Independent Contractor Compliance Blog

I recently read an interesting article entitled, “How setting goals creates happy workers,” by Maynard Brusman, accountingWEB.

The author believes the more detail you give workers on what to do, and how to do it, the better.

The article advises, “…intelligent managers increase worker productivity by helping their employees develop goals resulting in improved workplace performance…A mountain of evidence shows us that people perform best when they’re given goals…When you give an assignment with instructions to “do your best,” you aren’t providing enough specificity. Employees perform better when they know what needs to be done, the outcomes you seek, and how much effort they’ll need to expend to achieve results…”

Regardless if you agree with this philosophy or not, there is still one truism you should not ignore: Too much direction and control can turn the most qualified IC into an employee.

For example, if you:

• Dictate goals and objectives for performance.
• Require periodic reports on their progress and on the time spent on the project.
• Hold performance evaluations against the goals.
• Instruct workers on the details of how to do the work.
• Control the sequence of tasks to be done.
• Give instructions about the methods and means to accomplish the final goals.
• Pay by the hour-not by completed milestone or deliverable-while exercising the above control actions.

All of these actions can be considered evidence of direction and control which is evidence of an employment relationship. If you treat your independent contractors this way you are at risk of misclassifying your IC’s, regardless of their other qualifications.

When engaging an independent contractor – less is better.

If you need these details spelled out to insure the project is a success then make them part of the written agreement.*

• Establish milestones, by due date, and tie them to an installment payment.
• Clearly define the final deliverables that will signal when the project is completed and final payment is due.
• Do not control how the consultant will accomplish the details, or the order they will do the work, or the time they are required to work on the project.
• Ideally, pay a fixed price for a final product-not for the time they work.

Remember, you engaged this consultant because he/she is an expert and will deliver the end result you need for your business-right?

Then just sit back and let the IC do the job you engaged him/her to do.

*Disclaimer: Given the general nature and context of this presentation this article is for informational purposes only and should not be considered to be substitute for competent, expert or legal advice. For specific information on recent developments, the effects of particular factual situations, or of a particular law in regards to your business, or before making decisions based upon this presentation, you should obtain the opinion of a qualified expert like Collabrus or competent legal advice.