The moment a candidate is placed, the clock starts: documents to collect, classification to get right, and compliance to prove later. Do it well and the contractor works on day one. Do it badly and a single misclassified worker can cost six figures. Here is the checklist, and the stakes.
The documents to collect before day one
The exact set depends on classification and jurisdiction, but a compliant onboarding almost always includes these:
Independent Contractor Agreement (ICA)
Defines the relationship, scope, and that the worker is engaged as a contractor.
Statement of Work, where applicable
Ties the engagement to defined deliverables or scope.
W-9 (US contractors) or W-8BEN (non-US)
Captures taxpayer information for year-end reporting.
I-9 and W-4 (US employees)
Work authorization and tax withholding elections for W-2 workers.
Background check authorization
Signed authorization to run a check, with results kept on the worker profile.
Direct deposit and banking details
So the first pay run, or pay calculation, is clean.
Any client-specific documents
NDAs, security clearances, and certifications the client requires.
Classifying the worker correctly
The riskiest decision is whether a worker is an employee (W-2) or an independent contractor (1099). It turns on independence and control:
- Behavioral control. Who directs how and when the work gets done?
- Financial control. Who controls the business side: tools, expenses, opportunity for profit or loss?
- Relationship. Is it ongoing and integral to the business, or project-bound and independent?
There is no single classification test. Different laws and agencies apply different standards, and a worker can pass one while failing another:
- IRS common-law test (federal tax). The control factors above. It decides W-2 vs 1099 for tax withholding and year-end reporting.
- DOL economic-reality test (federal wage and hour). Under the FLSA, the Department of Labor weighs the economic reality of the relationship: opportunity for profit or loss, investment, permanence, degree of control, how integral the work is to the business, and skill. This standard is in flux. A 2026 proposal would narrow it back toward a control-weighted test, but the current economic-reality rule stays in effect until any replacement is finalized.
- State ABC tests (strictest). States like California, under AB5, presume a worker is an employee unless the business proves all three prongs: the worker is free from control, performs work outside the company's usual business, and is independently established in that trade. Some version of the ABC test governs classification in a majority of states, often for unemployment insurance. Prong B is the one staffing agencies most often fail, because supplying workers can be read as the client's usual course of business.
What getting it wrong actually costs
Misclassification is not a paperwork slap on the wrist. The exposure stacks up fast:
Compliance is invisible until an audit makes it the only thing that matters. The cheapest time to get onboarding right is before day one.
How onboarding software closes the gaps
Manual onboarding fails in the seams: a missing form, an unverified document, a rule that changed in one state. Software removes those seams by sending the right documents for each worker's classification and jurisdiction, collecting and storing them with an audit trail, keeping background-check results on the profile, and applying jurisdiction rules automatically.
Onboarding is the front door to the whole back office. Once a worker is cleared, that same profile feeds payroll calculations and billing, so the work you did up front pays off on every cycle. For the bigger picture, see how staffing agencies get paid.