5 things you need to know before hiring a contractor
The strong demand for contractors continues based on recent job flow – that’s contract job orders into our business, writes Charlie Cox, commercial director at international specialist staffing agency SThree.
In line with this, a 2021 survey from software company Ceridian found that more than half of executives plan to increase the size of their teams over the next 12 months, with a hefty 62% of them adding that freelancers would replace a substantial number of full-time staff within five years.
Already, at the time of writing, the UK and Irish STEM contract market is worth upwards of £10billion. So it’s clear that many employers already know there are many benefits to engaging highly-skilled professionals on a short-term or project-specific basis.
But for those who haven’t worked with contractors before, here are five things you need to know before hiring a contractor, particularly where they are sought-after because they specialise in Science, Technology, Engineering or Mathematics.
1. Contract rate and duration – make your role as attractive as possible
Given the nature of the market, contractors have a lot of choice. So, the first thing you need to do is make sure your role is an attractive proposition.
A couple of ways you can do this is through the rate and the duration of the contract on offer.
In a recent audit we ran, some of the contracts that finished earlier than planned (through contractor choice), were because the contractors moved to another role with a higher rate. This stresses the importance of making sure you are paying the market rate (or better) at the outset. This not only means that the contractor is more likely to choose to provide their services to you over your competition, but is also more likely they will complete the full contract assignment.
Contract duration is the next key point here. A longer-term contract will usually (not in all cases) be more attractive to a contractor who is considering their options. We know that a contract will last just over an average of 53 weeks in duration, featuring multiple extensions. So, think carefully about the total duration of the project or contract at the outset, and offer this up front rather than shorter-term contracts.
Mismanagement of contract extensions can create a risk of the contractor moving to another role and you losing continuity. A good agency will help you with this process to mitigate this through the contracting lifecycle.
2. Efficient hiring process – speed is key
Continuing the theme of making the opportunity attractive, the contractor hiring process itself needs to be as efficient as possible. Failure to do so will result in contractors being offered and accepting another opportunity with a competitor who does have a streamlined hiring process.
Making sure you have the appropriate levels of sign-off and commitment to hiring ahead of releasing the opportunity to the market will increase your chances of securing the skills you need. Most importantly, shortening the hiring process is key. So once you are clear on who you want to engage, do it as quickly as possible to avoid missing out on sought-after specialists.
3. IR35 / Off-payroll working understanding opens the door to more professionals
When hiring a contractor, understanding some of the surrounding legislation is important. None more so than off-payroll working regulations (IR35).
In most cases (notably where you as the end-client is not a small company), it will be the responsibility of the hirer to determine if the April 2021 rules (or the April 2017 rules if in the public sector) are applicable to the assignment.
The decision-making here will also make an impact on the volume of available contractors you can tap into, so it’s crucial to get this decision right. It could also make an impact on the rate you will pay.
We have found that a large number of contractors are increasing their rates significantly where an assignment has been determined ‘inside’ IR35, whereby the rules apply, compared to if the setup leads to an outside IR35 determination being reached.
4. Onboarding a contractor and business as usual – understand how to engage with a contractor compared to a permanent employee
Make sure you are set up and ready to onboard any new contractors coming in to supply their services by providing clarity on the timesheet and invoicing processes.
Ensuring your hiring managers are clear on how to engage with contractors is vitally important as well, especially when it comes to IR35.
Contractors determined outside IR35 supplying services to your business should in no way be treated the same as a traditional employee -- from the outset at this onboarding stage and throughout the engagement. Failure to treat bonafide contractors appropriately could result in a tax risk to your business.
5. Use a reputable agency that understands compliance risks
There are multiple compliance considerations to consider when hiring a contractor and one of the easiest ways to mitigate those is through the staffing provider you choose. Working with a financially-secure, reputable recruitment agency will help in many ways.
Ranging from being able to provide you with current market rates, information and guidance on legislation, to helping ensure third-party suppliers are compliant and ensuring systems and processes enable accurate and timely payments to contractors, working with a reputable agency will help mitigate the risk of employment litigation. And of course, the reverse is true – working with an underhand agency will surely increase that risk!
Perhaps most importantly as the bottom line comes to the fore for many of us, keep in mind that outsourcing the employment of contractors to a top-tier recruitment agency means the likes of us can alleviate the legal and administrative burden, leaving you able to prioritise, concentrate and achieve the things that are vitally important to your organisation.