Since an IC is running an independent business, he or she should submit an invoice setting out the amount you have to pay.
a. Fixed fee agreements
The following provision requires you to pay the IC’s fixed fee within a reasonable time after the work is completed. If you wish, you can delete “reasonable time” and add a specific time period for payment—for example, 30, 60 or 90 days.
Suggested Language: Alternative A
Upon completing Contractor’s services under this Agreement, Contractor shall submit an invoice. Client shall pay Contractor the compensation described within a reasonable time after receiving Contractor’s invoice.
b. Divided payments
You can also opt to pay part of a fixed fee when the agreement is signed and the remainder when the work is finished.
The following provision allows you to pay a specific amount when the IC signs the agreement and then the rest when the work is finished. The amount of the up-front payment is subject to negotiation. It could be as little as 10% or less of the entire fixed fee.
Suggested Language: Alternative B
Contractor shall be paid $[State amount] upon signing this Agreement and the rest of the sum described above when the Contractor completes services and submits an invoice.
CD-ROM/Document The text of this clause is on the CD-ROM under filename TERMPAY. Choose Alternative B if you will pay the IC in divided payments.
c. Installment payments
ICs may balk at accepting a fixed fee for complex or long-term projects due to difficulties in accurately estimating how long the job will take. One way to deal with this problem is to break the job into phases or milestones and pay the IC a fixed fee when each phase is completed. If, after one or two phases are completed, it looks like the fixed sum won’t be enough to complete the entire project, you can always renegotiate the agreement.
This type of arrangement is far more supportive of an IC relationship than hourly payment, since the IC still has some risk of loss.
To do this, draw up a schedule of installment payments tying each payment to the IC’s completion of specific services and attach it to the agreement. The main body of the agreement should simply refer to the attached payment schedule.
Suggested Language: Alternative C
Terms of Payment
Client shall pay Contractor according to the following schedule of payments
$[State sum] when an invoice is submitted and the following services are complete:
[Describe first stage of services]
$[State sum] when an invoice is submitted and the following services are complete:
[Describe second stage of services]
$[State sum] when an invoice is submitted and the following services are complete:
[Describe third stage of services]
d. Payments by unit of time
Even ICs who are paid by the hour or other unit of time should submit invoices. Do not automatically pay an IC weekly or bi-weekly the way you pay employees. It’s best to pay ICs no more than once a month, since this is how businesses are normally paid.
Suggested Language: Alternative D
Terms of Payment
Contractor shall submit an invoice to Client on the last day of each month for the work performed during that month. The invoice should include: an invoice number, the dates covered by the invoice, the hours expended and a summary of the work performed. Client shall pay Contractor’s fee within a reasonable time after receiving the invoice.