It's not at all uncommon for a small business to hire independent contractors. After all, these workers can offer some additional expertise or a skillset that you currently don't have—especially if you've got only a handful of employees.
But, when it comes to independent contractors, there's one key thing you have to remember—they are a different category than employees. That means there are a few things you need to do differently when working with them.
So before you hire an independent contractor, follow these simple questions as a guide.
Have You Done Your Homework?
Most employers wouldn't hire someone to work for them without at least one interview, right? The same attention to due diligence should apply when it comes to hiring an independent contractor as well.
Do more than just explore their website. Look for reviews online, check with any associations where they are members and ask them for a list of references. Don't hesitate to gather as much information as you can to ensure you're working with the right person.
What's the Length of the Project?
Think about the scope of the project you want the independent contractor to undertake. In some instances, especially for long term projects, it might make more sense to hire an employee for that role.
What's the difference between employees and independent contracts? If you aren't sure, this infographic can help you decode the difference between an independent contractor and an employee. If you really want to dive into the details, we've got you covered with an in-depth guide to the differences between subcontractors, independent contractors and contractor laborers.
Is Your Paperwork in Order?
When it comes to working with anyone outside your business, having a contract in place is always a good idea. But it's especially important when hiring independent contractors.
But that's not all you need.
Make sure you have the right forms at the ready. That includes the appropriate tax forms too. When working with independent contractors you will need to provide them with a W-9. You will also need to fill out a form 1099-MISC for reporting any payments to independent contractors totaling over $600 for the tax year.
And don't forget to set up any specific access codes or key cards they might need to get on your computers or in and out of your buildings while they are doing their work.
Do you have the details covered?
With a contract in place, the important details will get covered. This includes payment information, the scope of the project and any needed progress reports.
You can also use your contract to ensure that as Colorado workers' compensation regulations require your independent contractor has their own workers' comp coverage. And if they plan on using any subcontractors, you will want to make sure they have workers' comp coverage too.
All of that should get highlighted right in your contract to prevent any confusion.
Will Your Workers' Comp Insurance Change?
Remember, when it comes to your workers' compensation insurance a good rule of thumb to always note is that changes in your payroll can potentially impact your premium.
In most cases, working with an independent contractor won't impact your workers' compensation insurance in Colorado. The requirements in Colorado require independent contractors to have their own workers' comp insurance. However, there are a handful of exceptions to the rule to note.
If you supply tools or a vehicle to the contractor or if the contractor is only providing this service to you, they could actually be considered an employee. That means it will impact your policy.
Your best bet is to make sure you're protected. You can do this by putting language in your contract that requires a certificate of insurance from the independent contractor as well as language that covers responsibility when it comes to workplace safety.
If you have more questions about independent contractors and workers' comp coverages, Cake has a team of Colorado workers' compensation insurance specialists ready to chat with you about your specific needs. We're happy to answer workers' comp questions to ensure your business and employees have protection. With Cake you—or the contractors you work with—can get a workers' comp quote and buy it online in just a few minutes.
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