12 Must-Haves in an Independent Contractor Agreement
Independent contractor hiring can be a valuable part of your staffing strategy, giving you access to niche skills and helping you support your workload at a lower cost than adding full-time employees. If you’ve never hired contract workers, though, one glance at a standard independent contractor agreement can be enough to make you pause.
These agreements tend to be lengthy and filled with legal language, but they serve an important purpose. They provide clarity on the work to be completed and protect both sides if the relationship doesn’t go as planned.
Independent contractor agreements don’t have to feel overwhelming. When the right clauses are in place, you can move forward with confidence and build a smooth, productive partnership with your contractor. Below, you’ll find the basics of how these agreements work and what every independent contractor agreement should include.
What Is an Independent Contractor Agreement?
An independent contractor agreement is a legally binding document signed by a 1099 worker and the company hiring them. It outlines the scope of work and the terms under which it will be completed, helping both parties begin the project with a shared understanding of expectations.
Maintaining a clear distinction between contract workers and full- or part-time employees is essential. This protects your company from potential claims for benefits or employee protections and makes it clear that the contractor is responsible for handling their own taxes and insurance. The agreement formalizes this distinction and prevents any blurring of the lines between contractor and employee.
The agreement also sets expectations for timelines, payment terms, and responsibilities, and it explains how disputes will be handled. While it might seem like overkill for smaller projects, having a signed contract shows good faith, provides transparency, and supports a successful working relationship from the start.
Related: What Is a 1099 Contractor?
When Do I Need an Independent Contractor Agreement?
An independent contractor agreement is helpful any time you bring in a 1099 worker to complete a defined project or provide specialized services. These agreements aren’t only for large initiatives or long-term engagements. Even short projects benefit from clear expectations around scope, timelines, and payment.
You’ll want a signed agreement when:
- You’re hiring someone who is not an employee and will be responsible for their own taxes.
- The project involves confidential information, intellectual property, or proprietary processes.
- Multiple stakeholders are involved, and you need clarity around deliverables or deadlines.
- The work carries financial, legal, or operational risk if something goes wrong.
In our experience, companies rarely regret having documentation in place, but they often regret skipping it. A simple, well-structured agreement protects your business, supports a smoother working relationship, and keeps both sides aligned from day one.
Related: How to Hire an Independent Contractor in Simple Steps
12 Must-Haves in an Independent Contractor Agreement
1. Independent contractor relationship
This section establishes that the worker is an independent contractor, not an employee. It clarifies that they are not eligible for employee benefits and are responsible for handling their own taxes. Many companies also require proof of liability insurance when the contractor’s work could create legal or financial exposure.
Example: Contractor is engaged as an independent contractor and is not an employee of the Company. Contractor is responsible for all taxes, insurance, and benefits related to their work. Nothing in this Agreement creates an employer–employee relationship.
2. Scope of work
The agreement should outline the deliverables you expect in exchange for payment. Be specific. A clear scope prevents misunderstandings and keeps both sides aligned, especially for larger or more complex projects. When a deliverable is less concrete, like strategic consulting, define the goals the contractor is expected to achieve.
Example: Contractor agrees to complete the following work:
[Insert detailed description of the deliverables, services, or project goals.]
Any additional work not listed above must be approved in writing.
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3. Timeline for completion
Along with deliverables, your agreement should detail the work’s timeline. Include due dates, milestone deadlines, and review periods. Projects involving multiple stakeholders often need built-in time for approvals or revisions, which should also be reflected in the timeline.
Example: The work described in Section 2 will be completed by [Final Deadline], with the following milestones as applicable:
- [Milestone + Due Date]
- [Milestone + Due Date]
4. Payment terms
Spell out how and when the contractor will be paid. Common structures include net-30 invoicing, monthly billing, or an upfront deposit with a final payment at completion. Clarify who is responsible for any project-related expenses, such as software, travel, or materials.
Example: The Company agrees to pay Contractor [Rate or Project Fee]. Payments will be made:
- [Net 30, monthly billing, deposit + final payment, etc.]
Contractor will submit invoices to [Accounting Contact/Email]. Any pre-approved business expenses will be reimbursed upon presentation of valid receipts.
