What You Need to Know About Hiring Contract Workers
Need a project done—but it’s not really something an employee could (or should) do? Maybe the office needs painting or you want a new business card design? Maybe you’d like an attorney to look over some documents or a bookkeeper to help prepare for tax season? For these kinds of activities, it’s common to hire a contractor. But where do you start? Luckily hiring a contracted worker isn’t so difficult if you know where to look and what you’ll need to provide.
What is a contractor or contracted worker?
A contractor is someone you hire to perform a specific service. For example, if you run a coffee shop, you might need to hire an electrician for repairs or a developer to improve the functionality of your website. These workers would very likely be contractors.
It’s probably more important to know what a contractor isn’t: an employee. Contractors don’t get W-2s, hiring paperwork, training, or employee benefits. You won’t need to withhold or pay employment taxes for a contractor. Unlike an employee, contractors should have their own tools for their job. They’ll set their own hours. They’ll most likely work for multiple people or businesses.
So, a weekend barista at your coffee shop is highly unlikely to qualify as a contracted worker—you’d need to hire that person as a part-time employee.
How do I find a contractor?
One way to find a contractor is to ask around. If you have friends or business associates that have used contractors before, they can give you some recommendations. Whether they offer recommendations on which contractors to avoid or hire, it’s great to get advice from someone who’s been there.
Perhaps the most common way to find a contractor is to search online. There are loads of websites dedicated to connecting contractors to clients. These sorts of websites are mostly organized by industry. For instance, Angie’s List and HomeAdvisor focus on skilled trade workers, UpCounsel and Avvo are for attorneys, and Dribbble is for designers. For licensed services, another good place to start is the licensing agency’s website. For instance, you can usually search for a licensed attorney on your state’s bar association’s website (or on the American Bar Association website).
After you’ve found a potential contractor, do a little research. For instance, you can check online to see whether an attorney or a skilled trade worker is currently licensed. You can read reviews if there are any available and see if there are any complaints with the Better Business Bureau or the consumer protection agency in your state. If possible, contact previous clients and ask their opinion.
If everything checks out, it’s a good idea to set up an interview to meet face to face—you’ll be able to get a feel for how the contractor works and communicates. You can also request to see a portfolio if appropriate.
What do I do once I choose a contractor?
Selecting a contractor is only half the battle—the other half is working with your contractor. This includes effectively communicating your idea, getting all your paperwork in order, and preparing for IRS filing obligations.
1. Work out the particulars
What are your wants and what are your needs? When do you need the project finished? What’s your budget? Make sure you communicate the hierarchy of importance. For instance, if you absolutely need a website capable of taking orders by the end of the month, let your contractor know that this is a hard deadline that trumps other aspects of design and development.
2. Review and sign the contract
If you hire a seasoned contractor, odds are they have a standard contract they use for their clients. Like any document you sign, be sure to review the contract carefully for what is and is not included (and what happens if the work is late or doesn’t meet expectations). If your contractor uses sub-contractors or requires expensive supplies, make sure the contract stipulates you won’t be on the hook if the contractor skips town without paying suppliers or sub-contractors.
3. Give your contractor a W-9
What is a W-9? The more formal name for this form is the Request for Taxpayer Number and Certification. Basically, a W-9 is a formal request for the worker’s taxpayer ID number (TIN), such as a social security number or EIN. You’ll need this information later if you have to send this contractor a 1099 (required if you pay the contractor more than $600 over the course of the year).
4. Let the contractor do the work
Many kinds of contracted work can be done by contractors at home or in their office (think design or bookkeeping), so it’s often just a matter of checking in periodically and waiting for them to finish. If the work requires contractors to come to your home or work site (think painting or plumbing), be sure the area is accessible and that any residents, employees or visitors on site are aware of potential disruptions and safety issues.
5. Review the work and pay your invoice
Take some time to ensure the work completed was done to your specifications. If you requested a new logo design, for instance, make sure not only that it looks great but that it’s in a format and size that you can use. While payment arrangements are really up to you and your contractor, it’s fairly standard for contractors to send invoices upon completion of the work. Some projects may require a partial payment before work begins. Expensive projects (like a renovation) may necessitate a payment plan.
6. Send a 1099
A 1099 is a tax form that you send to your contractors and the IRS. The most common 1099 is the 1099-MISC. The 1099-MISC is a pretty straightforward form—if you have your invoices and your contractor’s TIN and mailing address, it shouldn’t be too hard to complete. The due date for most 1099s is January 31st. This means that both your contractor and the IRS should receive 1099s by this date.
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