We share our tips to help you hire a contractor for your startup.
Your contractor agreement should clearly set out the work terms and cover:
- Services - the work that the contractor will complete for your startup;
- Payment - when and how you will pay, invoice requirements;
- Intellectual property (IP) - IP will belong to the contractor unless you state that work created will belong to you;
- Confidential information - mutual protection for both your startup and the contractor for confidential information;
- Insurance - a requirement that the contractor and workers have their own insurance;
- Subcontracting - written permission before the contractor can sub contract;
- Restraint of trade - a non compete and non solicitation restriction for protection from the contractor competing with your startup or soliciting your customers or employees;
- Variation - a clause that allows both parties to vary the contract by written agreement;
- Disputes - a clause about dispute resolution to stop either party from going to court before attempting dispute resolution; and
- Termination - when the agreement will end.
The work conditions for a contractor are different to those of an employee.
In a nutshell, contractor's have more say about how work is performed compared to employees.
For a full list of all the key differences between employees and contractors, you can read our article: choosing between employees and contractors here.
3. Avoid sham contracting
Sham contracting means to hire someone and classify them as a contractor when they should really be classified as an employee.
Some employers engage in sham contracting to avoid paying employee entitlements.
There are expensive penalties for sham contracting and if you are unsure about whether you have incorrectly classified a worker you should get legal advice quickly.