Independent Contractor Compliance Blog - by Collabrus™

The time to protect your company and your consultant’s status as a true independent contractor is while the project is alive and running. In terms of IC status this is the time most companies go wrong. They often begin with a true IC (1099) and slowly turn him/her into an employee (misclassified worker) by the way the day-to-day management of the project is handled. In this segment I’ll cover some “Do’s” to follow while the job is running.

Make it clear to everyone that your independent contractor is an IC

This is especially important for your managers and staff to know. They need to understand that an IC is not subject to the day-to-day direction and control resembling an employee. They should always refer to the contractor as an IC, independent contractor, or independent consultant. They should only expect the IC to perform the work under the conditions as agreed to in the contract. When I say conditions, I mean the place, time, tools, how, and other details about the job should be consistent with the written agreement.

Train your project leaders the proper way to manage the contract

This means you should manage the deliverables, not the consultant. Remember it’s the end result you contracted for not the IC’s time. Your managers should be measuring and approving the contractual milestones and deliverables (in other words, the finished product or service) not the line-by-line details of how the work was produced.

Track the project spend

Tracking costs does more than just ensure the project stays on budget. Tracking the money being paid to the consultant will give you insight to whether your IC has entered the Land of Status Drift.  A project that is spending over budget could also be morphing your IC into an employee in the eyes of the law.

When the project is approaching the total dollar amount budgeted it is time to ask:

• Is the job complete?
• Is the consultant doing other jobs that were not part of the original contract?
• Has the project gotten out of control?
• Should we reevaluate the contract terms?

Of course, tracking the costs will also make you a hero in the eyes of your finance department.

What’s Next?

In Part 3 we’ll be covering some more Do’s to follow while the project is alive. I’ll also cover how to recognize when you have entered the Land of Status Drift.