Terminating a Contractor : Know How to End an Agreement Politely

Hiring freelance contractors has increased over the last few years, and with that, employers have started feeling the increasing need to know the correct procedure of terminating a contractor as well. Especially after the pandemic, more companies are willing to work with international contractors. Over 36% of the US workforce comprised independent contractors during the pandemic, and the number has increased since then. If your company is looking forward to working with freelance workers, the inevitable question will arise, how to onboard and terminate the services of an international contractor? There is no way to fire an independent contractor. They are independent contractors and not your employees. 

Although you cannot fire them, you can terminate their employment if necessary. Terminating an international contractor can be complex, requiring careful consideration and compliance with legal requirements. It is critical to follow a systematic approach when ending a contract with an international contractor, whether due to performance or budget constraints. Let’s try to explore how to terminate an international contractor.

Table of Contents

• What Conditions May Make You Feel the Need of Terminating a Contractor?
• Different Ways of Terminating a Contractor
• Legal Factors to be Considered Before Terminating a Contractor
• Ways of Terminating a Contractor: Key Points to Remember
• Terminating a Contractor Agreement: Top 5 HR Best Practices
• How can You Move Ahead With Terminating a Contractor without a Contract?
• Can an International Contractor Sue for Wrongful Termination?
• How is Terminating a Contractor Different From Firing an Employee?
• What should a contract termination letter include?

What Conditions May Make You Feel the Need of Terminating a Contractor? 

• Unsatisfactory performance
• Breach of contract
• Financial constraints
• Completion of the project or contract
• Change in business needs or strategy
• Contractor’s violation of company policies
• Incompatibility or conflicts with the company’s values or culture
• Lack of availability or reliability
• Contractor’s failure to meet deadlines or deliverables
• Legal or regulatory reasons
• Misclassification: sometimes a full time employee may be misclassified as an independent contractor. In case you wish to give payslips and benefits to an international contractor, you may explore an EOR option.

Different Ways of Terminating a Contractor 

Oral Termination 

Terminating an International Contractor orally can cause a few significant situations. The contractor may have worked with you or your company for months or on a specific project. So, they may have access to confidential documents, information, or access to company resources. As a result, oral termination can trigger company insecurity or slow the ongoing project. 

Typically, oral terminations are more common in informal or small-scale jobs. Besides, international contractors may face such issues early in their job life. Such terms should not be used in large projects or company culture. Taking such steps could directly impact the reputation of the company. 

Written termination

You can send a mail or letter to the contractor and inform them about the termination. The reason for termination is usually explained in the termination letter or mail. 

Contractual termination clauses

A termination clause is part of a contract negotiated and signed after a contractor is selected for particular work. Both parties have specific duties and responsibilities. The agreement can be terminated if the contractor fails to fulfill these obligations. 

As mentioned before, terminating an independent or international contractor can be complex because they have access to confidential items of the company. 

In this type of case, terminating a contract with a contractor involves providing facts and figures to explain why the contract is terminating. If there is disagreement, work may be paused, and meetings will be held to find a solution that both sides agree on. In this case, the contract termination process follows the provisions written in the signed agreement. 

Furthermore, if you want to learn more about international contractors,  you can read our article on Foreign Independent Contractors: Guide to best practices and actionable steps.

Legal Factors to be Considered Before Terminating a Contractor

Irrespective of the factors that have pushed you towards terminating the agreement with your contractor, there are some crucial legal factors that you ought to take into account.

As we have reiterated before, independent contractors are self-employed professionals. So, you are not technically firing them as you would do in case of a normal, salaried W-2 employee. Termination of the contractor agreement implies that the contractor will cease rendering services to your firm.

In a scenario like this one, ensuring the classification of workers becomes way too crucial. If you have classified the worker as an independent contractor rightly, the labor laws won’t be applicable to your relationship with the contractor here. However, make sure that you are upholding the terms and conditions that are laid out in the independent contractor agreement. Failure in terminating a contractor agreement as per the terms mentioned in it may make you get entangled in a lawsuit concerning breach of contract.

