Outsourcing or hiring independent contractors has taken the world by storm, and rightly so. It provides businesses access to a broad pool of talent worldwide while cutting their operational costs at the same time
Hiring contractors vs. permanent employees means you don’t have to pay for their health insurance, worker’s compensation insurance, or payroll and income taxes. While the hourly rate you will pay contractors might be higher than what you pay your regular employees, the amount you save on those aspects makes it a cost-effective solution.
But managing contractor work has its set of challenges, especially regarding standards, practices, payroll, health and safety policies, and legal compliance.
In this post, we’ll share everything you need to know about contractor management, from what it entails to how it works.
Table of Contents
- What Is Contractor Management?
- Who Are Independent Contractors?
- Why Is Contractor Management Important?
- Best Contractor Management Software
- Benefits of Contractor Management
- Who Does Contractor Management?
- Is Contractor Management Right for My Business?
- Factors for Successful Contractor Management
- Key Contractor Management Takeaways
What Is Contractor Management?
Contractor management is the act of supervising the work of contractors hired for a project and everything related to it. The main purpose, however, is to manage deliverables and foster a relationship with the contractors. This type of management also involves overseeing the safety of the contractors and the legal responsibility of the project owner.
A contractor management system involves a set of rules to oversee the contractor services, support operations, and performance goals. Most modern systems for this purpose typically involve using payroll software platforms — more on that in a bit — to enable easy data management and sharing between the parties involved. They do this through professional employer organizations, i.e., PEO companies, that aid in global hiring.
A contractor management system, also sometimes referred to as a contractor management program, keeps contracts in one place, thereby eliminating manual paperwork and ensuring that only authorized persons can access the contracts.
Who Are Independent Contractors?
Contractors (also referred to as freelancers or self-employed workers) are independent workers hired to complete separate parts of a project. Organizations often depend on contractors for their specific skills and knowledge and contract multiple people to tackle different aspects of the same project.
This helps save time when a company’s full-time employees cannot handle the workload themselves or lack the skills and expertise to do so.
Independent contractors can be found across various industries, from accountant companies and attorneys to construction workers, designers, copywriters, and more.
Contractors are:
- Paid per project as opposed to being paid on an hourly or weekly basis
- Free to work on different projects
- Often allowed to subcontract parts of the work
- Often responsible for providing their own tools/equipment
As such, contractors are not seen the same as regular employees hired directly by an organization, legally speaking. Hence, they are often not entitled to the same rights or benefits, such as a health insurance plan or a 401k plan, for example.
Why Is Contractor Management Important?
Hiring contractors and handling scheduling and task management is challenging, whether contractors work in an office, outside of the office, or remotely in a different geographic location or even time zone. This is especially true in areas where employers don’t have legal entities, presenting further complications, such as tax issues.
One of your options as a company is to establish a legal entity where you want to hire contractors. The other is to use the employer of record (EOR) method, where a third-party organization serves as the employer for tax purposes, while the employee works for another company (in this case, you).
Since employment and payroll legislation varies from country to country, hiring international workers can be extremely complex.
Contractor management ensures that services are delivered as ordered, communication between an organization and its contractors is efficient, and the organization hiring contractors can have a clear insight into the fulfillment of deliverables.
Best Contractor Management Software
Even though working with contractors will lessen the financial burden that sits on your company, opting for contractor management services can help you optimize the workflows with these experts and better oversee every project you are collaborating on.
That said, here are a few great contractor management platforms you should consider checking out:
Remote
Remote is a comprehensive contractor management platform offering international payroll, tax handling, and compliance for companies hiring globally.
Remote’s solutions enable companies to:
- Hire contractors from 170+ countries
- Run payroll regardless of contractor location
- Expand globally — hire talent without worrying about legislation
- Provide country-specific benefits for your global employees
Remote offers the following services:
- Employer of record
- Contractor management
- Global payroll
- Remote relocation
- Consulting services
Remote offers a free plan for contract management and a $299 plan for employer of record service (the first employee is free if you sign up), as well as custom plans for global payroll and remote enterprise.
Deel
Deel is another great HR platform for international teams that enables you to hire, onboard, and pay contractors. Deel is a popular platform with over 20,000 customers, working with over 120,000 workers/employees to get paid globally.
Deel enables you to:
- Hire, onboard, and pay both contractors and full-time employees
- It offers comprehensive payroll features, from document management and invoice tools to wage access features
- Global reach — just as Remote, Deel also enables worldwide expansion and simple business scalability
- Comprehensive and intuitive benefit management
The platform also offers the following services:
- Comprehensive employee/contractor hiring and onboarding processes with available background checks.
- HR services with possible automation
- Global Payroll
- Contractor/employee misclassification management
Deel comes with free HR administration and reporting. Contractor management features start at $49/month. Comprehensive EOR features cost $599/month; while businesses are encouraged to inquire about the cost of global payroll services, immigration features should be
Omnipresent
Omnipresent is another option that helps companies recruit and employ remotely in a total of 160 countries with the ability to set up local entities.
With Omnipresent, businesses can:
- Hire and onboard employees and contractors
- Offer contractors/employees global payroll services
- Take advantage of global benefits administration, tax management, and compliance adherence
While Omnipresent is mainly EOR software, it offers a wide array of services, including:
- Comprehensive employer of record services
- Professional employer organization
- Virtual employer organization
- HR support
- Global benefits and healthcare
Omnipresent offers a $31/per contractor plan, a premium plan starting at 538/per month premium arrangement, and comes with customizable offers as well, which can be tailored to each company’s needs.
