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Independent Sole Trader Contractor Agreement

Organisations often hire independent contractors to provide specific skills or services for their business. It is a flexible and efficient way to provide services or expertise where a gap exists in the hirer’s own resources.

If you are wanting to hire a contractor, or you are a contractor, then you should consider the following issues:-

The ATO actively investigates “sham contract arrangements,” a practice of disguising employees as contractors to avoid superannuation and other payments.

There are certain differences between independent contractors and employees that you should be aware of.

Independent contractors generally:-

  1. Operate and work their own business with a number of different clients;
  2. Have a high level of control over the work they perform;
  3. Are able to delegate their work in most situations;
  4. Can accept or refuse work at their discretion;
  5. Can be paid per project or on a results basis rather than per hour;
  6. Provide all of their own equipment and materials to perform the work.

Who is responsible for insurance?

Whenever you are hiring the services of a sole trader contractor it is essential a well drafted agreement be put in place. This no fuss, easy to use document clearly sets out the obligations and terms of the arrangement.

Generally, independent contractors take out their own insurance usually including public liability insurance and professional indemnity. A contractor may also wish to consider personal accident and illness insurance to provide cover in the event an accident or illness keeps them from working.

Putting an Sole Trader Contractor Agreement in place

An Independent Contractors Agreement can be used to clearly establish the terms and conditions of your working relationship.

It is important that each party is fully aware of their rights and responsibilities and the key issues have been negotiated and agreed on.

When preparing your contract, you should consider the following issues:-

  • The work or results that are to be achieved by the contractor. This information should be set out in as much detail as possible, giving both parties a handy reference point to the work needing to be performed and minimising the possibilities of any misunderstandings occurring. If work results are to be staggered, then the dates when certain results are due should be outlined;
  • Confirming that both parties agree that the relationship is one of principal and contractor rather than employer and employee;
  • Setting out insurance and professional indemnity responsibilities;
  • Providing clear exit strategies or avenues to end the contract should the relationship turn sour or expectations not be met;
  • Provide a dispute resolution process;
  • Define the ownership of any intellectual property created in the course of the relationship;
  • The cost of the results or services of the contractor and how and when payment is to be made;
  • Confidentiality and conflict of interest provisions;
  • Limitation of liability provisions.
Download your own Independent Sole Trader Contractors Agreement DIY Legal Kit .