Using contractors and subcontractors has become preferable to hiring full-time staff in businesses that are seeing short-term work coming in or where specialist skills are only needed for a short period. Contractors undertake to provide certain services for a limited period rather than being employees of the business. There are numerous advantages of going down the contractor route to build a more flexible workforce, but also a few things to be aware of.
- Flexibility: Although hiring contractors can greatly increase the flexibility of a business, they will usually cost more than a regular employee.
- Specialist expertise: Contractors are ideally suited for one-off jobs and those that demand a fast turnaround or specialist knowledge or expertise. By relying on contractors for such tasks, the business doesn’t need to invest in developing these skills in-house, which may be an advantage or disadvantage.
- Attitude of in-house staff: Although permanent staff will be able to concentrate more on the core business functions, they may resent the fact that contractors are being paid more for doing very similar work.
- Direct control issues: Some contractors use their own subcontractors, and sometimes it is not possible for the company to have any direct control over the work of these people.
- Tax and pay issues: Tax implications and other rights need to be fully understood, as workers on any project may be subcontractors or employees of the contractor. The self-employed PAYE status of contractors also needs to be understood by the company’s payroll department. An umbrella company can make the financial side of hiring contractors easy and convenient.
Taking on contractors can be especially useful for small businesses that need to respond quickly and flexibly to workloads arriving at any one time, but care needs to be taken when hiring them. References should always be taken up, no matter how impressive the first impressions, and skills and qualifications, professional memberships and accreditations all checked. It is often useful to set up a pool or database of reliable contractors if they are used on a regular basis. A written agreement should also be drawn up to define responsibilities, objectives, resources needed, fees and payment schedules, dispute procedures, and confidentiality agreements.
In addition to health and safety issues, and tax and employment rights, liability insurance should be looked into when taking on contractors. This should include cover for contractors who may be working away from the business premises.
Companies around the world are moving in the direction of more flexible employment in order to cut costs and increase efficiency in a rapidly-changing global economy. The advent of cloud computing has made contracting a more attractive option for many specialists and there are numerous advantages to companies of hiring the particular skills and knowledge required for limited periods of time only, thus saving on taxes, insurance and benefits. Above all, working with contractors is far more flexible than permanent employment because work is only handed out when it is available and, during slack periods, this reduces business running costs.