Before sending the notice of termination contract, it will be prudent enough to go through the actual independent contractor agreement to which both you and the contractor had assented. While reviewing the terms of the contract, pay special importance to the following:

Termination Clauses

Review this section to understand what grounds of termination have been specified in the contract;

Provisions related to Notice Period

Check how many days’ notice you need to give in order to cancel the agreement with your freelancer;

Payment Conditions

Carefully understand the exact time period you have to disburse the payment to the contractor after they send you the final invoice for the services offered till the time of the termination of the contract.

In case you need to gain more clarity about the terms of the contractor agreement you had signed before, don’t hesitate to seek the advice of a legal expert. Legal advice is indispensable if any clause of the contract is ambiguous or if you wish to dispute the payment stated in the final invoice of the contractor.

Confused as to how bring about the termination of your agreement with a contractor? Click here to get the right guidance while also safeguarding yourself from employee misclassification risks.

Terminating a Contractor Agreement: Top 5 HR Best Practices

An independent contractor might not be a permanent employee of your firm. However, this shouldn’t prevent you from following the best HR practices that you would have followed while terminating the job offer of a full-time employee. After all, a contractor is ultimately a human, and it is always a noble idea to acknowledge their services before they leave.

Let’s see what HR best practices you can adopt to bid adieu to your contractor in a considerate manner.

• Notify the contractor about the termination of the contract at least 14-30 days prior to the decided date.
• Politely give a nudge to the contractor in a way to remind them of your ownership of the deliverable they submit, as per the Intellectual Property Rights mentioned in the agreement.
• Further, it is always a good idea to inform all the permanent employees who had worked with the independent contractor about the same.
• Depending upon your working experience with the contractor, you may initiate recommending the contractor on professional networking sites or global marketplace.

Implementing the above HR best practices would not only add an element of warmth and cordiality to your working relationship with the contractor but will also enhance your employer branding.

Also read: Independent Contractor Agreement for USA (Download Template)

Ways of Terminating a Contractor: Key Points to Remember

Let’s have a look at the important points that you need to bear in mind before you move ahead with terminating a contractor.

Early Observations and Communication

Before terminating an International contractor, have a fair discussion with them. If you are dissatisfied with their performance, tell them your expectations. 

When you communicate your concerns and expectations, the contractor can resolve any issues.

There may be areas for improvement, such as quality of work, meeting deadlines, adhering to guidelines, etc. These issues allow the contractor to understand your perspective and rectify their under performance.

During the discussion, providing constructive feedback and guidance to the contractor is essential. Clearly communicate your expectations, outlining the specific areas where improvement is needed. Moreover, offering suggestions, advice, or additional resources that can assist them in enhancing their performance can be beneficial.

Make sure to keep documentation of your conversation. So, you can show what went wrong and explain the reason for your termination more clearly. 

Keep a Contract Form Containing Provisions About Terminating a Contractor 

If you failed to solve the issues after communication, you might wonder how to terminate the International contractor. Freelancers or international contractors do not sign the same contracts as regular employees. It’s best to have a written agreement or document while hiring an international contractor for your company.

 It will be the termination process if you can link and follow the deals from the beginning. Detailed information about the contractor’s scope of work, work quality, notice provisions, and termination causes exists. You can terminate the contractor easily if they violate the termination provision. 

Notify The Contractor 

The contract agreement or documents should include a provision for a notice period or warning period. This notice period typically ranges from 10 to 14 days, although some contracts may specify a longer period of up to a month. The notice provision outlines how the termination process should be handled.

The notice provision can also include terms that require requesting changes in work or behavior before termination. For instance, your contract may state that you will give the contractor a 30-day notice period to improve their work.

If your contract includes notice provisions, provide the contractor with written notice. To avoid legal consequences, you must follow contractual notice provisions precisely.

Check Termination Terms and conditions

The termination clause should clearly outline the circumstances under which either party can terminate the contract. 

You can include a provision that allows for termination without cause or for convenience. This provides flexibility in ending the contract even if there are no specific grounds for termination.