5. Contractor obligations
If the contractor needs specific certifications, licenses, or permissions to complete the project, the agreement should clearly state them. Include any rules about subcontracting or expectations around documentation, reporting, or filing paperwork on your behalf.
Example: Contractor agrees to:
- Maintain all required licenses or certifications.
- Meet deadlines and communicate promptly regarding changes or delays.
- Complete the work personally unless permission to subcontract is granted in writing.
6. Confidentiality and trade secrets
Contractors often work with proprietary information. This clause should state that any confidential information they encounter cannot be shared, downloaded, or used for personal benefit. This protects your company’s data and ensures sensitive details stay private.
Example: Contractor may have access to confidential information. Contractor agrees not to share, copy, use, or disclose any confidential materials for any purpose outside this project.
7. Intellectual property
This section outlines who owns the work created under the agreement. In most cases, the company retains full ownership of all deliverables. Some engagements allow contractors to keep certain rights, such as using samples in their portfolio. Any exceptions should be documented here.
Example: All work produced under this Agreement is the property of the Company. Contractor may not use or distribute the work without written permission, except where the Company grants portfolio usage or credit rights.
8. Non-compete and non-solicitation clauses
Depending on your industry, you may want to prevent the contractor from working with direct competitors during the project or from soliciting your clients after the agreement ends. These clauses should be reasonable and time-bound, focusing on protecting your business without restricting legitimate future work.
Example: For [X months] after the completion of this project, Contractor agrees not to:
- Work directly with the Company’s identified competitors [optional]
- Solicit business from the Company’s clients obtained through this engagement
9. Grounds for termination
The agreement should explain who can end the contract, under what circumstances, and how much notice is required. A flexible but clear termination clause supports both sides if priorities shift or the relationship is no longer a good fit.
Example: Either party may terminate this Agreement with [Number] days’ written notice. The Company will pay Contractor for all approved work completed up to the termination date.
10. Dispute resolution
If disagreements arise, the contract should specify how disputes will be resolved and which state’s laws will apply. This helps avoid confusion later and provides a roadmap for settling issues without unnecessary conflict.
Example: Any disputes arising under this Agreement will be handled in accordance with the laws of the State of [State].
11. Indemnification
An indemnification clause outlines which party is responsible if the contractor’s work leads to legal claims, damages, or financial loss. This safeguard is especially important when contractors produce creative assets, access customer data, or perform services involving compliance risks.
Example: Contractor agrees to indemnify and hold the Company harmless from losses, damages, or legal claims that arise directly from Contractor’s work or actions.
12. Data security and compliance
With cybersecurity top of mind, many agreements now include requirements for how contractors must handle sensitive information. This may include following internal security policies, using approved tools or devices, or complying with relevant privacy laws. A well-written data security clause protects your business from unnecessary exposure.
Example: Contractor agrees to follow the Company’s data protection practices and use only approved tools, software, and devices when working with sensitive information.
Example of an Independent Contractor Agreement
The example below was created with the help of AI and is for educational purposes only. It should not be considered legal advice.
Independent contractor agreement
This Independent Contractor Agreement (“Agreement”) is entered into on January 5, 2026, by and between ABC Company LLC, a Florida limited liability company (“Company”), and Jordan Smith, an independent contractor (“Contractor”).
1. Relationship
Contractor is engaged as an independent contractor, not an employee. Contractor is responsible for all federal, state, and local taxes, insurance, and benefits associated with their work. Nothing in this Agreement creates an employer–employee relationship.
2. Scope of work
Contractor agrees to provide marketing consulting services, including:
- Developing a content strategy for ABC Company’s Q2 product launch
- Writing three blog posts (approximately 1,000 words each)
- Delivering a creative brief and messaging recommendations
Contractor will perform the work remotely and will provide all equipment necessary to complete the project.
3. Timeline
All work will be completed between January 10, 2026 and March 1, 2026, with the following milestones:
- Content strategy due: January 20, 2026
- Creative brief due: February 5, 2026
- Blog posts delivered individually by: February 15, February 22, and March 1, 2026
4. Payment terms
Company will pay Contractor a flat project fee of $6,000. Payments will be issued as follows:
- $2,000 deposit within five business days of signing
- $4,000 upon final delivery of all work
Invoices should be sent to [email protected]. Contractor is responsible for all routine business expenses unless approved in writing by Company beforehand.
