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What Is an Independent Contractors Agreement?
An independent contractor agreement is a contract that lays out the terms of the independent contractor’s work. It covers the obligations, scope, and deadlines of the work to be performed. It affirms that the client and contractor are not in an employer-employee relationship. For example, most skilled tradespeople like plumbers will have you sign an independent contractor agreement when hiring them. Meaning that, while you pay them to fix your broken sink, they are not considered to be your employee.
An independent contractor agreement ensures that there is no confusion between the parties regarding the worker’s classification, payments, and tax obligations. It also helps establish a worker’s contractor status by showing the Internal Revenue Service (IRS) and other government agencies that both parties intended to create an Independent Contract relationship. This is important because an independent contractor has different legal rights and obligations than an employee.
What are the types of employment in India?
In India, the predominant types of employment are:
- Permanent employees: Workers hired for an indefinite period
- Independent contractors and subcontractors: Self-employed workers who work their own hours using their own equipment
- Apprentices and trainees: Usually unpaid workers who are there to gain experience or qualifications while assisting a company
- Casual and temporary employees: Workers usually hired for short periods, such as busy seasons
Need for Independent Contractors Agreement
Small to medium and large business organizations and body corporates hire various full-time and part-time employees per the company’s terms and conditions. A variety of segregated daily tasks are allocated to each employee across multiple departments such as finance, marketing, accounting, human resources, sales, purchase, IT, research and development, etc. However, specific business tasks and immediate or high-priority company projects call for professional individuals who possess expertise in a particular niche or multiple niches. These professional experts are independent contractors and enter into a contract with the company to accomplish a particular task for a fixed time interval. These contractors’ scope of work might include working independently or in collaboration with certain company personnel as agreed in the independent contractor agreement.
FAQs for Independent Contractors Agreement
Q1. What is the main objective of the Independent Contractors Agreement?
Ans – As the main objective of an independent contractor agreement is to clarify that the worker is not an employee of the hiring company, it must state that the worker is not entitled to employee benefits such as health insurance, compensation insurance, unemployment compensation, insurance coverage, and paid time off.
Q2. What is the general rule in Independent Contractors Agreement?
Ans – The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.
Q3. Why do employers prefer Independent Contractors Agreement?
Ans – Independent contractors allow companies to respond with flexibility to meet market demands. Engaging independent contractors for projects that require specific skills or additional resources allows companies to access in-demand skills, get to market faster, better manage turnover, and have flexibility in cost models.
INDEPENDENT CONTRACTOR’S AGREEMENT SAMPLE FORMAT
Provides for an independent contracting agreement for virtually any type of services, which can be performed by an independent contract
THIS AGREEMENT is made BETWEEN
________________________________________________________ (hereinafter referred to as the as CONTRACTING PARTY) a Company incorporated under the Indian Companies Act, having its Registered Office at ____________
AND
_______________________ s/o/d/o Mr___________________________________.____________, resident of _______________________________________________________________________ (hereinafter referred to as the INDEPENDENT CONTRACTOR). Together referred to as the Parties.
IT IS HEREBY AGREED BY PARTIES AS FOLLOWS:
1. INDEPENDENT CONTRACTOR shall perform the following services for CONTRACTING PARTY:
1.____________
2.____________
Rs. ______ per unit
2. This agreement shall begin on (Date) ____________ and shall terminate on (Date)______ unless earlier terminated.
3. Contracting Party may terminate this contract on 14 days notice to Independent Contractor for unsatisfactory performance. Similarly independent contractor may terminate this contract on 15 days notice to contracting party.
4. This is an agreement for independent contracting services. The contracting party provides no benefits such as E.S.I.., Provident Fund, compensation under Workmen Compensation Act etc. to independent contractor. Independent contractor will be himself liable for all these.
5. Contracting party is only interested in the results obtained by the independent contractor. Independent contractor shall be responsible for providing all tools and materials required for performance of the tasks agreed to.
6. Independent contractor is responsible for payment of all central and state government levies and taxes. He is also responsible for any other law in force.
7. Any dispute between parties, if failed to resolved by mutual consultation, will be referred for arbitration under arbitration and conciliation act, 1996. The decision of arbitrator will be final and binding to both the parties.
The agreement is read, understood and agreed by both the parties and have hereto respectively signed.
Date:__________
Place:__________
DECLARATION BY STAFF OF SECURITY COMPANY
I________________________,
S/O_______________________,
Shri ______________________,
resident of ____________________________________________________________have fully understood the conditions as explained to me, to my entire satisfaction by M/s. ___________________ for contractual appointment as __________________________in the said security company.
I have therefore, willing and consciously decided to seek employment with M/s.______________ ________ and to abide by the rules and regulations as prevalent in the company from time to time.
That in the event of my quitting/abandoning the said company on my own, I shall do so on my own risk and responsibility.
That the company has the prerogative to assign me duties at a place /premises, as deemed fit by the authorities.
That I shall not join any labour union and in such an eventuality, the company authorities will be at liberty to part with my services, without any notice.
That I shall not seek refund of security towards uniform as long as I work with the said company. In case of quitting before completion of one year, I shall seek refund only after one year on the production of original receipt in support of having deposited the security money.
That security profession requires high standard of honesty and alertness. If at any point of time I am found lacking in discharge of my duties or found of any kind of misconduct or under the influence of liquor, the company will be at liberty to terminate my services without any notice.
Name ____________
Address:___________
Witnesses:-
1.
2.
