Work has become more decoupled from the physical location of the office as a result of advances in technology that are intelligent and powerful enough to enable individuals to work effectively from any location at any time. Because of this, it is now much simpler for businesses to hire more independent contractors who can supply the essential expertise on an as-needed basis. In 2010, eighty percent of the largest firms in the United States stated their intention to dramatically expand the amount of work they outsource to contractors. By the year 2020, ninety percent of businesses will have said that they feel having a workforce that consists of both full-time employees and independent contractors offers a competitive edge.
External employees have never been more in demand, both to augment full-time personnel and to replace the 41% of individuals who say they aim to quit their current positions in the immediate future. This need for external workers has reached an all-time high, and it shows no signs of slowing down. In addition, the number of people who are self-employed is presently at a six-year high, which means that organisations have access to a large pool of talent. However, although businesses may be prepared to recruit more independent contractors, the managers who will be accountable for those contractors are not nearly as well equipped.
Leaders need to get better at managing people who work for the company but are not employed by the company in order to realise the full flexibility, agility, and value of an external workforce while minimising the risk to the organisation. In other words, they need to get better at managing “contractors.” This requires tackling the challenges of integrating contractors into a team and the larger corporate culture without crossing the complicated regulatory lines that prohibit treating them the same as employees. This line is one that the new normal of distributed teams and remote or hybrid work environments has made blurrier than it has ever been.
The increasing number of self-employed workers
Companies that want to rent specialised abilities by the hour or project rather than hiring an employee full-time are increasingly spoiled for choice when it comes to talent. This was not always the case, notably in the United States, where in 2014 just 17% of the workforce was comprised of full-time independent contractors and freelancers. However, by the year 2021, that figure had more than quadrupled, reaching 35%. This surge was driven in no little part by talented professionals who intentionally opted for alternatives to traditional work that offered greater flexibility.
“Enterprises that are rethinking productivity are by necessity shifting from hiring for head count to hiring for results,” Miles Everson, CEO of MBO Partners adds. “This is because hiring for outcomes is more predictive of actual production.” Therefore, in order to accelerate development, cut expenses, and boost agility, businesses are turning to consultants with more specific expertise.
When you work with contractors, you are essentially taking what is known as a “talent as a service” approach to staffing. This means that you are only paying for the skills that you require at the time that you require them, and you do not have to invest in any additional overhead such as benefits or training. Adding external talent to your internal teams does require forethought, however, in order to avoid frequent problems and is analogous to any other change to a “as a service” model.
Acquiring an understanding of the many forms of external talent
In the purpose of this article, freelance workers (such as Uber drivers and Instacart delivery drivers, for example) are placed in a distinct category apart from those who are hired from the outside. Gig workers are considered contractors in a broad sense; yet, they more closely resemble part-time employees in that they have the ability to create their own schedules but are obligated to work under the platform provider’s brand. Gig workers are paid by the job rather than by the hour. They won’t get compensated unless they employ the necessary applications and procedures. This article will not discuss the difficulties associated with managing them; rather, it will concentrate on contract workers who are classified as belonging to one of the following groups.
People who continuously work more than 20 hours per week on a contract lasting between one and three months are considered to be working as short-term project contractors. In most cases, they are employed for a certain reason, and after that goal has been fulfilled, they are released from their obligations. A software developer who possesses a unique skill set that is only required for one job inside a larger-scale project is a classic illustration of this pattern.
People who routinely work 20 hours or more per week on a contract that is up to a year long are considered to be long-term project contractors. They are frequently hired on board for one of two reasons: either the organisation needs their expertise for a number of different short-term initiatives, or the team needs someone to guide them through a substantial transformation. On the other hand, this can occasionally serve as a technique to get around employment freezes.
People who supply services concurrently to numerous clients who all need their specialised abilities regularly but not on a full-time basis are known as independent freelance contractors. This type of worker is also known as a side hustler. This is the traditional paradigm for a consultant, and it is frequently utilised for various specialist talents such as accountancy, legal counsel, and others.
