Managing contractors is not the same as managing employees. Businesses need to have processes in place to ensure that independent contractors and freelancers are managed effectively, in full compliance with tax, labor and commercial laws.
Here we offer 8 key tips for managing contractors.
1. Make managing contractors part of your people capability/HR strategy
2. Benchmark contractor payments
3. Indirect tax compliance
4. Income tax compliance
5. Craft independent contractor agreements
6. Consider the optimal payment method
7. Regularly review contracting arrangements
8. Consider contractor management outsourcing
What Is the Meaning of ‘Contractor’?
An independent contractor is a professional that engages with a company to provide services according to the terms of a contract. They may work ‘in house’, or they may be a remote contractor. They are usually distinguished from employees, according to a set of ‘common law rules‘ based on the degree of control that the company exercises over the individual. In short, the higher the degree of control from the company, the more likely they are to be an employee rather than an independent contractors.
To read more about the connection between independent contractors and employees see What Is a Contingent Workforce?
Independent contractors need to be distinguished from ‘contractors’ in the building or construction industry. In that sense of the term, a ‘contractor’ is someone who enters into a contract for the overall management of a building/construction project: This includes labor and materials. The key difference between this and independent contracting is that independent contractors only enter into a contract for services — it is not bulk contracting covering products as well as services.
Throughout this article we use ‘contractor’ as a shorthand for ‘independent contractor’.
What Is the Purpose of Managing Contractors?
The purpose of managing independent contractors is to ensure that:
(a) their performance matches contractual expectations
(b) the interests of the client business are protected at all times
(c) the contractor is paid in full compliance with applicable laws and regulations.
We consider each of these in turn:
When managing contractors, we recommend the following 8 actions to ensure that you are working towards these three goals.
8 Tips for Managing Contractors
Where managing contractors, we recommend the following steps:
Managing Contractors Effectively with a Contractor Management Firm
Businesses often hire contractors as a seemingly quick and effective option for hiring professionals, both overseas and locally. However, businesses inexperienced in managing contractors — especially across international borders — are likely to come unstuck without effective support.
Horizons provides comprehensive contractor management services to ensure that both your contractors, and employees, are managed efficiently and in full compliance with the law. Get in touch today for more information.