5. Contractor obligations
Contractor agrees to:
- Maintain any professional licenses required for marketing services
- Meet the agreed-upon deadlines
- Communicate promptly about project needs, obstacles, or delays
- Perform the work personally unless written approval to subcontract is granted
6. Confidentiality
Contractor may receive access to proprietary information, including client lists, internal strategies, or unpublished materials. Contractor agrees not to disclose, copy, or use any confidential information outside the scope of this project.
7. Intellectual property
All materials created under this Agreement, including written content, strategy documents, and creative concepts, are considered “work for hire” and become the sole property of ABC Company LLC upon payment. Contractor may request permission to use final work samples in their portfolio.
8. Non-compete and non-solicitation
For six (6) months following project completion, Contractor agrees not to:
- Provide marketing consulting services to XYZ Innovations, BlueWave Tech, or any other direct competitor identified by ABC Company
- Solicit business from ABC Company clients learned through this engagement
9. Termination
Either party may terminate this Agreement at any time with seven (7) days’ written notice. If terminated, Company will pay Contractor for all approved work completed as of the termination date.
10. Dispute resolution
Any disputes will be governed by the laws of the State of Florida. Both parties agree to attempt good-faith negotiation before pursuing any formal dispute resolution.
11. Indemnification
Contractor agrees to indemnify and hold ABC Company LLC harmless from claims, damages, or expenses arising directly from Contractor’s work, actions, or negligence.
12. Data security and compliance
Contractor agrees to follow ABC Company’s data protection practices and use secure, password-protected devices when accessing or storing Company information. Contractor will comply with all applicable privacy laws.
ABC Company LLC
Representative: Laura Bennett, Director of Marketing
Signature: __________________________
Date: _______________________________
Contractor
Name: Jordan Smith
Signature: __________________________
Date: _______________________________
Limitations to Consider
Independent contractor agreements offer structure and protection, but they’re not a cure-all. One of the biggest risks is misclassification. Even with a signed agreement, a contractor still must meet legal criteria to be classified as a 1099 worker. If you treat the role like a traditional employee, you could face penalties later. This is the biggest issue most people have when trying to use a 1099 over a W2 employee.
Agreements can fall short when expectations shift mid-project. Scope changes, new priorities, or delays can create tension if the original terms weren’t detailed enough. In our experience, teams have the most success when they address changes early and update the agreement as needed.
Some clauses, such as non-competes and certain IP provisions, may be subject to state-specific restrictions. Courts typically uphold these only when they’re reasonable and clearly written.
Contracts also can’t replace good communication. They outline expectations, but consistent check-ins, clear feedback, and thoughtful contractor management keep projects moving in the right direction.
Do I Need an Attorney?
If the legal details feel overwhelming, you might wonder whether you need an attorney before hiring an independent contractor. The answer depends on the nature of the work and the level of risk involved.
For smaller projects with straightforward deliverables, a basic independent contractor agreement—often pulled from a reputable template—can be perfectly adequate. Many businesses handle these engagements internally without any issues.
For larger or more complex projects, working with sensitive data, or situations where the stakes are high, it may be worth having an attorney review the agreement before you proceed. A legal professional can confirm that the document reflects your intentions, complies with state and federal laws, and protects you from potential liability down the line.
Trust the Staffing Experts for Your Independent Contractor Hiring Needs
Working with contractors can be a great way to expand your team’s capabilities, but managing agreements, expectations, and compliance can quickly become time-consuming. Partnering with a staffing firm removes that burden and gives you access to experienced professionals who understand how to navigate 1099 hiring the right way.
Our team handles the details so you can stay focused on your goals. We help you identify qualified talent, avoid misclassification issues, and protect your company from costly oversights. When you work with us, you get the flexibility of contract staffing with the confidence that every step has been handled correctly.
Start leveraging contract staffing to fulfill your needs today by scheduling your free consultation with us now.
