An independent contractor is a self-employed service provider outsourced by a company to perform work for them. With the increase in the number of independent contractors, America’s workforce is foreseen to be run mostly by them in the next decade. With this shift, many business owners are grasping proper concepts on how to pay an independent contractor.
Unfortunately, some companies have been making mistakes in terms of working with independent contractors. While it’s understandable that you want to assert your authority over them, ICs don’t appreciate this as they wish to work with you – not for you. The difference lies heavily in work setup and how they see things should be done.
If you’re working with independent contractors, it’s best to assess yourself and see the kind of relationship you are building with them to check if this fits the narrative they want to be a part of.
On the other hand, companies should be careful with building a seemingly employer-employee relationship with independent contractors. Although you’re trying to establish a good working relationship with them, indicating this kind of relationship could put you in hot water with the EDD or the IRS.
You may face issues with misclassification or mislabeling and deal with federal tax concerns. However, working with independent contractors can be a great experience if you exercise some caution on common mistakes other companies make when working with freelancers.
Mistakes Companies Do with Independent Contractors
Setting a Work Schedule for Contractors
If you’ve talked to freelancers, you will discover that most, if not all of them, decided to leave their previous jobs because they dreaded the eight-to-five work schedule. Independent contractors look forward to owning their schedule; that’s why they opted to accept per job or per project arrangements.
With this, they can choose their work hours, the number of hours they want to allot for work every day, and the time they need between work for breaks. Setting a specific work schedule that you prefer won’t sound any good to them. At the same time, you might be seen as establishing an employer-employee relationship with these people.
Making Independent Contractors Work in the Office
When independent contractors work in the office, doing the same job your people do, they can easily be misconstrued as your employees. Additionally, whatever reason they may have, freelancers prefer to work at home, or anywhere they like. This kind of freedom allows them peace of mind and the proper headspace to work efficiently.
Independent contractors hate the idea of commuting or traveling for work as this can be inconvenient for many of them.
Paying Wages and Expenses Incorrectly
When you hire an independent contractor, you should discuss the payment scheme with them. Since they are mostly hired to perform a particular project over a specific period, it’s best to consider paying them by the project. Monthly or hourly wages can look like they are regular employees, which may put you in trouble with the EDD or the IRS.
Do You Need Help on How to Pay an Independent Contractor?
Things can be confusing when you’re working on payroll methods for both your employees and independent contractors. The processes are a bit different, but it doesn’t mean they should be difficult.
Thankfully, we at ClearPath specialize in that, and we can definitely help you sort things out to clear you out of this work. Talk to us today so your business can move forward the best way possible.