What Essentially Embody Independent Contractor Agreement

Absent employee-employer relationship, but nonetheless working in agreement with another entity or employer, generally connotes a concept of independent contractor.

In this set-up, the employer hires the services of another, which may happen to be another company, to perform particular tasks or duties at the behest of the hirer or the principal.

The one hired, the independent contractor, can be a natural person, business or even a corporation. They are hired to render services or provide goods to another natural person business or even corporation under terms and conditions specifically embodied in a contract called the independent contractor agreement.

The agreement can be either verbal or written. Common practice nowadays, however, is to reduce the agreement into writing.

An independent contractor agreement, in order to be valid and enforceable must contain the following essential provisions:

• Description of work - This is the most essential. Without this provision, it would make the contract inadequate. It describes what kind of goods will be provided or what kinds of services will be rendered by the independent contractor. Ideally, it must also state the term when the supply or rendering of service will end, how they shall be carried out, by whom and where they shall be done.


• Payment and work schedule - This is another important provision which tells how much the hirer (principal) will pay the independent contractor. It also provides the terms of payment whether by installment or one time payment. The deadline of the project, time frame, etc.


• Relationship of Parties - This provision spells out what kind of relationship that exists between the parties, i.e. the principal and the independent contractor. To avoid the possibility of confusion it must be clearly stated whether it is agency, partnership or some other. The word employee must not be used so as not to directly contradict the heading of the contract, which is independent contractor agreement.


• Right to Supervision and Control - This provision commonly states the right of the principal to control the manner in which the work is done, or to be done including the outcome. In some cases, the principal may opt to waive this right.


• Equipment - This may be essential especially in cases of independent contract for services. It may provide whom equipment or machineries shall be used – whether that of the principal or the independent contractor.


• A provision that can provide whose liability – whether that of the principal or independent contractor in case of non-payment of wages, torts, etc.

The rule of the thumb is, an individual is independent contractor of the people for whom the services are performed if the latter have the right to control or direct only the result of the work and not the means and methods of accomplishing the result.

As an exception to the general rule that employer must withhold income taxes, withhold and pay Social Security and Medicare taxes and pay unemployment tax on wages paid to employees – employers do not generally have to pay any taxes on payments to independent contractors.

What also sets an employee different from an independent contractor is that the latter is not under the employ of an employer. The independent contractor works only as required, when required.

Drafting a complete and valid independent contractor agreement involves complex details of employment and labor laws. It is highly recommended to consult with a lawyer who specializes in making, creating and establishing business contracts.