Given the recent uncertainty of the job market in the face of COVID-19, the future of what working life looks like has everyone guessing. There appears to be some agreement that flexible working is here to stay and the traditional 5-day week in an office has had its day, but what about the structure of employment?
With almost 2 million working on a contract basis in the UK at the start of 2020, the rise of the contractor is one prediction that’s gaining a lot of steam (hot on the heals of the predicted death of the contractor in 2019 from the fear of IR35). The arguments for using contract staff are numerous, but how do they stack up against the disadvantages and how should a business make the most of its contractors?
Firstly, let’s weigh up the pros and cons of employing contractors.
Benefits of engaging a contract workforce.
Flexibility. Unlike your own staff who need to be engaged on an ongoing basis, contractors can be brought in as and when needed to make sure deadlines are met. They can also be used on a temporary basis if you have a business-critical role you’re struggling to recruit for.
Affordable expertise. Using contractors allows you to access expertise that perhaps you can’t afford, or don’t need to hire, on a permanent basis. If you want to build a product or restructure a business unit and need someone with more expertise than you already have on your team, a contractor could be the right answer.
Contractors also comprise a great talent pool for startups to draw on as they make it affordable to achieve things quickly when they don’t have the budget or need for permanent hires to do it.
Speed. Once you’ve identified a need for extra support, you can often have a contractor in place in as little as 24 hours. Coming fully reference checked (if through an agency) or recommended from within your own network, you can be sure you’re hiring proven talent that as the saying goes, will “hit the ground running”.
Cost-saving. When engaging a contractor on a limited company basis, there’s no PAYE or National Insurance liability, nor is there holiday or pension contributions or any of the associated paperwork or reporting obligations. Contractors often get a bad rap for seemingly making more money than their perm counterparts, but people overlook the fact that contractors don’t benefit from things such as holiday or sick pay and so need to cover that in their day rate.
Time saving. Having a contractor to perform work that your own staff may be covering gives them back the time to focus on their own jobs. If you hire someone to deliver a certain piece of work, you also won’t have line management responsibilities aside from giving direction and monitoring progress.
Downside of going the contract route
So, what are the disadvantages? Why aren’t businesses just using contractors to do everything for them? Why haven’t we seen the revolt of the gig workers yet?
Lack of in-house skills. Relying too heavily on contractors can be dangerous as it leaves you exposed to not developing essential skills within your own business. If you hire a contract team for a specific project that can be managed in-house once complete once it’s not a concern, but if your whole exec team is employed on a contract basis, you may run into problems.
Culture. If the majority of your workforce is comprised of either short-term contractors or regularly revolving postholders, you’ll struggle to develop a strong identity and sense of community. That’s not to say contractors shouldn’t be part of your company’s culture, but you’ll need a decent amount of permanent staff to nurture and develop one that’s not constantly changing.
Legal requirements. You’ll need to stay on top of legislation that affects the engagement of contractors, such as IR35 which will affect the private sector from April 2021. You also need to be aware of the contractors’ insurance arrangements in case of issues resulting from their work. If you employ someone via a limited company with the right to substitution (i.e. they can subcontract the work), think about how you’ll have oversight of the quality of that person’s work too.
How to maximise the returns on a contract workforce
There’s definitely a right and wrong way to approach the use of contractors. I once placed someone with a client and their desk turned out to be in the stationary cupboard. The client had literally stuck a desk into a stationary cupboard (barely big enough to walk into) and the contractor was expected to sit there, with the door open, facing into the 3 walls of the cupboard. Needless to say, I resolved this, and they were soon sharing the Director’s office which had a spare desk in it.
The point is, if you want to get the best results from your contractors, you need to give thought to their engagement just as you do when hiring permanent staff.
Onboarding. You need to develop an onboarding process specifically for contractors to help get them up to speed quickly on the company’s mission and goals. Without an understanding of your business, what drives you and what you’re looking to achieve, you’re not going to get the best results out of them.
Culture. I’ve heard many stories from contractors where they’ve been made to feel like outsiders and viewed with suspicion by a company’s own employees who fear they’re going to encroach on their roles or believe they’re earning twice as much as them. If someone’s coming into your business to help achieve something that otherwise wouldn’t be possible, it’s only right they’re treated fairly and equally. Contractors should be welcomed as people who are going to help the whole team reach their goals and any wins they make should also be celebrated. Don’t be that company that excludes contractors from team meetings, social events or office banter. You’re all working towards the same goal, so encourage a welcoming culture.
Management. You need to be clear on whether you’re hiring contractors or temporary staff that you need to line manage or who will work under their own direction. Are they filling an otherwise permanent post that’s sitting vacant (i.e. inside IR35) or is your contractor coming in to perform a piece of work that they’re solely responsible for?
Whichever it is, make yourself readily available for questions and catch-ups. Don’t assume just because someone is experienced that they know what needs doing in your business, or what outcome you’re expecting, based on their previous roles. Ideally you should aim to have at least a weekly catch up to ensure both parties are happy with the work being done and the progress made.
If the assignment doesn’t require direct line management, then you need to be clear on your expectations from the outset and agree on the deliverables, milestones and timeframe in which these should be achieved. Then, be prepared to stand back and let them perform the work without interference. As opposed to permanent staff where you may be monitoring their activities, with contractors you want to be looking at deliverables.
Learn and grow. Finally, be sure to make the most of your contractors and benefit from their expertise and experience. These are people who have most likely worked with other successful businesses and potentially even your competitors so why wouldn’t you want to maximise on that experience? Encourage your contract staff to share their insights and experience where they can with your own in-house team, and don’t miss a trick by not seeking their input into your projects. You’re paying for expertise that you’re currently lacking so make the most of it.
When properly planned, the employment of contractors can benefit a business greatly and ensure you reach your goals quicker than relying on your in-house team all the time.