Specify any damages, penalties, or remedies that may apply in the event of termination. Which can include financial compensation, return of property, or other appropriate actions. Further, clarify the obligations regarding protecting confidential information and intellectual property even after the termination of the contract. 

State the governing law that will apply to the contract and any disputes related to termination. Besides, the term and conditions should also explain if any contractor images in unethical activities; you may terminate them immediately. It can include harassment, tax evasion, or damages to employees, supervisors, or harm to the company’s assets. In that case, your company will not provide any explanation or chance to improve the actions. According to the termination provisions, you can terminate the International Contractor without harming your company’s reputation. 

Reimburse the contractor for completed work

Some companies may want to terminate the contract without paying for their work. The simple answer is it’s not ethical to fire or terminate someone without paying for the work they have already completed. You must pay them for the work they have completed for you or your company. Even if you are not satisfied with their work, you have to pay till the date of termination. It demonstrates ethical conduct and reinforces trust and fairness within business transactions. Keeping these values in mind promotes a healthy workplace and ensures your company’s reputation.

Send a Written Document Prior to Terminating a Contractor 

You should provide a written notice to the contractor before termination. As an official document, it prevents potential misunderstandings or disputes. To do that: 

• Clearly state the specific date on which the termination will take effect.
•  Provide a concise and transparent explanation of the reasons for terminating the contract. Clearly articulate the factors or circumstances that have led to this decision.
• Reference any relevant contract sections or clauses supporting the termination decision. 
• Maintain a professional and respectful tone throughout the written notice. Avoid using language that may be interpreted as aggressive or inflammatory. 
• It is advisable to keep a copy of the written notice for your records. 

How can You Move Ahead With Terminating a Contractor without a Contract?

You can still terminate the international contractor even if you have no formal agreement. You simply contact him/her and explain the termination. Here’s what you should consider when terminating an International contractor without contact. 

• You can end your business relationship with the contractor through phone or email. 
• When terminating an international contractor, the absence of a formal agreement may complicate the process. 
• Research and understand the labor laws and regulations in the contractor’s country. This will provide insights into legal obligations or requirements when terminating a contractor.
• Initiate open and transparent communication with the contractor. Clearly express your reasons for terminating the relationship and discuss any concerns or issues.
• It is crucial to create written documentation of the termination and send it through email. Include the date, reasons for termination, and any agreed-upon terms.
• Consider consulting with legal professionals if the termination becomes complex or disputes arise. Few firms are experts in international contract laws. They can help you to get the best solution. 
• Remember to determine the appropriate financial settlement, taking into account any outstanding payments, and reimbursement of expenses.

Can an International Contractor Sue for Wrongful Termination?

As we mentioned before, international contractors are like freelancers. They are not like a regular employer, so they don’t sue you for wrongful termination. However, there are exceptions.

To avoid a lawsuit for breach of contract, follow any written agreement to the letter.

The ability of an international contractor to sue for wrongful termination depends on several factors, including: 

• Specific circumstances
• The governing laws
•  And the terms of the contractual agreement (if any)

If the termination violates the terms of the contract or any implied agreements, the contractor may have grounds for a legal claim. They may argue that the ending was wrongful and seek compensation. Some jurisdictions may classify certain contractors as employees, granting them additional legal protections and rights.

It is advisable to seek legal advice if you face such situations. You must pay the contractor for all work completed, even if you are unsatisfied with the quality. You and your company could get into legal trouble if you fail to comply.

How is Terminating a Contractor Different from Firing an Employee? 

Firing a contractor differs from firing an employee in several significant ways. Firstly, contractors are typically engaged for a specific project or task. On the other hand, employees have an ongoing employment relationship with the company. 

Generally, contractors work based on a contractual agreement that outlines the terms of their engagement, including termination clauses. In contrast, employees are subject to labor laws and regulations governing termination, such as notice periods and severance pay. A

Additionally, terminating a contractor is often driven by factors such as project completion, breach of contract, financial constraints, etc. Conversely, employee firing may involve performance issues, disciplinary actions, or organizational restructuring. Because of their different working arrangements, terminating a contractor differs from terminating an employee.

