Hiring a contractor can be a nightmare dressed up as a dream: How to get it right

Hiring contractors can be an exciting prospect for any business. It usually signifies growth and expansion, which is good news for owners and managers.

However, there are some pitfalls to be avoided, and you have to do your research. So, let’s take a quick look at some of the basics: definitions, pros, cons, tips, pitfalls, sourcing, and treatment.

Definition 

A contractor is a business unto themselves – a supplier.  They differ from an employee, and getting this wrong can be very costly. So before you hire, head to the ATO’s online ‘Employee or Contractor’ tool.  

Read more: Three tips to help your business avoid sham contracting

Pros

A contractor is selling you a result or set service, and that’s what you’re paying for – a limited commodity, both in time and scope. 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 or altered than an employee agreement, allowing greater flexibility and reduced risk (i.e. it’s not working out, take a look at the contract).

Many people who contract out do so because they want more flexibility and more power over when and where they work. 

A great example of this is full-time parents. They collectively contain some amazing skills that lay largely idle due to the mandatory flexibility they need to support family and work. They are keen, capable, experienced and the market is awash, so you get your pick!

Cons

A contractor is an independent business. The contractor has a contractual agreement with you at an agreed remuneration for an agreed amount of work. This means a contractor is well within his or her rights to refuse additional work or charge you additional fees for that work. In this regard a contractor is much less flexible than an employee. 

Because they are contractors they may dictate how they achieve the result or service they are delivering, which may not be the method that you first envisioned. Because they are contractors they may dictate how they achieve the result or service they are delivering. 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, again depending on how the contract is structured.

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 contractors as a method of hiring employees commitment free.

It’s important to ensure that you are very clear about your expectations and that this is articulated correctly in any contract, so that in the event of a disagreement a discussion can occur around the facts of the agreement and not devolve into a he said/she said argument.

Keep in mind you’re paying for a result. Don’t necessarily hire the keenest or cheapest contractor. 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 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. If the sub-contractor is working ‘on-site’ you still need to provide the same safe working environment for the sub-contractor as you do all employees and contractors.

Once the contract is complete re-assess your options, it could be worth continuing the relationship, or even putting them on as full-time/part-time staff.

Sourcing contractors 

Sourcing contractors is similar to finding employees. Some good avenues:

• 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. Similar sites include elancer.com.
• Seek – Advertising on this site is a good way to get the maximum exposure on the contract very quickly, of course it will attract the usual spam.
• 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.

Your own networks – don’t forget to leverage these contacts. They can lead to the most trusted contractors and they may have better familiarity with your company and how it works.

Treatment of contractors

Contractors aren’t immune to poor treatment and they 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. If a disagreement does pop up then a contractor with a positive relationship with their client is more likely to agree to an amicable comprise.

Take a systematic approach

Hiring a contractor is a multi-faceted exercise, just like hiring an employee. It has advantages, particularly if the work is of a finite nature. However, it can have its own unique problems that need to be addressed. 

Take a systematic approach, don’t be deterred if you hit some speed bumps, do your research and, as with all business, develop a positive relationship. 

David Simpson is the managing director and founder of Melbourne HR which provides HR/IR services to the SME market.