How to create an independent contractor agreement

With 11.9 million people working as independent contractors in the U.S. as of July 2023, one of the first steps in hiring one is creating an independent contractor agreement. This document lays out how contractors will be hired and managed, regardless of their responsibilities and location.

Whether you hire contractors regularly or just occasionally, rushing to create agreements isn't smart. A solid template saves time and keeps things consistent.

Not sure if you should bring on your next all-star as a contractor or employee? Wondering if you need to convert an existing contractor to full-time employment? Find out using our Contractor vs. Full-Time Analyzer.

What Is An Independent Contractor Agreement?

An independent contractor agreement is a legal document that outlines the working relationship between you and a freelancer or contractor. It defines what work will be done, how much you'll pay, when it's due, and who owns the final product.

Without an independent contractor agreement, your entire arrangement is based solely on individual conversations. And that means there's a greater chance of a disagreement or misinterpretation that could affect your working relationship.

Do You Need An Independent Contractor Agreement?

Sure, there are plenty of excuses for skipping the paperwork, but that's unnecessary risk you don't need. Even small projects deserve protection.

Every contractor should sign an agreement—no exceptions. If they won't, find someone who will.

What Does An Independent Contractor Agreement Cover?

Overview

Every independent contractor agreement should begin with a brief outline stating the name of the client and the name of the service provider. This is also the best place to include the date and each party's contact information, including their physical address, email address, and phone number.

Scope of work

The scope of work section should include a clear description of the services to be provided, the duration of the relationship, and a timeline for deliverables. Providing this level of detail minimizes the risk of misunderstandings and ensures that both parties are working toward a common goal.

It's also important to include a clause detailing your expectations regarding the speed and quality of work. By clearly specifying your expectations, you can help ensure that the services are delivered to the highest standards.

Compensation

Clearly outline how the contractor will be paid, payment frequency, and invoicing procedures. For example, will you pay the contractor per project or by the hour? Will you pay after each project, once a week, or once a month? How do you want to receive and pay invoices?

A clear, detailed compensation section can help prevent payment disputes later.

Termination

Even if you have a good business relationship with an independent contractor, your engagement may come to an end at some point, and the termination clause should clearly define the process and any final payments, drawing on principles like those from the ILO regarding severance allowance or other separation benefits. Use the termination section of your agreement to address:

It can be awkward to move on from an independent contractor, but a well-constructed termination section in your agreement can help clarify the situation.

Intellectual property and ownership

Independent contractors often work with multiple clients in a specific industry. Protecting proprietary information and work produced during your contractual relationship needs to be a priority. The agreement needs to address intellectual property ownership, particularly who has the rights to work created during the working relationship. It's important to include clear expectations to prevent any confusion. Not clearly defining this matter can lead to lengthy and costly legal disputes.

Furthermore, an intellectual property disagreement can be even more complex when dealing with an international contractor because laws vary from country to country.

Here's what every solid contractor agreement must include:

How To Create An Independent Contractor Agreement

So, how do you actually create one of these agreements? It's simpler than you think. Every good contract follows the same basic structure:

Legal Requirements For Valid Contractor Agreements

Here's the thing about contracts—they're not just paperwork. They're legally binding promises that courts will enforce. What makes them stick? These universal elements:

Are Independent Contractor Agreements The Same In Every Country?

The need for an agreement stays the same worldwide, but two things can vary by country:

Aspect

Domestic Contractors

International Contractors

Content requirements

Standard business terms

Same core elements

Legal requirements

Local employment laws

Varies by contractor's country

Complexity

Moderate

High due to varying regulations

Oyster makes it simple to hire contractors in over 180 countries worldwide. We take care of legal compliance in every country, so you can have peace of mind when working with contractors, regardless of location.

Getting Started With Global Contractor Management

A solid contractor agreement sets the foundation for success—a key factor considering that most independent contractors overwhelmingly preferred their work arrangement in recent surveys. It brings clarity, reduces risk, and aligns expectations from day one.

But global hiring? That's where things get complex. Managing compliance, payments, and contracts across countries requires expertise you might not have in-house.

Oyster provides locally compliant contract templates and a single platform to manage payments and onboarding for contractors in over 180 countries. You get the peace of mind that comes with expert-backed compliance, so you can focus on building your global team. Ready to hire talent anywhere? Start hiring globally.

Oyster is a global employment platform designed to enable visionary HR leaders to find, engage, pay, manage, develop, and take care of a thriving distributed workforce. Oyster lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.

Oyster enables hiring anywhere in the world—with reliable, compliant payroll, and great local benefits and perks.