Contractor Management Outsourcing (CMO) became a vital trend in the global expansion industry. Using these services allows international companies to delegate the tasks of managing a contingent workforce to a trusted partner.
Further, this allows your business to focus on its core competencies and employees can focus on generating revenue rather than focusing on local administrative tasks.
What Is Contractor Management Outsourcing?
Contractor Management Outsourcing (CMO) transfers a business’ contractor management to another provider outside of the company.
It is a form of Business Process Outsourcing (BPO). The contractor management service provider takes over the contractual discussions and sets up the foreign workforce. The contractor management service provider acts as an intermediary between contractors and contingent workers and the business.
Contractor management services may also include management of payments to the business’ partners.
Why Do Companies Use Independent Contractors?
Using independent contractors provides greater flexibility to companies and contractors alike, making it a viable option for many businesses.
Using independent contractors provides advantages to companies and contractors. Companies can gain access to talent by keeping contracts open and using them for specialized projects while the independent contractor can freely work for other organizations.
Contractors often have specific skillsets and knowledge specific to certain industries that companies can tap into through concrete contracts with these individuals.
Using contractors allows business to avoid the risk associated with employees. For many businesses, using contractors is part of the business’ strategic recruitment and human resources plan.
Many workers today prefer the flexibility that independent contractor work offers. Independent contract work is becoming increasingly common in all sections of the world.
Workers provide more flexible hours that allow them to maintain other responsibilities, like taking care of children or elderly parents. At the same time, companies benefit from being able to scale up or down their workforce as the needs of their business provide.
Why Should You Use Contractor Management Outsourcing Services?
Contractor Management Outsourcing is a strategic model that was developed to keep up with the expanding market of independent contractors.
Using contractor management services streamlines the process of using contractors. It is often complex to manage full-time, part-time, short-term, long-term, job share and satellite workers simultaneously.
CMO improves the governance and processes for many leading companies. This one-stop service can be used for all of your temporary workers, contractors, consultants and specialists. You will receive an invoice from a sole supplier for your managed workforce.
Contractor Management Outsourcing can also include contractor payroll and HR management.
Your CMO can handle back office administrative duties associated with having a complex contingent workforce, taking pressure off of your in-house HR department.
Contractors must be managed in a very different manner than permanent employees, so it makes sense to delegate this responsibility to another company while also relieving yourself of the legal complications associated with contractor agreements.
While using independent contractors provides many benefits, it can also bring about greater complexities, costs and risks. Employing contractors may involve specific laws in other countries.
These laws impact the type of wording that must exist in the contract, ways to ensure that contractors are properly designated and not classified as employees, and how payment is structured.
CMOs can structure agreements with independent contractors that comply with all relevant laws. Additionally, they often have standardized and proven methodologies to establish management of these workers that have yielded positive results in similar situations in the past.
Having access to a global partner who has an expert understanding of compliance matters can ensure that risks are minimized. Additionally, they can ensure that companies are compliant with local legislation and global standards.
Using a CMO can be used in conjunction with other options for foreign companies, such as using the PEO services provided by New Horizons Global Partners.
In this manner, you can utilize New Horizons’ Employer of Record services, passing on the liability of hiring direct employees to us while being able to use the employees for the daily needs of your business. At the same time, you can utilize our CMO services so that we also effectively manage your contractors.
Using these options allows you to reduce costs associated with administration of employees and independent contractors. We manage all compliance issues and are responsible for payment to your employees and contractors.
We also take all of the administrative duties off of your hands so that your employees can focus on core business activities.
You gain better visibility of your managed workforce and the peace of mind knowing that all of your contracts conform to statutory requirements.
What is the Contract Management Procedure?
When you engage in CMO services, a local provider takes over the management of the relationship with independent contractors through the following procedure;
- You have a written agreement with the CMO, clearly outlining its duties and responsibilities and your business.
- The CMO then establishes contracts with your independent contractors and contingent workforce.
- These contracts are compliant with the country where the contractors are sourced.
- Your independent contractors contact the CMO provider, which serves as an intermediary.
What Needs to be Considered Before Using a Contractor Management Outsourcing Company?
If you have contemplated using contractor management outsourcing services, some things you should consider include:
- How many contractors do you have?
- How visible is your contingent workforce?
- What are the number of part-time employees, independent contractors, consultants, specialists and others do you have?
- How many suppliers are currently involved in the employment of your temporary staff or independent contractors?
- How many different types of contracts do you use for contractors?
