What Is an Independent Contractor Agreement?

An independent contractor agreement is a written agreement that outlines the scope of work, payment terms, and legal expectations between a business and a self-employed service provider. It helps clarify that the arrangement is not an employer-employee relationship, which can reduce the risk of misclassification under IRS and labor regulations.

This type of contract is commonly used to protect confidential information, define who owns the work product, and explain what happens if the term of this agreement ends early. It may include clauses around reimbursement, trade secrets, and intellectual property rights, depending on the nature of the contractor’s work.

Learn more in What Is an Independent Contractor?

Why Independent Contractor Agreements Matter

Having a clear independent contractor agreement benefits both the business and the contractor. For the business, it provides a layer of protection when hiring freelancers or consultants across different states or countries. For the contractor, it sets expectations around scope, timelines, and compensation.

When Agreements Are Typically Used

• Working with someone for short-term or project-based work
• Collaborating across borders or jurisdictions
• Sharing confidential information or access to internal systems
• Addressing ownership of deliverables, tools, or software
• Avoiding risks related to social security, income taxes, or workers’ compensation

See A Guide to Working with 1099 Employees for more insights.

Key Components to Include in an Independent Contractor Agreement

1. Scope of Work

A clear description of the services to be performed, expected deliverables, and timelines or milestones.

2. Payment Terms

Agreements should outline rates, the payment schedule, and conditions for reimbursement or invoicing.

3. Confidentiality and Protection of Information

Most agreements include clauses related to confidential information, trade secrets, and proprietary information, especially when the contractor has access to sensitive data. Some businesses also use a separate non-disclosure agreement.

4. Intellectual Property and Work Ownership

Depending on the nature of the contractor’s work, the agreement should address who owns the work product created and whether any intellectual property rights are transferred.

5. Liability, Insurance, and Indemnification

Some agreements include language on indemnification, liability insurance, or compensation insurance, especially when the contractor is performing high-risk work or accessing client systems.

6. Term and Termination of This Agreement

State how long the agreement will remain in effect, how either party can end it, and what happens if it ends early. This section may also include waiver, severability, or subcontractor provisions.

7. Governing Law and Dispute Handling

Since contractors may be based in different regions, the agreement should specify the governing law, and whether disputes will go through arbitration or court proceedings.

8. Other Provisions

Include the entire agreement clause to clarify that all terms are captured in the contract, and reference any relevant registrations, covenants, or prior legal advice received.

Explore related templates and clauses in 6 Essential Forms for Hiring Independent Contractors

Adjusting for Global Contractors

If you’re working with international freelancers, legal requirements may differ. Here are a few considerations:

• Income taxes and social security contributions vary depending on the contractor’s location
• Local laws may require additional registrations or permit certain types of subcontract work
• Protecting proprietary information or resolving disputes may fall under different applicable law or governing law
• In some jurisdictions, workers’ compensation rules may apply even for independent workers

Learn more in How to Create a Compliant International Contractor Agreement

Why Some Teams Use Templates, Others Use Tools

Using a Template

A downloadable template can help you get started, especially if your team is managing contractors on a small scale. However, many templates do not cover region-specific risks like local IRS classification, governing law, or protections around confidential information.

Using Thera’s Platform

Thera’s contractor management solution provides a systemized way to help teams prepare agreements, store documentation, and stay organized across states or countries. It helps reduce manual errors by:

• Aligning agreements with applicable law
• Supporting key clauses like indemnification, warranties, confidential information, and payment terms
• Making it easier to track the term of this agreement and the responsibilities outlined in each provision of this agreement

This isn’t a replacement for a law firm or formal legal advice, but a helpful tool for companies that want structure and visibility as they grow.

Managing contractors shouldn’t be overwhelming. With the right agreement structure and support system, your business can move forward with more clarity and less risk. Whether you’re working with one contractor or scaling a team across borders, it helps to have a system in place.

Need help organizing agreements and onboarding workflows?
Book a demo to explore how Thera supports growing teams.

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