What should a contract termination letter include?

A contractor termination letter should contain vital information to document the end of the agreement and provide clarity to the contractor regarding the termination. The letter may include the following details:

• Contractor’s full name
• Your company’s name
• Name of the manager responsible for overseeing the stop or communicating with the contractor
• Date of the letter
• Termination date, specifying when the agreement will end
• Reason for the termination, providing a brief explanation for the decision
• Information about the notice period, if applicable, including the duration and any specific requirements
• Mention of any final payments owed to the contractor, indicating the amount or method of calculation

Sample of termination email for International contractor. 

Dear [Contractor’s Name],

I hope this email finds you well. I am writing to formally notify you of the contract termination between [Name of Your Company] and yourself, practical [Termination Date]. This decision has been made after a thorough assessment and consideration of various factors about the project and its requirements.

We have valued your contributions and efforts toward the project throughout our engagement. However, due to [provide a brief explanation of the reasons for termination, such as project completion, change in business needs, or any specific circumstances], we find it necessary to conclude our contractual agreement.

We understand that this termination may have implications for you and your team, and we would like to express our appreciation for the work you have delivered thus far. Your professionalism and dedication have been commendable, and this experience will contribute to your future endeavors.

Regarding the transition process, we kindly request that you promptly provide us with any pending deliverables, documentation, or project-related materials within [specified timeframe, if applicable]. Also, please inform us of any outstanding invoices or financial matters requiring attention.

Should you have any questions or concerns, please do not hesitate to contact me directly at [your contact information]. We remain open to further discussing the termination and its implications and providing any necessary support during this transition period.

On behalf of [Your Company’s Name], I express our gratitude for your valuable contributions and extend our best wishes for your future professional endeavors. We hope that our paths may cross again in the future.

Thank you for your understanding and cooperation.

Kind regards,

[Your Name]

[Position]

[Company Name]

Final Words

Hope you have got a complete idea bout how to terminate an international contractor. By following this process, you can efficiently and effectively terminate a contractor from your project or company. Further, do note that it is essential to adhere to the prescribed steps and guidelines to ensure a smooth and legally compliant termination. With this knowledge, you can confidently navigate the termination process and make informed decisions regarding the contractual relationship with the contractor.

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FAQs

What is the best way to fire an international contractor?

Have an honest conversation with the contractor and explain the issues. Give them some time to solve the problems. If applicable, provide resources or suggestions to help the contractor transition to other projects or clients. This can include offering references or industry contacts. If it doesn’t work, clearly state the termination date and any notice periods required. To avoid misunderstandings, provide written notice outlining the effective date and reasons for termination. Show them the decision is based on business considerations and not on their professional worth.

What does the termination clause in a contractor’s agreement entail?

A termination clause is a written provision included in a contract that outlines the specific conditions and events that can lead to the contract’s early termination. This clause allows for the agreement to be ended before the parties involved have fulfilled their respective obligations as stated in the contract.

What should I say when terminating a contractor?

When terminating a contractor, expressing gratitude for their contributions and maintaining a professional tone is important. Further, it is better to use clear and concise language to convey the reasons for termination. Provide specific examples and avoid personal attacks.

Does a contractor have the right to sue for non-payment without a contract?

Yes, a contractor can sue for non-payment even without a written contract. While a written contract provides clear terms and conditions, oral or implied agreements can still be legally enforceable. If emails, invoices, or proof of work are available, a contractor may be able to seek legal action for non-payment.

What are the steps to terminate a contract?

It is recommended to follow the conditions under the termination clause of the independent contractor agreement to terminate a contract. Make sure to include the date you are writing the termination letter along with name and contact information of both the parties. It is important to be specific while writing the content of the termination letter. Further, specify the date when you want the contract to stand cancelled.

Not to be considered as tax, legal, financial or HR advice. Regulations change over time so please consult a lawyer, accountant  or Labour Law  expert for specific guidance.