Hiring contractors can be an exciting prospect for any business. It usually signifies growth and expansion, which is good news for any business owner.
However, there are some pitfalls to be avoided, and you have to do your research. The wrong choice will cost you more than money.
Don't let that dissuade you from taking this route, but you must do your research and setup the situation succeed.
We’ll look at definitions, pros, cons, tips, pitfalls, sourcing, evaluating, and retention. So sit back and begin the absorption process.
Definition
The difference between an employee and a contractor is that an employee works for the company whilst a contractor is a business unto themselves and delivers services to your business and possibly other businesses as well. They will have an ABN and their own internal structures.
Pros
As a contractor they are selling you a result or set service and thus you are making payment with this in mind. This can be reassuring for a business, particularly in a period of early or temporary expansion.
Another great aspect of this arrangement is that within the bounds of the contractual agreement it can be more easily ceased than an employee agreement. Allowing for greater flexibility if work doesn’t go as planned.
A great example of this can be the contracting of sales staff. By putting in place positive base and commission arrangements you can incentivise the contractor to reach and exceed expectations, and once the contract is complete you can re-assess your options. The main choices being signing another contract, ceasing the relationship, or even putting them on as full-time staff.
Cons
A contractor is an independent company. They have a contractual agreement with you at an agreed remuneration. This means that they are well within their rights to refuse additional work or charge you additional fees for that work. As such a contractor is much less flexible than an employee. This can be altered by broadening the contract, but you need to be very careful that your contract doesn’t mimic an employee-employer agreement. This is covered in Pitfalls.
Within the pros is listed the advantage of paying for results/services rather than just hours. This can be as much a negative as a positive. Because they are contractors they may dictate how they achieve that result. This may not be the method that you first envisioned. That’s not to say that you have no choice, but you need to think carefully when faced with this situation about whether their method will alter or devalue the result. If this is the case then they may not be achieving the desired result, depending on how the contract is structured.
A contractor may be working on multiple projects. You may be one of three or more companies. This isn’t an issue in the vast majority of situations, however you need to be aware that you may not be the only focus of the contractor and they may later choose to subcontract some or all of the work if they so choose.
Tips / Pitfalls
You need to be careful not to ‘employ’ a contractor. What does this mean? Well if you engage in a contract that mimics an employee-employer agreement then it may be construed as such by a court of law or ombudsman. This is designed to stop employers from using this as a method to hire employees commitment free.
It’s important to ensure that you are very clear about what you want achieved and that this is articulated correctly in any agreement, so that in the event of a disagreement a well thought discussion can occur around the facts of the agreement and not devolve into a he said / she said argument.
Don’t necessarily hire the most keen / cheapest contractor. Keep in mind your paying for a result. The more thoughtful and/or reluctant contractor may have a better understanding of the situation. Therefore have a higher probability of success at the desired qualitative level, but also may have a higher attached cost.
If a contractor chooses to sub-contract out some or all of their work then that is well within the rights of that contractor, however they are absolutely responsible for the output of that work and at no time should you deal with the sub-contractor. If there is an issue with work then you need to treat the situation as if the work came directly from the contractor themselves. The one caveat to this is that if they are working ‘on-site’ then you still need to provide the same safe working environment for the sub-contractor as you do all employees and contractors.
Sourcing contractors
Sourcing contractors is similar to finding employees, however depending on the circumstances you may have greater flexibility than a regular employment situation. This is particularly so if you are contracting out for ongoing work that doesn’t require a full-time commitment or a short one-off assignment. This may provide you with the opportunity to employ experienced staff who are unable to engage in normal work due to other personal or work commitments. A great example of this is full-time parents. They collectively contain some amazing skill sets that lay largely idle due to the mandatory flexibility they need to support family and work.
Freelancer – This is a great site and it's Australian. It allows you to engage professionals for a range of tasks on a temporary basis. A good choice for short term one offs. Other sites include elancer.com.
Seek – Advertising on this medium is a good way to get the maximum exposure on the task as possible.
Twitter/Bloggers – Many bloggers and social media gurus do contract work on the side. Pairing the right kind of work with the right kind of call to action can attract some of the latest thinking to your task at hand.
Your own networks – They are an important aspect of the sourcing strategy. If your working within the a specialised industry then you’ll already have a good understanding of the local players. Leveraging these contacts can lead to the most trusted contractors and they should have better familiarity with how you operate and how your company works.
Retention of contractors
Contractors aren’t immune to poor treatment. In fact their temporary status means that they are often treated as second class citizens within the workplace. Their non-permanent nature leads individuals (employees/management) to make an inappropriate assessment of their individual worth. This creates further issues. Contractors are almost always re-hired, if such work re-surfaces. A poor experience can mean that they don’t return or they may add a premium to their next contract. Contractors that have positive working relationships with their clients will go the extra mile whilst on the job and they’ll be keen to return for the next round of work.
Conclusion
Hiring a contractor is a multi-faceted exercise, just like hiring an employee. It has it’s own advantages, particularly if the work is of a finite nature, however it can have it’s own problems that need to be addressed.
Take a systematic approach, don't be turned away, and do your research.