet the criteria of an independent contractor. 
  2. Clearly define the scope of work and terms in a written contract and protect your Intellectual Property. 
  3. Obtain necessary insurances and tax clearances. 
  4. Ensure compliance with any applicable laws. 
  5. Set clear payment terms and keep accurate records. 


Need help? Don't hesitate to reach out for additional support. And don’t forget to grab that Independent Contractor Agreement! 





***Disclaimer. Please read!!*** 

This article is for general information purposes only and should be used solely as general guidance. It does not and is not intended to represent legal advice or other professional advice. 

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