Many companies use independent contractors instead of full-time employees to lower expenses. Independent contractors aren't employees but often refer to themselves as freelancers, entrepreneurs, consultants, or self-employed workers.
Companies use independent contractors to outsource their work, so instead of having a full-time IT department, a company may hire an independent contractor to do work of limited scope and for a limited duration. Hiring is then done through an independent contractor application, which is different from an employee application.
Independent Contractors vs. Employees
When hiring an independent contractor, clients and employers consider their company's needs and costs.
A company can hire freelancers or entrepreneurial companies to do all sorts of work, such as legal representation, accounting, decorating services, cafeteria services, writing, graphic design, or creating intellectual property such as inventions.
An independent contractor works either as an individual or, for liability reasons, as a member of a limited liability company (LLC) or a corporation.
As the client, you need to make sure the independent contractor meets the definition under the law, including the Fair Labor Standards Act.
Independent contractors are treated differently by the Internal Revenue Service, compared to employees. For example, an employer or client doesn't take income taxes, Social Security, or Medicare taxes out of an independent contractor's pay, as employers do with employees.
Instead, independent contractors fill out a Request for Taxpayer Identification Number and Certification (Form W-9) and present it to their employer so they can receive a Miscellaneous Income (Form 1099-MISC) from their client at the end of the tax year.
Independent Contractor Application and Agreement
You may not need an application for an independent contractor, depending on what information you're able to obtain without it.
You certainly want the freelancer's resume and references, but you may also want to research the freelancer, including if they have a company listed with the Better Business Bureau.
Other information you may request include diplomas, transcripts, and certifications, if applicable.
You can also include background and drug tests as part of the application process, although it is best practice to provide notice to the applicant ahead of time.
You must also make sure that background checks are not performed randomly—every applicant should undergo the process—to prevent discrimination claims later on.
Once you've hired an independent contractor, you should also get a written contract. Many independent contractor agreements include noncompete clauses, which state that the client's work is confidential, and clauses that state that the client owns the intellectual property created by the independent contractor while working for you.
Contents of a Basic Independent Contractor Application
A basic independent contractor application should contain all of the general information found in an employee application, but you may also request additional information, such as:
- The name, address, contact information, and date of birth of the freelancer
- The name of the freelancer's company, if applicable
- The freelancer's Social Security number or employer identification number
- Emergency contacts
- Criminal background, as stated by the freelancer
- Employment record, including who else the freelancer is working for or has worked for, with dates and contact information
- The date the freelancer can start work, general availability, and their hourly fee
- What type of position she's seeking
- If she has any disabilities that would impair her performance
- If she has her own liability insurance and information about the insurance
- If she will be driving for your company, her driving record, make of vehicle, and any traffic-related offenses
- If she's ever tested positive for drugs or alcohol during a test performed in the course of her employment
- The freelancer's signature and the date signed
While using independent contractors or freelancers can help save your business money, you need to know who you're hiring. An independent contractor application, along with background checks, resumes, and drug and alcohol testing can ensure that you hire the right person for the job.