Hiring independent contractors for your business can save it time and money. However, you should be aware that there are also some risks to doing so. It’s important to be able to weigh the risks against the advantages to determine if independent contractors are the right choice. There are a few common mistakes that are easy to make.
Misclassification Of Workers
When it comes to financial and legal issues, it is important to correctly classify workers as either employees or independent contractors. The recommended course of action when you have contractors working for you is to have a separate management system for them than you have for your employees. You may even choose to team up with a firm to manage the independent contractors you have working for you.
Depending on where your business is located, misclassifying workers can result in fines and extra interest paid on your taxes. In extreme cases, you may even find your business facing a lawsuit.
You also run the risk of being audited if you misclassify a worker. This can happen if you have an independent contractor that later files for unemployment. It is also possible that someone who works for your business will file a form to officially determine if they are, in fact, an employee or independent contractor.
Mismanagement Of Designated Independent Contractors
It is easy to mismanage an independent contractor, oftentimes without even realizing it. The best way to avoid this is to have a contract with the individual that clearly states what you expect them to do, how you expect them to do it, and when you expect them to be done. In general, independent contractors should never complete the same tasks or assignments that are given to employees of the business.
Lacking Proper Contractor Insurance
Your business liability insurance does not apply to independent contractors. It is essential that you make each contractor aware of the requirements for insurance. These requirements should be included in the contract you have with these workers.
For more information and tips on how to properly manage independent contractors, please contact KPI.