Why You Need a Non-Disclosure Agreement When Hiring an Independent Contractor

The Challenge of Finding Personnel

In today's competitive business environment, companies have to find different ways to stay even with or above their competition. The myriad of daily operating challenges that even the smallest of companies face can be daunting, and they can take up a great deal of time and resources. Many organizations utilize their best talent in the day-to-day operations of the company because budget constraints prevent hiring additional personnel to handle these tasks. Hiring additional employees is expensive; from the time invested to finding good candidates to the time and resources needed to train them and provide benefits, the costs of acquiring help can be prohibitive, especially to smaller companies.

Value of Hiring Independent Contractors

Independent contractors are individuals who specialize in performing specific tasks for a company without becoming an actual employee of that company. As explained clearly by the U.S. Small Business Administration, independent contractors are individuals who, at one time, were the talent of their company, and they chose to branch off and work for themselves by hiring out their specific knowledge set to different organizations. They are highly-skilled professionals who are able to come in and begin working on the tasks at hand immediately with little to no investment of time on the part of the company to get them up to speed.

There are many benefits to hiring an independent contractor to help with the needs of a business, not the least of which is the reduced time expense of finding a talented individual. Independent contractors have a proven track record and skill set in their chosen field, and they will be able to provide references of past employers and companies with whom they have contracted their services.

They do not require specific training on how to perform the tasks required of them, which is one of the most valuable aspects of independent contractors. They are not considered employees of the company, so they do not fall under the legal constraints of most labor laws. Independent contractors provide their own health insurance and pay their own self-employment taxes, and since they are usually compensated according to their performance, there is little need for supervision.

Considerations When Hiring

The benefits of hiring an independent contractor make them a very popular option for organizations to consider, but there are considerations that companies should be aware of. Independent contractors are not permanent employees, so they will eventually move on after their contract has been completed.

Similarly, they oftentimes work for several different companies at one time. This creates a scenario where the independent contractor can receive sensitive information about a client company's operations while working for other companies that are in competition with it. Also, once the contract is completed, the contractor will hire out with other companies in the same field, who also could be competitors.

Human Resources Tip

It is vital for companies that hire independent contractors who will be dealing with sensitive information to have them sign a non-disclosure agreement prior to contracting for the position.

The Value of a Non-Disclosure Agreement

A non-disclosure agreement for the independent contractor will legally prevent the contractor from disclosing or utilizing sensitive information obtained during the course of their contract work.

A non-disclosure agreement binds the independent contractor to secrecy and has legal ramifications should the contractor intentionally or inadvertently disclose privileged information. The idea that a contractor will be held liable for disclosure even if not intentional serves to strike home the importance for the contractor to maintain discretion long after the contract has ended.

NDAs for Larger Companies

Larger companies have the ability to maintain larger staff, so for them, independent contractors do not have the same potential value as they do for smaller companies that might not have the resources for a large, full-time staff. If the independent contractor has specialized skills that are rare and difficult to find, many times larger firms will bring them on for specific contract tasks. Regardless of the scenario, it is vital that the company utilize a non-disclosure agreement to protect their internal data and sensitive information from any potential leaks that might occur from the hiring of an independent contractor.

How to Create a Non-Disclosure Agreement

Creating a non-disclosure agreement is easy when you use our customizable independent contractor non-disclosure agreement.