In this blog, Suna’s Client Success Partner, Hasti Khodadad, shares a step by step guide on how to hire an independent contractor the right way by covering everything from proper classification and written agreements to onboarding best practices and risk mitigation.
How to Hire an Independent Contractor
Hiring an independent contractor can be an excellent way to access specialized skills, manage short-term projects or bring in expertise without committing to a full-time hire. However, the process requires careful planning to ensure compliance with laws and regulations while setting up a smooth working relationship.
Understand the Classification Rules
Before moving forward, it is important to make sure the role truly qualifies as an independent contractor position. Misclassifying an employee as an independent contractor can result in penalties, back taxes and other liabilities. Federal guidelines, such as the economic realities test under the Fair Labor Standards Act, help determine whether a worker is truly in business for themselves or should be classified as an employee. State laws, such as California’s ABC test, may be even stricter. Review both federal and state rules before posting the role.
Define the Scope of Work Clearly
A successful contractor engagement starts with a clear understanding of the work to be done. Outline the project scope, deliverables, timelines and expected outcomes in writing. The more specific you are, the easier it will be for both sides to understand the requirements and measure success. This also helps reinforce the independent nature of the work, as contractors typically operate with autonomy over how the results are achieved.
Use a Written Agreement
A written contract is essential for protecting both parties. It should detail the scope of work, payment terms, deadlines, ownership of work product, confidentiality obligations, and termination conditions. The agreement should also specify that the contractor is responsible for their own taxes, tools and methods of work. This not only ensures legal clarity but also sets professional expectations from the start.
Verify Qualifications and References
Just like hiring an employee, it is important to vet independent contractors. Review their portfolio, check references and confirm they have the necessary experience for the project. If specialized licensing or certifications are required, ask for proof before the work begins.
Set Up Payment and Communication Processes
Agree on payment terms before work begins, including the rate, invoicing schedule, and payment method. Establish how and when you will communicate with the contractor. Many successful contractor relationships are built on regular check-ins to ensure alignment while still respecting the contractor’s independence.
Monitor Progress Without Micromanaging
It is reasonable to check in on progress, review deliverables and provide feedback, but remember that independent contractors typically control how they complete the work. Focus on outcomes rather than dictating daily tasks. This helps maintain compliance with classification rules while building trust in the working relationship.
Keep Records
Maintain records of contracts, invoices and communications related to the work. These documents will be important for accounting, tax purposes and any potential compliance audits.
Quick Reference Checklist for Hiring an Independent Contractor
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Classification
Confirm the role meets federal and state criteria for independent contractor status
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Scope of Work
Define deliverables, timelines and outcomes in detail
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Written Agreement
Include payment terms, work ownership, confidentiality and responsibilities for taxes and tools
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Verification
Check qualifications, references and any required certifications
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Payment and Communication
Agree on rates, invoicing schedule and preferred communication channels
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Oversight
Monitor progress based on results, not daily tasks
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Documentation
Keep all contracts, invoices and relevant communications on file
Final Thought
Hiring an independent contractor can bring valuable expertise to your business when handled correctly. By understanding classification rules, setting clear expectations and maintaining professional boundaries, you can create a productive relationship that benefits both your organization and the contractor.