Risks of hiring a contractor

Misclassification

When you hire a contractor, you must do it properly, or you risk substantial back taxes, interest, and penalties. A new hire is not made a contractor automatically by signing an independent contractor agreement. For a worker to be properly classified as a contractor, certain characteristics of the working relationship must meet IRS standards. Sometimes state governments impose additional standards, as well.

Less control

You have much less control over a contractor's time and efforts than you do with an employee. A contractor is free to accomplish your stated desired results in the manner, location, and time of his or her choosing. Providing the contractor with too much detailed instruction puts you at risk for a misclassification ruling later on.

Unless otherwise specified in the contract, you do not have rights to intellectual property or copyrights for a contractor's work. Furthermore, a contractor can legitimately substitute another person to do the work you hired the contractor to accomplish. In cases where control over the work is important, hiring an employee or temporary worker may be a better choice.

Less commitment

Contractors typically have multiple commitments to many clients, and no obligation to renew your contract upon its conclusion. If continuity is important to you, you may need to renegotiate a new price in order to renew the contract.

Also

Although in most cases you are not required to provide worker's compensation insurance for contractors, you can be successfully sued for injuries if an unsafe situation was due to negligence on your part.