- Is your business vulnerable to unfair dismissal claims, annual leave payouts or other laws related to employees or labor laws in the host country?
- How have you been able to manage your supplier’s quality assurance protocols?
- Do your current suppliers conduct background checks and ongoing employment checks?
- Do your contingent employees have legal authorization to work in the host country?
- Do you have appropriate insurance on your contractors?
- What insurance covers your contractors if they have an accident?
How Does Using Contractor Management Outsourcing Save Valuable Resources?
Like all aspects of BPO services, cost is a major consideration. There are many ways that using contractor management services can save your business money, including:
Spend Less Time Drafting Contracts
For all businesses, time is money. When you spend ample time on non-core activities like preparing contracts, you have less time available to implement innovative ideas into your business or generate revenue.
Writing a compliant agreement with a contractor can take considerable time, especially if you have to create a unique contract every time you hire an independent contractor.
Additionally, it can take even more time to negotiate these contracts with your contractors and modifying the contract accordingly. Your CMO service provider can handle all of these responsibilities.
Spend Less on Legal Fees
You may have decided that foreign countries’ laws regarding independent contractors is too complex for you to handle on your own. As a result, you may have decided to hire an attorney to write these contracts.
Using contracts in different countries may have required you to hire a different attorney for each country. This can cost considerable money.
Using a CMO allows you to tap into that provider’s expertise. CMOs have relationships with the country’s labor agencies. They use proven contracts that are accepted by the country’s regulatory agencies.
Pass on Employer Liabilities
If you outsource your contractor management needs, your CMO is the employer of record. Therefore, it is responsible for any employment liability issues, so you get to avoid any risks associated with being the employer.
Similarly, if a worker later claims to be an employee instead of an independent contractor, you can avoid issues involved with misclassification.
Focus on More Important Tasks
By passing off non-essential tasks to a company that provides contractor management services, you also pass off time-consuming and ineffective tasks to another company.
This allows your actual employees to focus on generating revenue for your business and adding value to your business.
What Benefits Does Using a Contractor Management Service Provider Offer?
Using a CMO offers a number of key benefits to your business, including:
Ability to Scale During Busy Periods
Using a CMO allows you to increase your workforce during busy seasons without incurring the additional liability of unemployment or other employee-related risks with this action.
Many companies cannot and do not actively monitor contractors’ work.
However, by being lax in this regard, a company may wind up not fulfilling a project when depending on a third party that does not complete the job properly or does not submit the work on time.
This can expose the business to greater risk with its own partners or clients. A CMO manages outsourced workers and can check in with these workers to ensure that work is being completed properly and on time.
As explained previously, CMOs can ensure that companies are compliant with various regulatory agencies. They may also assist with immigration compliance.
CMOs may offer assistance with VISA service and immigration consulting. These services can allow you to tap into a global pool of talent while delegating tedious tasks like visa and work permit applications to a company with expertise in this area.
Regulations pertaining to contractors may be much different than employees, so it may take considerable time to set up these processes and routinely deal with them. CMOs can take over these tasks. CMOs can reduce the administrative functions of your business, including on-boarding activities, payroll and tax compliance.
Additionally, if a business is using multiple services to recruit employees or various temporary staffing agencies, the methods in place may not be efficient and money may be wasted in the process.
CMO services can also reduce the need to invest in infrastructure. A company can use a CMO to have a remote presence in the country instead of having to build a separate infrastructure in the foreign country.
Contractor management outsourcing service providers utilize standardized and proven methodologies and processes that make the business run more efficiently. They can also provide consolidated reporting that makes it easier for the business to analyze the business function.
Being an employer of record can impose substantial risk on a business. It may wind up liable for issues related to employee misclassification.
Using a CMO effectively transfers this risk to the CMO provider.
Additionally, tax issues may be complicated when using contractors. An experienced CMO provider can provide guidance regarding tax issues and take on the regulatory risk related to taxation issues.
Using contractors and CMO providers, the business can improve its speed and accuracy. CMOs can actively manage contractors. CMOs can customize solutions that meet the specific needs of the business, further enhancing quality. CMOs deal directly with contractors, so they have greater control over influencing the final product.
Looking for Support with Global Contractors? Reach out to New Horizons Global Partners for More Information
CMOs can provide expertise, cost savings, flexibility and greater efficiency. They can help businesses scale their companies in a way that minimizes hassles and makes the most out of outsourced work.
If you would like more information about New Horizons Global Partners, contact us today.