What is an independent contractor agreement?
An independent contractor agreement is a contract between a business and a self-employed person or company that provides services without becoming an employee. It covers the work, the rate, invoicing, who owns what the contractor creates, confidentiality and – importantly – the fact that the contractor runs their own business, pays their own taxes and does not receive employee benefits.
Businesses use contractor agreements for developers, designers, writers, marketers, tradespeople, virtual assistants and other specialists engaged for a project or a limited period.
Worker classification: the contract is only part of the picture
Calling someone a contractor in a contract does not by itself make them one. Tax authorities and courts generally look at how the relationship works in practice, and getting it wrong can lead to back taxes, penalties and claims for employee rights.
| Where | What is generally considered |
|---|---|
| United States | The IRS looks at behavioural control, financial control and the type of relationship. Some states apply stricter tests, such as the "ABC test", for wage and unemployment purposes. |
| United Kingdom | Employment status and the off-payroll working rules (IR35) look at factors such as control, the right to send a substitute and whether there is an obligation to offer and accept work. |
| Elsewhere | Most countries use similar factors: control, integration into the business, financial risk and who provides the tools. |
Signs of a genuine contractor include setting their own hours and methods, using their own equipment, working for several clients, invoicing for results and being able to use helpers or a substitute. If the person works fixed hours under close supervision as part of your team, get professional advice before treating them as a contractor.
Key clauses explained
- Contractor status and no benefits – records the intended relationship and that the contractor arranges their own cover.
- Taxes – the contractor handles their own income tax and contributions; the company only issues forms the law requires.
- Tools and expenses – the contractor brings their own equipment, a typical sign of independence.
- Intellectual property – work created for the company becomes the company's (as work made for hire or by assignment) once paid for, while the contractor keeps their pre-existing tools.
- Assistants and substitutes – an optional clause allowing the contractor to use helpers, which can support independent status.
How to use this template
- Enter the company and contractor's legal names and addresses.
- Describe the services or refer to written work orders. The AI scope of work generator can help.
- Set the rate, invoicing frequency, payment terms, end date and notice period.
- Choose optional clauses such as insurance or non-solicitation.
- Download the PDF and have both parties sign before work begins.
Tips and common mistakes
- Don't manage a contractor like an employee. Agree outcomes and deadlines, not daily hours.
- Get the IP clause signed first. Without a written assignment, a contractor may keep rights in what they create.
- Collect tax details up front so your year-end reporting is straightforward.
- Contractors: invoice promptly. Use the invoice generator and log hours with the time tracker.
Sharing sensitive information before the contract is agreed? Start with an NDA.
This template is general information, not legal advice. Worker classification, tax and intellectual property rules differ by country and state and change over time; ask a lawyer or accountant if you are unsure about a contractor's status.
Frequently asked questions
Does this agreement guarantee someone is a contractor, not an employee?
No. Authorities and courts generally look at how the work is actually done – control, financial risk, tools, substitution and integration into the business – not just the contract label. The agreement helps record the intended relationship, but the day-to-day reality must match it.
What is IR35?
IR35, also called the off-payroll working rules, is UK tax legislation aimed at contractors who work through their own company but would be employees if engaged directly. Depending on the size of the client, either the client or the contractor's company decides whether the rules apply. UK businesses and contractors should check current HMRC guidance or take advice.
Who owns the work a contractor creates?
Without a written agreement, a contractor may own the copyright in what they create. This template makes work created specifically for the company the company's property once it has been paid for, while the contractor keeps their own pre-existing tools and know-how.
Does the company withhold taxes for a contractor?
Usually not – the contractor pays their own income tax and contributions. The company may still have reporting duties, such as issuing an annual information return in some countries. Check the rules where you operate.
Can a contractor work for other clients?
Yes. Being free to work for others is one of the signs of a genuine independent contractor. This template allows it, as long as the contractor keeps the company's information confidential.
