Hiring a contractor can be tricky. How do you know you picked the right one? How do you pay them?
There are many reasons you might hire a contractor for your small business. You might want to remodel or add on to your store. You might need specialty shipping for an item. Or, you might hire a contractor to build a website.
1. Get recommendations
Reach out to the people you know. They might know a contractor who is a good fit for your job.
When you get recommendations, ask questions. What was their experience like with the contractor? Was the work satisfactory? How was their pricing? Were there delays?
Knowing how the contractor performed their work for someone else can help you make a good hiring decision.
2. Go local
While it’s not necessary, hiring a local contractor has benefits. The contractor will likely have local knowledge and experience that will result in better decisions for your project.
Also, you understand the importance of local businesses as a small business owner. Hiring a local contractor gives you a chance to support other people who are like you.
3. Conduct an interview
Even though the contractor is not an employee, it is OK to interview them before hiring. An interview gives you a chance to make sure the contractor’s skills are a good fit for the job you need done.
During the interview, you might want to ask questions about previous experience, certifications, when the contractor is available, and pricing. By getting to know all the candidates, choosing a contractor will be an easier choice.
4. Avoid rushed decisions
Don’t feel like you have to hire a contractor simply because you talk to them. It is acceptable to look around to see what other contractors can offer. You want to choose the right contractor who meets your needs and budget.
When you talk to contractors, tell them approximately when they will hear back from you with a decision. Then, follow through by contacting the contractors with whom you spoke to let them know whether you chose them or not.
5. Classify correctly
When you hire any worker, you need to make sure you classify them correctly. Just because you agree to call the worker a contractor, that does not automatically make them a contractor. Also, just because the worker works on one project or works a short time for you, they are not automatically a contractor.
You can classify a worker either as a contractor or an employee. Misclassifying a worker can be devastating for a small business. You might owe back wages, back taxes, penalties, and court fees. You can use the DOL independent contractor economic realities test to determine if the worker is truly a contractor or an employee.
6. Request Form W-9
On this form, the contractor will include his or her name, business name and structure, address, and individual taxpayer identification number. You will then use the information on Form W-9 to fill out Form 1099-MISC.
7. Work out a payment plan
Your contractor might have a set payment plan. Or, the payment plan might be negotiable. Either way, make sure you know what the schedule for payments is.
Ask your contractor how he or she prefers to be paid. You will want to find out when your first payment is due. You will also want to know how frequently payments are due. You might want to ask about what happens if unexpected project expenses arise.
8. Create a contract
A contract is an important document to have. It outlines the obligations for both you and the contractor. It is also useful if a legal issue develops.
The contract should include all the expectations of the project for you and the contractor. It might include things about when the project will start, when the project should be finished, and how the payment plan will work. You and the contractor should both agree to and sign the contract.
9. Get involved, but not too involved.
When a contractor does work for you, you need to be clear if there is something you do not like. Make your opinions known.
However, you do not want to get too involved with how a contractor does their work. If you dictate exactly how the project should be done—including the tools used and the times worked—you might be showing control over the contractor. The degree of control you have over a worker is often used to determine if a worker is a contractor or an employee. If you have a lot of control over how the worker does their work, they might actually be an employee.
10. Be flexible
Even though you have an expected project completion date, delays might happen. You should leave some wiggle room for any timeline changes. For example, you’re having your store remodeled. If the contractor says they will complete the project by May 1, you probably do not want to set your opening date for May 2.
Depending on the work the contractor is doing, things like weather, back orders, and other complications can push the completion date back.
11. Keep the records
Once the contractor completes the project, you shouldn’t throw away the contract. Instead, keep any records you have for the project. Things you might keep include the contract, invoices, and payment records.
While you might not need these documents in the future, they are useful to have in case a legal issue arises. You could also reference them if you ever decide to hire the contractor again.
Once you’ve chosen a contractor, you need to pay them correctly. Patriot’s inexpensive accounting software can help. If you also have employees, our Full Service Payroll services can simplify your payroll process. Try both for free!