Attracting good talent is one of the most important things you can do as an HR leader. But if your company is having trouble getting and keeping good talent, it might be time to turn to contractors. While contractors aren’t your traditional hires, they are a fantastic way to fill in the gaps in your team. Never had to onboard a 1099 contractor before? Then you’re in the right place.
What Is A 1099 Contractor?
A 1099 contractor is an independent contractor (or freelance contractor) who provides services to your company. However, they are not an employee. They are self-employed, which means your company’s benefits plan does not cover them, and you don’t have to withhold or pay any taxes on independent contractors. Instead, they invoice you for the work they do. You will tally up how much you paid each freelancer at the end of the year and send a 1099-MISC or 1099-NEC for every contractor you paid over $600.
There are some limitations to how you can use contractors. Laws like California’s AB-5 have put some parameters on who can be considered a contractor. As the line between contractor and worker becomes more blurry, you can expect more states to adopt laws around contracting.
For example, the PRO Act was recently discussed in the House & Senate. It hasn’t moved into law yet, but there could still be action on it in the future. If you want to hire independent contractors, you have to think about what regulations like this could do to your bottom line.
Why 1099 Contractors Are A Great Investment For Teams
If you are looking for a way to fill in a gap in your team, or if you are looking to bring someone on for a specific project, 1099 contractors are a great option.
Independent contractors are a great way to:
Attract And Retain The Right Talent
This is especially important when you need temporary talent for a specific project while still having control over your team.
For example, say your small business needs a complete website overhaul, but you don’t currently have a full-time web developer on staff. Instead of hiring and training someone you’ll only need for this short-term project, you can go ahead and onboard a 1099 contractor to complete the job per the terms of your contract.
Reduce Your Company’s Overhead Costs
If you hire a 1099 contractor, you don’t have to pay for benefits (such as health insurance, paid time off, and retirement benefits) for that person.
Ultimately if the person is only doing a small task for your organization, there is no need to fill that person’s day with busy work. Instead, hire them for the task you need, and reduce the number of full-time team members you need.
Hiring full-time workers still makes sense for many companies, but it doesn’t have to be the only way you work with talented people.
Why Companies Need To Onboard 1099 Contractors
Many organizations don’t have a formal onboarding process for 1099 contractors. It makes sense because we often associate onboarding with part-time and full-time employees. However, there is a purpose behind onboarding contractors. Let’s walk through some of the reasons you might choose to onboard your contractors:
Great Onboarding Ensures All Your Ducks Are In A Row
Starting with a new contractor can be difficult. There is so much to settle, like contracts, federal paperwork, and payment details. It can be easy for these items to fall through the cracks if you aren’t careful. We encourage you to create a simple contractor onboarding checklist to make sure that you have everything you need before you start working with someone long-term.
1099 Contractor Onboarding Creates A Quicker Speed To Productivity For Companies
When you take a few moments to understand why you are working with a contractor, what you need them to learn, and what your first steps are, you can get new contractors up to speed quicker. We all want contractors to feel knowledgeable and excited. Onboarding is your chance to make sure contractors have what they need to succeed.
Onboarding Improves Your Contractor’s Experience With Your Organization
Being a contractor can be a daunting experience. Freelancers are always trying to learn as much as they can so that their work can reflect your organization. When you help contractors get up to speed by answering questions and providing the right information, they will enjoy their time working with your organization.
Remember, freelancers are business owners who can choose who they want to work with. By putting some energy into the beginning of your time together, you ensure a long-term freelance relationship.
What You Need From 1099 Contractors During The Onboarding Process
As with any new hire, you should have a clear onboarding plan for your 1099 contractors. Since they are not employees of your company, your onboarding process will be a little different.
Here are a few forms you might want to include in your 1099 contractor onboarding packet:
W-9 (Or W-8 BEN For Foreign Contractors)
The W-9 is the standard form that companies use to verify tax identification numbers for independent contractors. This form comes in handy when you need to file 1099-NEC or 1099-MISC forms for contractors at the end of the year. This simple form includes their name, tax classification, address, and tax identification number. This form does not need to be filed with the IRS. It is for your records only.
A W-8 BEN is a similar form you will need if you consider hiring someone outside of the United States.
When you onboard a 1099 contractor, you might decide to create a confidentiality agreement. This will protect your company’s proprietary information and prevent them from sharing it with third parties and/or competitors.
If your contractors will have proprietary information about how you run your day-to-day business, it makes sense to have them sign this agreement so you can take legal action if they break this agreement later. If they handle simple tasks (or don’t have access to private information), you could decide to forego this agreement.
Sometimes, you will need to have your contractor sign a non-compete agreement.
There are a couple of ways you could think about non-compete agreements:
- Avoiding poaching clients and setting up their own competitive business using your customers.
- Avoiding working for a current competitor in your space.
