Many businesses, especially those that are just starting up or those that are expanding quickly, at times need access to skills that are not within the expertise of their employees. Or perhaps employees are so busy that they have no time to undertake a job, even if they do have the required skills. That is when the use of a contractor can be very helpful.
Using contractors to help develop projects, or fulfil specific tasks, is an efficient and cost-effective way of getting a job completed. However, employers should be aware of the administrative differences that exist between full time employees and using contractors when they plan to hire an outside person or organisation.
Adding value with contractors
Permanent employees are an integral part of organisation, and are employed to carry out a number of functions to ensure the business runs smoothly. They are recruited for their specific skills, but are also assessed as to how they will fit in with the company ethos and contribute to a variety of other tasks that help the business to function.
The difference with contractors is that they are brought in to do a specified piece of work, which is time-limited and essential for business development. They can have several advantages over permanent employees:
• they are highly skilled and experienced
• they are flexible and only hired when needed
• they are low risk because they are not employees and can, subject to the terms of their contracts, be hired and fired at will
• they can provide added value through being independent and objective, especially if looking at the restructuring of a business
• they are highly motivated – if they don’t perform they don’t get paid.
Effective hiring policies
Contractors provide services in all business sectors and although it’s common to think of them as being mainly in the construction industry, there are contractors that deal with business planning, financial investigation, landscaping, IT systems, marketing and specialised public relations, to mention only a few.
There are three key steps to take when hiring a contractor:
• evaluate CVs carefully
• conduct effective interviews
• negotiate the contract to get exactly what the business requires
Examining CVs in detail is crucial. The brief should be tightly written and the skills and experience required clearly outlined. Strengths and weaknesses should be assessed and a strong shortlist drawn up.
Interviews with contractors are different to interviewing prospective employees. There is a particular job to be done and it doesn’t matter if the contractor doesn’t seem to “fit with the team”. They are there to get the work completed. The focus must be on the suitability of the applicant, the range of experience and solid references.
Contracts can be tricky so it’s important for a business to know exactly what it wants and what it expects the contractor to do. If the company does not have an in-house legal expert, it pays to contract one to ensure that both sides are protected in the event of any problems.
Employment law and IR35
Contractors who are not deemed by the tax authorities to be self-employed need to be compliant with IR35 legislation. This ensures that an individual is not trying to use a personal services company for tax avoidance purposes. Contractors who come under IR35 rules will pay more tax and NICs, after allowable expenses, so it is important that employers check a contractor’s status during the interview process.