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Contractors: Is Using Them A Good Idea?


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.


Supporting The Entrepreneur’s Vision With Effective ERP


Time is money, as Benjamin Franklin stated in his letter Advice to a Young Tradesman, Written by an Old One, and as a Founding Father of the USA his advice still carries weight in the business world today.

One of the greatest tasks for entrepreneurs is to manage their businesses effectively, without cutting corners, to maximize profits and ensure that effective solutions for every aspect of the business are in place. Streamlining management systems is one of most valuable ways to reduce costs, enabling the traditional functions of business, such as human resources, finance, manufacturing, sales and marketing and supply chain management, to be part of a fully integrated system. In this regard Enterprise Resource Planning (ERP) is the ideal tool for an organization to utilize.

What is ERP?

ERP provides businesses with a system whereby all those traditional and usually separate functions are rolled into one. The system is made up of various modules and sub-modules, each representing a specific business element. Entering data into one module automatically updates modules that are related, and does this in real time. Thus, for example, if data is entered into the module for receiving, it will update inventory and accounts payable, removing the need for multiple entries of identical data.

The advantages of ERP

Monetary resources for many businesses can be scarce, especially when economic times are as tough as they are at present. Securing a healthy bottom line is of paramount importance, and by using an ERP system significant cost savings can be made to assist with this. Instead of having several separate cost centers everything is combined into a single system, and with a reduction in the number of machines and servers required there is an immediate cost benefit to the business. In addition, fewer machines means less people needed to input data and thus a saving on the cost of human resources is realized.

Speed is of the essence when satisfying customer demand and using an ERP system means that time can be saved and productivity enhanced. The centralized database allows client details to be found quickly and the automatic updating process takes away the need for error correction. A more productive use of time can lead to earlier project completion dates and, consequently, reduced costs.

Strategic planning

All businesses should take a strategic approach to planning, and ERP can assist by storing variables such as demographics and cost implications in the system, giving a range of options to the business and allowing CEOs and senior management a choice of how to move forward. It is essential to train those who will implement and use the system so that there is a real benefit to a streamlined organization.

Building a new enterprise

Entrepreneurs starting a new business can use ERM to help plan how the organization will work most efficiently and effectively. The system cuts out many wasteful areas of running a business, enabling the main focus to be on satisfying customers and making a good profit. When margins are squeezed and time is wasted on laborious and repetitive data entry into a number of cost centers, ERP can help create a smooth-running and slick operation.


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