Female business owner shaking hands with new contract hire.

Contractors for Small Biz

Updated December 2, 2021 . AmFam Team

Thinking of bringing contractors on board? Make sure you’re getting the most out of your contract hires with this hiring checklist.Thinking of bringing contractors on board? Make sure you’re getting the most out of your contract hires with this hiring checklist.

Hiring Contractors? These Steps Are Key.

Looking to grow your business but don’t have the staff to match? Hiring contractors is a great option. However, it’s important to keep in mind that, although they’re not permanent employees, contractors still represent your business to your customers – so finding the right ones to fit your business is essential.

Hiring the Right Contractor

Since any contractor you hire will be a direct reflection of you and your business, it’s important to make sure you and your business are protected in the event of any damage, accidents or mistakes.

Get Estimates: Be sure to get written cost estimates, but that doesn’t mean automatically choosing the lowest bidder. Ask for an explanation to see if there’s a reason for the difference in price.

Get it in Writing: Written contracts can save you the high legal costs associated with surprises and misunderstandings, and putting an agreement in writing helps formalize parties' commitments to each other. Consider having a lawyer review or draft contracts for larger, more expensive agreements. A contract doesn’t have to be long, but make sure it includes:

  • Complete name, address, phone and license number (if required) of the contractor
  • Specific work the contractor will do
  • Estimated start and completion dates
  • Payment schedule
  • Contractor’s obligation to get all necessary permits
  • Warranty information, if applicable
  • Dispute clause that explains how the parties will handle a disagreement

Ask Questions: Ask the contractor if they have prior experience on projects similar to yours. You can also ask for documentation so you can see how familiar the contractor is with your type of project.

Require References: Be sure to ask a potential contractor for names, addresses and phone numbers of at least three clients with projects like yours that they’ve worked on. Ask each client how long ago the project was and whether it was completed on time and budget.

Ensure Insurance: It’s important to make sure that any contractor you hire has insurance to cover any losses or damage they may be responsible for. Ask for copies of insurance certificates including liability and workers compensation, and make sure they’re current – or you could be held liable for any damages that occur. Also make sure your contractor has the same level of liability you do. Once the contract is signed, require the subcontractor to add you as an additional insured on their commercial insurance policy.

Using Subcontractors: Will your contractor be using subcontractors? If so, make sure the subcontractors have current insurance coverage, all applicable licenses and a work reputation for quality that equals your own.

Background Checks: For liability reasons, it is important to make sure the contractors' employees do not have a criminal record. Check with the county courthouse records to see if the contractor has had prior suits, just in case.

After the Work Is Complete

As your contractor’s contract draws to a close, it’s important that you’ve kept all paperwork related to your project for bill paying, tax purposes or settling any disputes. Also, before signing off, make sure to protect yourself from any legal action by requesting a lien release or lien waiver from contractors and any subcontractors they hired.

Contractors are a great way to help you satisfy customers, build capacity and grow your business. By making sure you’re partnering with the right contractors, you’re protecting everything you’ve worked so hard for – including your business dreams.

This article is for informational purposes only and is available through different sources. This information does not, and is not intended to, constitute legal advice. You should contact your attorney for legal advice specific to your situation.

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