Benefits of Contractor Management
1. Legal Compliance
Legal compliance is crucial when hiring contractors, as the risks and penalties for failing to comply with the legislative requirements can be costly and damaging. The risks of lawsuits from contractors can vary from breach of contract or discrimination to intellectual property disputes, wage law violations, and others.
Contractor management services help mitigate these risks and avoid legal troubles as it ensures you are compliant with local employment laws and can monitor and update contracts efficiently.
2. Streamlined Payroll
Paying contractors can also be complex, especially if they’re remote workers. Payroll for independent contractors is made easy with a management system as they streamline payroll processing. Organizations can process payments quickly regardless of the location of their hired contractors.
3. Less Paperwork
A contractor management system helps minimize paperwork and manual work for both the organization and the contractor. By keeping all the relevant documents and information in one platform, both parties can have access to what they need with just a few clicks.
4. Improved Communication
Great communication is essential for the success of any project. A contractor management system connects people and enables them to communicate efficiently by providing a chat option. It also gives organizations insight into tasks’ statuses.
5. Simplified Reviewing and Analyzing
Implementing a contractor management program helps streamline the process of hiring contractors, managing projects, reviewing work, and analyzing other work-related activities. Since everything is transparent and stored in the system, organizations can oversee all activities, spot and handle any irregular tasks, and improve productivity.
Who Does Contractor Management?
Simply put, you can do contractor management yourself or you can take advantage of the specialized platforms we’ve listed above.
If you do decide to take care of it, in a nutshell, here’s what you need to do:
- Break down work structure to identify project tasks.
- List tasks that can’t be completed by your team.
- Create a legally binding document called an SOW (statement of work) that defines work that must be done, including all pertaining deliverables, activities, and timetables.
- Opt for the right service contact for the project. This can be either a fixed scope contract, a time and material contract, a retainer-based contract, a not-to-exceed service contract, or a managed services contract based on your needs.
- Establish an agreement with your chosen contractor, defining the scope of work, compliance requirements, deadlines, payment terms, and basic terms and conditions.
- Track the contractor’s progress and overall performance to ensure that the project is on track and that the work meets predefined quality standards.
Is Contractor Management Right for My Business?
Contractor management services can be highly useful for any company that needs either short-term or long-term help. For instance, IT firms often experience workload spikes during product updates or launches, and working with contractors allows them short-term workforce scaling without committing to hiring full-time members.
Marketing agencies may also leverage contractor management, especially when they need a group of experts with peculiar skills to help them execute a campaign or project. Startups and small businesses may also work with contractors to mitigate any resource restraints, allowing them to tap into a pool of specialized skills without the need to hire an entire team or new crew member.
Typically, every business entity that looks for staffing flexibility, cost-effectiveness, and a flexible and scalable business model can benefit from working with contractors, which also limits compliance risks and the administrative burden of managing a full-blown team.
Factors for Successful Contractor Management
Successful contractor management depends on several factors. To manage contractor work effectively, consider the following best practices:
Contractor Selection Criteria
The first step towards successful management of contractor work is the criteria selection process. Establishing the criteria for hiring contractors starts way before a project begins.
This is also referred to as prequalification of contractors.
Establish systems for evaluating candidates and their qualifications, capabilities, etc. This step is also important for establishing responsibilities for both parties: the contractor and the organization contracting their services.
This way, when applications start coming, you will know exactly what you’re looking for and will save time in the process.
Job Description
When you determine the skills and qualifications needed for your project, create a detailed job description with a clear explanation of the type of services you need.
The job description should clearly define the skills required, scope of work/duration of the services required, and payment structure.
Risk Assessment
Risk assessment is a vital part of contractor hiring and management. Some projects are more hazardous than others, particularly in industries such as construction or electrical work where injuries are common.
These risks can result in project delays and increased costs. It is important to conduct a risk assessment to identify potential hazards related to activities contractors will perform.
Managing contractor safety is the responsibility of the organization hiring the contractor, so all potential risks should be identified and efficiently managed by the organization hiring contractors. Contractor safety management and compliance protect both the contractor and the organization hiring them as it helps avoid legal troubles and potential project delays.
Auditing
The auditing process helps ensure contractors understand the project requirements and responsibilities clearly. For this stage, develop a system by which you will evaluate contractor applications and determine whether they are a good fit.
Conduct brief interviews with the contractor applying for the job to go over the work requirements needed for the project's completion.
At this stage, the contractors should also be made aware of any potential risks related to the job, if any as well as any permits and licenses they might require to complete the tasks.
Training
If the project requires it, you should also plan and execute training sessions to prepare contractors for the activities they will perform. This includes health and safety training and any other relevant training sessions required for the project. This especially applies to heavy industry jobs where safety is a priority.
Here, you should also determine and clearly communicate what type of training is provided by you and what falls within the contractor's scope of responsibilities.
Feedback
Schedule regular follow-up meetings to give feedback to your contractors and answer any questions they might have related to the project they’re working on.
Regular meetings help tackle any hurdles along the way and help increase productivity — it’s essential to be available to both give and hear feedback to ensure the successful completion of the project.
Companies that hire contractors, whether locally or internationally, often need assistance managing the entire process, from recruiting to service delivery. You can benefit greatly from a platform that streamlines all aspects of contractor management, from hiring to payroll.
Key Contractor Management Takeaways
Hiring and managing contractors has numerous challenges, including legal and safety compliance, effective communication, and lack of control over activities contractors perform, to name a few.
A contractor management system can help you streamline processes and provide visibility and control over tasks and responsibilities.
It is also important to follow the best practices outlined above and be specific about the services and job requirements in order to build solid relationships with contractors who deliver quality work.
