Guide to Hiring a Contractor
Hiring a contractor instead of employing a permanent staff member can be beneficial for a number of reasons. Contractors are often required to provide expert skills the in-house team may not have, usually to complete a particular project or task. Companies also hire contractors to save money. If a project or job role is not long-term, you may not want to add to your permanent headcount.
The majority of contractors tend to be paid on a daily or hourly rate, and occasionally on a fixed rate for the entirety of a project. Rates will vary depending on a wide range of factors including market demand, sector, skillset and the amount of experience a contractor has. In order to offer competitive contractor rates you will need to do some research – for example speaking to recruitment agents and looking at recent advertisements for contracts. For the latest average rates for top IT contracting skills and contractor demand updates you can also visit our market rates page.
Contractors CVs may not follow what is considered to be the ‘normal’ layout and content of a CV, which you would typically see from an employee. They are applying for specific projects which require a particular set of skills, and as such will only include their most recent and relevant contracts. Their CVs will therefore need to be approached in a different way to permanent candidates– and you must remember that you are entering into a business-to-business relationship with them rather than recruiting employees.
Just as there should be a different approach towards employee and contractor CVs, contractor interviews should be conducted differently than if you were recruiting a permanent member of staff. This is a business-to-business transaction, and the contractor will typically be well prepared to sell you their skills and services. Often contractors will only have one interview, so this is your opportunity to find out if the contractor has the skills and experience they claim on their CV, and whether they will fit in with the team. Here are some typical interview questions that IT contractors get asked.
Many clients choose to work with recruitment agencies to fill their contract vacancies. Finding and hiring contractors can be a lengthy process, particularly if you have never done it before.
When choosing which agencies you want to work on your behalf – make sure you do your homework. Start by looking at agencies that are currently advertising contracts similar to yours and pick a few to investigate further. Choosing just a select few agencies that you know have in-depth industry and sector knowledge, and experience in hiring contractors. This will mean often the invoices will come direct from the recruitment agency and they will deal with all the compliance and payment of the contractor. Note that recruitment agencies will also add their own mark up to cover their daily management of the contractors and payroll administration. This mark-up varies across agencies but means that the employer does not need to get involved with sourcing, payroll and any regulatory contract compliance.
Sending your vacancy out to many agencies which you know little about can result in receiving an abundance of CVs for candidates that have not been properly vetted or that do not have the required experience or skills.
If you’re looking to hire an IT contractor through an agency then you might start with looking at the ContractorUK IT recruitment agency directory.
If you want to avoid recruitment agencies, you can source contractors directly. Advertising contracts on job boards and searching CV databases are the most popular methods of sourcing contractors direct. Specialist sites are particularly beneficial as they will have a wealth of candidates with the skills and expertise you are looking for. If you are looking to hire an IT contractor you may use a specialist IT jobsite such as Technojobs.
You may also consider networking or social media to fill your contract vacancy – both online and offline. LinkedIn is an especially handy tool, with a job posting facility as well as specific groups where you can post your contracts such as the IT Contracting Network.
The negotiation process with contractors again differs from negotiating with a potential employee. As a business service they will not receive any employee benefits such as sick pay, holiday pay, pensions etc. so the main things that need to be agreed upon during negotiation are the length of the contract, the contractor’s daily or hourly rate, and what services the contractor will provide. If you are unsure on handling the negotiation process alone then this is something a contractor recruitment agency would normally do on your behalf.
Contracts and IR35
IR35 affects all contractors who do not meet the Inland Revenue’s definition of ‘self-employment’ and was designed to stop contractors working as ‘disguised employees’ by taxing them at a rate similar to employment.
Their IR35 status is determined by factors such as control, financial risk, substitution, provision of equipment, right of dismissal and employee benefits. IR35-friendly contracts will therefore reflect that the contractor does not have the same responsibilities, control and benefits as a permanent employee – which should also be true to their working practices. IR35-friendly contracts will go a long way to keeping contractors on board.
You can find some more tips on the structure and clauses a contract for services should include here.
Alternatively, if you are a recruitment agency looking for information on hiring contractors, then you can read our agency guides here.