Simplify Your Hiring Process With This Independent Contractor Checklist

Hiring independent contractors has become standard for small businesses and large enterprises alike.

Whether it’s a freelance web developer helping a start-up create a website or a graphic designer enhancing a marketing campaign, the collaboration between businesses and independent contractors has transformed the way we get work done.

But here’s the catch—managing these working relationships effectively and in compliance with the law can be challenging. To help you overcome the most common obstacles, this article provides 15 recommendations for what to include in your independent contractor hiring checklist, or you can simply download ours below. 

We’ll break down the essential elements for successful and legally compliant working arrangements, ensuring you’re well prepared to navigate the intricacies of hiring an independent contractor.

What Is an Independent Contractor Hiring Checklist?

An independent contractor hiring checklist is a resource to help you navigate the process of working with independent contractors.

Your checklist will serve as your compass, highlighting key steps and considerations before, during, and after signing an agreement with independent contractors for specific projects or tasks.

By carefully following the items on your checklist, you can start your relationship on the right foot and establish a strong legal and operational foundation. This minimizes the risk of legal complications and optimizes the overall productivity of your team and the success of your efforts.

What To Include in an Independent Contractor Hiring Checklist

From assessing a candidate’s qualifications to legal compliance, your checklist must cover every aspect of the hiring process, leaving no room for oversight. Below are the main items we recommend checking off your list when hiring an outsourced professional.

1. Contractor status

Confirm that the work you’re hiring for aligns with the criteria for independent contractor status rather than employee status. This assessment ensures that the individual hired is indeed an independent contractor and not entitled to employee benefits, such as health insurance or retirement plans.

By clearly distinguishing between these two classifications, you maintain compliance with employment regulations and avoid any potential legal or financial complications.

To learn more about the differences between contractors and employees, check out our article on employee and independent contractor misclassification and how to avoid it.

2. Legal compliance

Understand and adhere to your local, state, and federal laws and regulations pertaining to independent contractor relationships, taxation, and reporting. Compliance with these laws not only ensures that you operate within legal boundaries but also helps prevent any potential legal issues or financial penalties down the line.

Staying informed about and compliant with these regulations is essential for a successful and risk-free contractor working relationship.

3. Contract agreement

Have the contractor sign a comprehensive contract that covers the scope of work, payment terms, and data privacy (including a non-compete clause if you feel you need one).

A comprehensive contract ensures a transparent and productive working relationship with your contractors. However, make sure you include a termination clause defining when the contract can end and procedures for dispute resolution should things go wrong. 

(In the unfortunate case that your non-employee workers don’t fully meet the agreed-upon contract requirements, we have “3 Independent Contractor Termination Letter Templates” for you to use.)

4. Verification of credentials

There’s sometimes more beneath the surface than what’s written on paper (or an online resume). Conduct a thorough assessment of a contractor’s qualifications, skills, and experience to make sure they’re the best option for your project or company.

Review their past performance, previous projects, and references, if they are available, to understand their expertise and ability to meet the project requirements.

5. Business information

To establish a secure and compliant working relationship, obtain essential information from your contractor. Collect details such as their legal business name, contact information, and tax identification number (Employer Identification Number, or EIN, and Social Security number). This data is crucial for contractual and tax-related purposes, ensuring legal compliance and accurate payment reporting.

6. Insurance and licensing

Evaluate whether the contractor should maintain particular forms of liability insurance or professional licenses within their specific profession or industry. Check whether they are adequately covered and qualified for the job to mitigate potential risks, protect your interests, and meet industry standards and legal requirements.

7. Project details

Provide contractors with a comprehensive project description encompassing its overarching goals, objectives, and relevant materials or resources. 

By providing this detailed outline, you clarify the project’s purpose and set expectations, equipping the contractor with everything they need to efficiently plan and deliver the desired results. 

8. Tax forms

Make sure you collect the necessary tax paperwork from your contractor. This will usually be:

• a W-9 form for contractors who are US citizens or US residents for tax purposes.
• a W-8 BEN form for contractors who aren’t US citizens or US residents for tax purposes.
• a W-8BEN-E form for contractors who operate as a company outside the US.

These forms provide the tax-related information you need for tax withholding purposes and ensure compliance with IRS regulations.

This documentation also helps you prepare for the tax year, accurately report payments (for example, when submitting your 1099-NEC form), and fulfill your state and federal tax obligations.

The copy of your 1099-NEC form that goes to your contractor at the end of the year also helps them pay their self-employment taxes (as this is something they have responsibility for). 

Keep your contractor’s W-9 form (or equivalent) and other records up to date to simplify filing taxes and maintain compliance with tax and documentation regulations.

9. Intellectual property

Address the usage rights of intellectual property. Include information such as who retains ownership, how the intellectual property can be used, and any limitations or restrictions if necessary. Be clear, as both parties must understand intellectual property rights to avoid potential disputes.

10. Set project timelines

Discuss and agree on the overall project timeline. Depending on the type of project, you may want to set separate deadlines for specific deliverables or milestones. This helps track progress and ensures the project stays on schedule.

11. Communication and reporting

Establish which communication channels and reporting systems you prefer. Also, define how often progress updates and reports should be provided and any key contact persons. 

Effective communication and reporting facilitate transparency and ensure that you and your contractor are on the same page throughout the project.

12. Review by legal professionals

Seek legal advice to address any concerns you might have—for example, compliance with relevant laws and regulations related to health and safety, data privacy, immigration policies, or how you pay contractors. Legal professionals can help safeguard your interests while ensuring your contract meets all necessary legal standards.

13. Onboarding and integration

Provide onboarding and integration resources for the contractor, such as links to relevant documents for the project they will be working on, company policies, and any information they need for shared tools and software. This helps new contractors integrate smoothly into your organization and understand your processes and expectations.

To get the most out of the onboarding period, read “6 Best Practices for Your New Virtual Onboarding Process.”

14. Ongoing communication

Encourage proactive communication throughout the project to address any questions or concerns. Effective collaboration is key to favorable project outcomes. Regular check-ins help mitigate any issues as they arise and avoid potential misunderstandings down the road.

15. Project evaluation

So this one isn’t part of the hiring process, but we’ve included it as it’s something you don’t want to forget to do. 

When the project is over, evaluate the contractor’s performance and the overall project’s success. Discuss your conclusion with the rest of your team and relevant stakeholders. By assessing the effectiveness of your non-employee workers, you can gain insights into their contribution and decide if they’re the right fit for future opportunities.

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Final Thoughts

A comprehensive independent contractor hiring checklist will help you ensure legal compliance, minimize risks, and facilitate successful working relationships. By including all the essential elements discussed in this article in your own checklist or by using ours, you can streamline your hiring process and set the foundation for productive collaborations with independent contractors.

If you are looking to hire top independent contractors for your business, book a free consultation with Near—your 360° solution for finding, hiring, and onboarding top talent based in Latin America.