What's included
What is an independent contractor termination letter?
Like any contract termination letter or notice of termination, an independent contractor termination letter is a formal method of ceasing an agreement and business relationship. The only difference is that these letters are tailored to independent contractors.
Every termination requires a letter, even if you’ve already informed your contractor verbally. A formal letter lets the contractor know in writing that the business no longer needs their services and that payment is due to end.
Independent contractor termination letter overview
Before you begin customizing our free sample template, we thought we’d share some guidance, tips, and insight on why these letters are so important and what it takes to get them right.
Why might you need an independent contractor termination letter?
Independent contractors comprise approximately 46% of the global workforce, possess desirable skills, and will have ownership of vast successes throughout your company’s history. But with flexibility and transience at the core of independent contracting, your company must know how to disengage when the services are no longer required.
Independent contractors are self-employed, which means they aren’t governed under applicable labor. While this technically makes contractors easier to terminate than employment relationships, there are still some formalities to abide by to ensure the arrangement ends on good terms.
Why are independent contractor termination letters important?
Independent contractor termination letters are essential for three reasons:- They provide legal evidence that you have terminated the relationship per the terms and conditions set out in the work contract.
- They provide the contractor with physical confirmation and pertinent information that the business relationship is ending.
- They conclude the relationship respectfully, ensuring brand protection and supporting future talent acquisition.
On what grounds can you terminate an independent contractor?
The grounds for terminating an independent contractor vary depending on the terms and conditions outlined in the original independent contractor agreement. In case you aren’t sure what this is, an independent contractor agreement is a legal document signed by both parties at the start of the business relationship that outlines the scope of work, required quality of work, and termination provisions.
Check out our guide about independent contractor agreements to learn more.
Most independent contractor agreements have termination provisions describing the conditions under which either the company or the independent contractor can terminate the agreement. You should follow these independent contractor termination provisions to avoid breach of contract lawsuits.
Typically, the termination provisions stipulate that a company can terminate an independent contractor relationship if the contractor:
- Comes to the end of an assigned project
- Fails to deliver in line with the agreed-upon work
- Breaches the terms of the contract, such as a non-disclosure agreement
Learn more about how to terminate an agreement with an independent contractor here.
What should an independent contractor termination letter include?
There are a few key pieces of information that you should include in your termination letter:
- Contractor name
- Company name
- Name of the manager overseeing the termination
- Date of letter
- Date of termination
- Brief reason for termination
- Details about the notice period
- Final payment
Again, it is essential to refer to the original independent contractor agreement, if one exists, in case it provides guidelines for ending the agreement. The agreement may include information regarding the required notice period, how to conclude ongoing projects undertaken by the independent contractor, and remunerative matters.
When should you deliver an independent contractor termination letter?
Independent contractor agreements frequently have advance notice provisions under which the terminating party must provide a certain number of days or weeks’ notice to terminate the agreement legally. Most notice provisions require 10-14 days’ notice, but others require a month or more.
Notice provisions may also refer to notices requesting a change in work or behavior before any party decides to terminate the business relationship. The contract might say, for example, that you’ll inform the contractor 30-days in advance if the quality of work is not as expected.
If terminating the contract early, the letter should specify the reason. A brief explanation will help the independent contractor identify weaknesses in their service provision or changes in their industry.
How should you deliver an independent contractor termination letter?
An independent contractor termination letter is typically sent via email by the contractor’s direct manager, a member of the human resources department, or by an employer of record (EOR).
How do I follow through with the termination as per the letter?
Once you’ve sent the letter, you must follow through with the actions as indicated. This includes paying the contractor for all of the services and products they delivered to you. Even if you are dissatisfied with the quality of work, it’s good practice to settle up and move on.
If you have a dispute about payment with a contractor, it is best to seek advice from a law firm or legal profession before proceeding with any course of action. EORs typically have legal experts onboard that can help you determine details regarding the termination of the contract and necessary payments.