Independent contractors need to be free to move about within their niche or space. You probably won’t legally be able to tell an independent contractor they can’t work with a competitor. However, you should be able to tell them they can’t poach your clients and set up a business using those clients.
Remember that non-compete agreements need to be specific. These agreements need an expiration date, geographic locations, and specific categories if possible. These boundaries will help your non-compete agreements stand up in court.
An Agreement On The Price Of The Project
You’ll want to agree on the price of the project upfront. You may not be invoiced for the project right away (some freelancers want money upfront, some ask for a deposit, and others might have another way of getting project funds from you.) Having the pricing conversation upfront ensures that everyone is on the same page and that there will be no surprises later.
Once you’ve received each of the above documents, you’ll then be able to move onto the next part of the contractor onboarding process: supplying the contractor with the information they’ll need to do their job.
What Contractors Need from You During Independent Contractor Onboarding
As you onboard a 1099 contractor, you will need to give them the same information you would give any employee. This includes:
A Clear, Written Explanation Of Their Duties And Responsibilities
First, you’ll need to explain your expectations for the contractor in writing. This should include a description of the project they are working on, the deliverables they will need to complete, and their responsibilities. You should also include a description of the project’s scope and deadline.
Insight Into What You Do
If you hire a contractor to perform a specific task, you’ll need to make sure they understand what you do. This will help them understand how their work will impact your business. You could create a quick video with some background into your company or write up a background. Encourage your contractors to watch product demos or test your products at home.
Access To Any Systems They Need To Use To Do Their Job
Once you onboard a contractor, you will need to ensure they have access to any systems they need to complete their job. This includes any software and databases that they will need to do their work.
You should also make sure that your contractors understand how to do their job at your organization. Help them understand the technology and processes that are unique to your business. For example, you might want to give your email writer a brief overview of your email management system. Even if they have used the software before, this training gives them insight into how your organization uses the tool.
A Contact At Your Organization That Is Available For Questions
You’ll also need to make sure that your contractors have someone within the organization to reach out to with any questions or concerns. This will make it easier for your contractors to get the information they need quickly.
With all of the above processes in place, your contractor will be able to get right to work.
How To Succeed At 1099 Onboarding
The best onboarding programs can make a massive difference in the success of new contractors. It’s essential to create a positive experience for new freelancers, starting with a personalized welcome. Here are a few things you can do to ensure that the onboarding process goes smoothly.
Before You Onboard, Work On Your Internal Systems
Let’s be honest. Sometimes we are working within awful systems. We have memorized all the tricks and techniques we use to get our internal systems to work. Processes that aren’t well-documented lead to a lot of random training that doesn’t work.
Before you onboard an employee or an independent contractor, take some time to think about and write down all the instructions you wish you had when you started this project. Internal systems help us outsource work effectively and reduce uncertainty with contractors. You will thank yourself later for taking a few minutes to write down how things work.
Keep It Brief And Asynchronous Whenever Possible
Independent contractors are not employees. You can’t expect freelancers to spend weeks going through training materials to get up to speed with your organization.
To maximize freelancer time, keep training brief and try to offer it asynchronously. You can do this by:
- Writing out detailed instructions with photos and examples.
- Using a tool like Loom to record a quick video showing something to freelancers.
- Hosting quick 15-20 minute calls with freelancers to answer questions.
Give 1099 Contractors The Lay Of The Land
During the onboarding process, you’ll want to make sure you are taking the time to not only walk your 1099 contractor through the project they’ll be completing but give them the lay of the land as well. While these contractors may be a temporary solution, you want them to understand the business to do their job effectively.
You can do this by taking them for a tour of the facility (if they are working on-site, not remotely), presenting the tools they’ll be using, introducing them to other employees, and showing them how your business works. The more welcoming you are during the onboarding process, the more confident your freelancer will feel.
All the time you spend with freelancers can also be helpful as you are considering hiring full-time employees. Contractors make amazing hires!
Get Feedback From Contractors After The Onboarding Process
Once the onboarding process is complete, you should always ask your contractors for feedback. This will help you identify any issues you overlooked in the process and give you insight into how they feel about working with you.
Once you get that feedback, consider how you can improve your current procedures. The first time you onboard a contractor, you might get pretty rough feedback. Over time, your feedback should be more positive and exciting.
Onboarding A 1099 Contractor Has Many Benefits Worth Exploring
If you are looking to streamline new contractors joining your team, onboarding these contractors has many benefits for companies. While you aren’t responsible for handling certain taxes for freelancers, you still need to provide these independent contractors with the necessary tools to do their job.
We have amazing tools that can help you onboard all your hires and freelancers all in one tool. Do you want to take a look at how this works? Check out our video on onboarding using WorkBright’s groups feature. If you want to onboard 1099 employees, request a demo to see how WorkBright can streamline your onboarding for employees and contractors.