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What Is a Contractor & How Is Using Them Beneficial?

what does contractor mean

A contractor is a self-employed person or company that is hired to perform set tasks or services for another company or individual over a set period of time.

Benefits of using contracts include cost saving, flexibility, access to specialist skill sets, flexibility on staffing needs, the ability to outsource non-core business functions, reduce overheads and mitigate risks.

Overall contractors can be cost-effective solutions for businesses looking to adjust their staffing and skill set requirements without the overheads that come with employing new employees.

Read on for more information about contractors and their benefits, including tips on hiring contractors for your business.

What does contractor mean?

A contractor is a person or company that has made an agreement with another person or company to complete a set task or deliver services in exchange for an agreed price. Contractors usually have a specialised skill set in an area of business or production that is useful to others in need of that expertise for a set period of time.

Most businesses will use contractors in some way or another. For example, If they need people to go through their numbers, do their taxes, or manage their money they will hire an accounting contractor to make sure it gets done without mistakes.

If a business needs a new website, it’s likely they will hire an external freelancer or design business to do this for them. Cleaners and maintenance contractors are also used to keep businesses clean, tidy and operational.

Benefits to hiring a contractor

Expert contractors bring years of experience in their chosen field which can in turn bring a host of benefits to your business.

Some key benefits to contractor hire are:

1. Cost-effective

Paying for a full-time employee can be more expensive than you think. Using a contractor will make sure you only pay for the skills that you need for the time that you need them. This is perfect for short term projects and prevents you shelling out for all the overheads that a typical employee would incur such as office equipment, wages, pension contributions and statutory benefits like sick pay.

2. Flexible

Contractor agreements are inherently flexible. They can be brought into the business and let go as and when you need them. There is no expectation of a long term contract – they are there to provide the service that you need, then they will move on to another client in need of their skillset and expertise.

The beauty of this flexibility is that your business can adapt to seasonal fluctuation in demand without having to keep an employee on your payroll when there is no need for them to be in the office due to less work being available.

3. Expertise access

Contractors are a great way for small business owners to access the expertise they need in an affordable way. It’s incredibly hard for one person to do everything needed by a business, so spreading the load across several contractors in specialist areas ensures that the business benefits from the specialist knowledge each contractor can bring to the table.

4. Better productivity

Contractors are service and task orientated – they will be paid for the work delivered, so it’s in their best interests to work efficiently and deliver excellence. As a result, you’re likely to find contractor relationships can be productive because they won’t be spreading themselves across multiple projects and will actively want to get the work instructed done.

5. Lower overhead costs

Business owners don’t need to pay overhead costs when dealing with contractors. Things like equipment, office supplies, and benefits are not due to contractors because they’re not your employee. They are responsible for paying their own taxes and providing the equipment they need to do the jobs requested.

6. Less employee turnover

Every business has to deal with employee turnover and if employees are entering and leaving the business regularly on the hunt for better working conditions or pay, it can lead to a lot of additional administration and costs for the business to absorb.

Choosing to use contractors instead is a way to help manage high employee turnover because the organisation can access the skills and extra capacity when needed without having to hire permanent staff. This can also help to avoid overworking existing employees and giving them a reason to leave due to burnout.

7. Access to a global pool of talent

Contractors are often agile workers that are prepared to travel or relocate for the right contract opportunities. This means that the talent pool for contract work is significantly larger than regular employment pools. This is advantageous as it allows employers to find contractors from anywhere in the world. As long as the skills and experience meet their needs, location really isn’t a factor – particularly in an age of remote working and digital tools that aid same time communication regardless of physical location.

How to find and hire the right contractor for your business

Just like hiring an employee, there are key considerations to factor into your contractor hires. With so many contractors to choose from, how do you narrow down your search and get the right fit for your business?

  • Understand your needs
  • Start the search
  • Meet & evaluate candidates
  • Agee terms of work
  • Engage

It’s crucial to have a clearly defined requirement. What exactly is it that the contractor needs to work on for you? The clearer you can be on what you need, the easier it will be to find the right match of skills and experience.

When searching for contractors, consider your existing professional networks for recommendations or use online databases such as ‘Upwork’ or industry specific contractor sites to search from thousands for people looking for the type of work you have available.

Once you have a handful or possible contractors, arrange a time to talk to them either in person or virtually. This is the time to see if their skills and experience and personality suit the needs of your business. Consider this your interview process.

If you think you’ve found the right candidate to support the business, you should verify their references and examples of work to verify their credibility. If everything checks out, you can then offer work to the contractor and agree on the terms of the arrangement. This should be formally agreed in writing with a contractor agreement that sets out contact terms, payment terms, severability terms and the scope of work required.

At all points in the discussions it’s important to be very clear about what you need and are expecting. Without this information, the contractor may not be able to meet your needs so don’t be afraid to give them feedback during the contract so they know if they’re meeting your expectations or if improvements are needed.

Frequently Asked Questions About Contractors

What is the difference between a worker and a contractor?

A worker is someone who is employed by an employer and receives a salary, while a contractor is an independent professional who works on their own terms. Contractors are typically self-employed and may provide services to multiple clients at the same time.

It can be difficult to decide when to use a contractor and when to hire an employee. As a general rule, consider hiring a contractor for short-term or one off projects, and an employee for more long-term roles.

What should I look for in a contractor?

Experience and field knowledge are good starting points. But there are other things that should be taken into account too. Trustworthiness, reliability, and the ability to meet deadlines are worth considering as well. Good references and a portfolio of work is also a good indication of their abilities.

Why do employers prefer contractors?

When it comes to business, it’s all about getting the right fit for your business needs across your business operations and deliverables. You will likely therefore have a mix of employees and contractors.

Some employers will prefer contractors due to the flexibility they offer, whereas others will prefer to invest in employees that stay with the company for years. There really is no single preference when it comes to who employers prefer to work with.

What are common mistakes employers make when working with contractors?

One of the biggest mistakes employers tend to make when working with contractors is failing to define the scope of work upfront. This can easily lead to misunderstandings and disagreements down the line so it’s important that both parties are on the same page from the beginning. Using a well populated contractor agreement can help this process and remove the potential for confusion.

Employers should also be very cautious about deadlines and payment dates. Contractors need their money in order for them to remain motivated enough in continuing their service at a quality standard. So always make a point of paying contractors on time, just like you would with an employee.

Finally, but just as important, everyone must remember to treat contractors fairly and with respect by everyone in the business.

How do I ensure the quality of work from a contractor?

Having a clear written agreement in place is one of the best ways to ensure quality work from a contractor. This means including things like expectations about what they’re doing, how much you’re paying, and when it’s all due.

Another thing employers should do is provide feedback about the quality of work. If mistakes have been made and need rectifying, you need to let the contractor no.

Final thoughts

Using contractors can be a great business strategy for any organisation looking for flexible access to specific expertise and cost effective solutions.

When using contractors, always do so with the required due diligence surrounding contract agreements to govern expectations on deliverables and payment terms. Remember to treat contractors as partners in your business’s success for the best results and value the expertise that they can bring. By working together and fostering a collaborative approach, you can access unique perspectives and skills that can really benefit your business.

With open communication, fair treatments, and professionalism on both sides, businesses can reap the benefits of contractor relationships.

 

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