10 Tips to Prevent and Manage Disputes as a Contractor
Working as an independent contractor has its advantages, but just as with any business, there is the potential for disputes with clients. There are steps that you can take to minimize disputes, and avoid interrupting work or otherwise damaging the working relationship. If you follow these tips, you will have fewer problems and can spend more time performing quality service for your clients.
Steps to Take Before You Begin Work
1. Research the Business Area and Company
A key preliminary step before working with a new client is to thoroughly research the company and its business. The most obvious resources for gaining information are the company’s website, social media, LinkedIn and other public sources. If you secured the job through a third party network or agent, then you may be able to learn the opinions of other contractors with the same client. In this way, you can detect problem areas and be proactive in preventing any disputes. Companies that have frequent conflicts or payment issues with contractors can then be avoided.\
Your research has an additional benefit as well. By taking the time to research the company’s history and background you will be able to present a targeted proposal, as well as demonstrate your knowledge of their business and market. Recruiters can tell when you have done your homework, and any knowledge gained will give you an advantage over your competitors.
2. Ensure Goals and Expectations are Communicated Clearly
One of the pitfalls of beginning a new client relationship is making assumptions about the scope of work, timing and expected outcomes. It is best to clarify every single aspect of what the company needs from you, how they plan to cooperate and what the will be the final goal for the project. Specific deadlines and milestones will be set for each party, and it will be necessary to inform your new client what you will require in terms of support, information and compensation.
Many of these items may be included in the contractor agreement, and should also be a part of any preliminary discussions. Pre-agreement communication is key to avoiding disputes of any type and is a normal aspect of doing business.
3. Ensure All Important Communications Are In Writing
There is a popular saying among lawyers that “all verbal agreements are worth the paper they are written on”, meaning that if it’s not in writing, it never happened. This may seem like a strict approach in the mobile and flexible work-life of a freelancer or contractor, however, the moment there is a misunderstanding or conflict you will be grateful to have some written communication to rely on.
Even if a client proposes a new job or work terms in a phone call, be sure to follow up with a written confirmation via email, text or online message system. Whatever method you use, ensure that you save it for future reference in case of a dispute over what was said.
4. Get a Written Agreement Before You Begin Work
Although most independent contractors understand the importance of a written contract to provide services, it is essential to finalize the signed agreement before beginning work. If a client delays in either returning an agreement or is still negotiating terms, then do not be tempted to begin working in good faith.
The reason for this is that you have to signal to your clients that you take a professional approach to your work, and only perform services when a contract is in place. This includes any payment methods and verifications so that you are confident in the company’s commitment and you can be fully engaged with the new assignment.
5. Get Legal and Tax Advice Before You Sign an Agreement
Unless you have a background in law or accounting, you will want to ask the advice of professionals regarding your standard contract for services, as well as the tax implications. For example, there may be specific rules in the home country of your client that impact your agreement, such as limits on confidentiality clauses or a requirement that the contract is in the native language.
Tax advice is often overlooked as a part of a contract for services, but if a client is reimbursing your expenses or there are other aspects of compensation, you need to consider the entire after-tax value of the assignment, which may affect the terms of the agreement.
Step To Take After Beginning an Assignment
6. Update Time-sheets and Cost-sheets
If your assignment is based upon time spent working, or if the client is reimbursing your costs, then keeping and updating those records is crucial. Taking a casual approach, or waiting until project completion only increases the risk of a dispute. Most assignments will have limits on time and expenses, which should be outlined in the agreement, and if those limits are exceeded without notice you may not be paid the full amount.
7. Document Any Updates to Agreement
It is common for ongoing clients to ask for more work from existing contractors, and one of the goals for your business should be to generate repeat assignments from the same company. However, with each new project or assignment, you must create an addendum to the original agreement, or otherwise document the new milestone and reference the contract.
This step will give you some way to confirm the project scope and payment terms in case of a disagreement and will convey to the client your expectations. You may need to prompt your client to confirm the new job, since they may think that they can extend the contract verbally.
8. Communicate Regularly
Many contractors are used to working independently, and may not require much contact with the client while working. This is especially true for technical or other project-based assignments, where the parameters and outcomes are clearly defined. However, you want to maintain communication with your client as a means to offer assurance of progress and interest. If there are changes in timelines or a need to adjust the scope of a job, be sure to communicate before continuing.
Communication gives the client the impression that you are giving their job your attention and are not otherwise distracted by other work or priorities. It also allows you to confirm that there are no changes or other information you need for completion.
9. Ensure You Have Clearly Defined Payment Terms
In every business, payment is a priority, but too few contractors realize that they are in control of how they are paid for their services. Because payment terms should be part of the original agreement, the exact amounts and timing of payment should be included. Some clients will have their payment issues with customers and may ask that you are paid in instalments, after completion, or even accept a reasonable time delay such as 30 days net.
No matter how you decide to run your business and be compensated, you must define and find the agreement to the terms. Payment terms are negotiable and may evolve as you accept more work from the client. It may be worth waiting for payment if you work with a client long term, and they will appreciate it if you understand their budget and timing issues.
10. Ensure Tax Compliance Early in the Assignment
Once you have begun an assignment, it is wise to review what you need to do for tax compliance. This is especially true if you are working in a country that is different from your tax residence, since the host country authorities may require some form of withholding or payment for work performed. If your client is located in the home country, they may report your payments to local authorities who will follow up to see if you have fulfilled the requisite immigration and tax rules for business operations.
Many contractors like to ‘fly under the radar’ of host country authorities, but try to learn the rules to avoid non-compliance issues. Method of payment can trigger classification issues as well, and try to avoid being re-classified as an employee by operating like a credible business.
Working as an independent contractor requires you to take steps to safeguard your financial and professional interests. By using these tips you can avoid the majority of common disputes, create quality client relationships and maintain steady sources of work and income.