Your construction business depends on independent contractors who may perform a variety of tasks, including demolition, installation or painting. Because your business depends on quality work performed in a timely manner, use seven tips to ensure you hire reliable independent contractors.
For guidance on vehicle coverage for contractors, see Contractors/Construction Trades Business Auto.
If your projects involve potential pollution or environmental exposures, review options like Mechanical Construction Monoline Contractors Pollution Liability (MCPL).
Hiring reliable independent contractors
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1. Preview previous work.
Check out jobs the independent contractor has already completed. Do they match the scope of your project and meet your quality standards? If so, you can reasonably expect the independent contractor to successfully complete your job, too.
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2. Do a background check.
Your reputation, business and future career can depend on the work your independent contractors perform, and you may be liable for their actions on the job site. Perform background checks and assess the contractor's work history and any recent criminal charges.
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3. Check insurance paperwork.
Independent contractors should carry insurance appropriate for construction site hazards. Inspect their certificates and policies to ensure coverage is adequate before work begins.
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4. Complete a W-9.
Independent contractors are not employees, and they must complete a W-9. This form includes their name, address and Social Security number (SSN) or Employer Identification Number (EIN) and indicates they are exempt from tax withholding. Reliable contractors will readily agree to sign a W-9.
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5. Discuss Form 1099-MISC.
The IRS requires you to file Form 1099-MISC for independent contractors paid $600 or more in a year. If a contractor refuses to provide a current address or asks you not to file required tax forms, consider that a red flag.
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6. Sign a contract.
A contract is an agreement between you and the independent contractor. It should include the project timeline, payment schedule, work expectations, a statement of independent-contractor status, and termination and nonsolicitation terms. Work only with contractors who will sign a project-specific contract.
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7. Pay via invoice only.
Independent contractors should submit invoices when work is finished. Pay those invoices and not other expenses that are the contractor's responsibility, and confirm your paid invoices match amounts reported on Form 1099-MISC at year end.
Hire reliable independent contractors for your construction business when you use these seven tips. For more assistance, talk to an agent or business consultant.
Frequently Asked Questions
How can I confirm a worker is truly an independent contractor?
Check their contract terms, control over work methods, whether they provide their own tools and their tax form status; consistent documentation and a signed contract help support independent-contractor classification.
What insurance should I require from contractors?
Ask for general liability, workers' compensation (if applicable), and any project-specific policies; require up-to-date certificates of insurance naming you as an additional insured when appropriate.
Why is a W-9 necessary before paying a contractor?
A W-9 provides the taxpayer identification needed to prepare Form 1099-MISC and helps you comply with IRS reporting requirements.
What should an invoice include to make payment and tax reporting easier?
Invoices should list the contractor's name, address, EIN or SSN (if appropriate), a description of work, dates, amounts due and payment terms to match year-end reporting.