Project contractors put in a lot of overtime hours, are often considered to be part of the workforce who are not on payroll, and sometimes even have business e-mail accounts. It’s possible that other workers and consumers are unaware that they’re independent contractors. Freelance contractors, on the other hand, frequently preserve a robust corporate identity that is distinct from that of the corporation that hires them. People are aware of their status as consultants. They must nevertheless be incorporated into the larger team, but not in the same manner or to the same extent as the project’s contractors.
Problems encountered in the management of foreign personnel
If you want to avoid potential legal, logistical, and cultural issues, you need to be aware that managing contractors requires a different approach than managing your in-house employees from the moment you begin to deliberate whether or not to bring in a contractor until the moment you hand over their final check.
A lot of businesses have trouble answering what should be the simplest question: when should they hire a contractor instead of an employee? Because of the epidemic, staff hiring was put on hold, which either caused a skills gap or made an existing one worse. This situation has become extremely critical. Managers have made investments in contractors who are already competent and do not require any more training in order to fill open positions as fast as possible. Nevertheless, this necessitates that managers have an understanding of how to set and maintain clear standards for the engagement of these personnel.
It is simple to cross the boundary between an independent contractor and an employee in the legal sense if one does not have a crystal clear grasp of this line, which differs from one location to the next. This has been a problem for some of the most successful businesses in the world. For instance, in the legal system of the United States, the length of time someone has worked for the same company is one of the most important considerations in determining whether or not they are an employee. It is illegal for a firm to classify a worker as a temporary worker or independent contractor for an extended period of time in order to circumvent the expense of providing them with the benefits and safeguards that come with employment. In point of fact, Microsoft agreed to pay US$97 million to employees that it had classified as contractors on a long-term basis in order to deny them benefits in order to settle the infamous lawsuit that was filed against it in the year 2000. This lawsuit was responsible for the creation of the term “permatemp.” In spite of this cautionary tale, Google’s global workforce in 2019 consisted of more freelancers (54%) than full-time employees (46%), and contractors complained that even though they made up the majority of the workforce, they were excluded from meetings and denied the information they required to perform the jobs they were hired to do.
To be honest, even while many freelancers are dedicated to maintaining their autonomy, some regard contract work as a stepping stone toward full-time employment in-house. But if that information isn’t volunteered at the beginning of the engagement by anyone, a manager needs to pry it out of them in order to establish the expectations, obligations, and dangers of both parties. If you make a commitment to a freelancer’s professional growth — for instance, if you don’t simply give them the choice of attending a training course but instead require them to do it – you run the danger of crossing the legal line that differentiates an independent contractor from an employee. Additionally, it is important for employees to be aware that contractors will be leaving once their contracts have been fulfilled. Even if a management expresses interest in extending a contract for an employee, the corporation may not be able to do so due to legal constraints. Therefore, it is absolutely necessary for managers to make preparations for the transfer of contractor responsibilities to those of permanent staff members.
In addition to this, it is essential to ensure that the experience that the contractor has while working on the contract is a favourable one. This involves giving them with the tools necessary to execute their work and assisting them in developing the necessary working connections in order for them to be successful in their professions.
However, even businesses that have been utilising contract labour for a considerable amount of time have varied policies on who is liable for the workers. Some managers choose to hire freelancers on their own, establishing what is known as the “shadow IT” counterpart in the field of human resources. Certain ones go through human resources or procurement. Some people go through an intermediary such as a talent agency. And many businesses do all of these tasks simultaneously, delegating management of their various contractors to a variety of personnel based on the nature of their work and the group they belong to. This hodgepodge of methods can leave a company without a clear understanding of the size of the external workforce it actually employs, which can have catastrophic effects on personnel levels, budgeting, project management, provisioning, and other areas.
Even in HR departments, there is confusion about how to deal with independent contractors. Despite the fact that HR professionals have extensive knowledge in the areas of legal classification and compliance, twenty-five percent of HR professionals told researchers from SAP/SHRM that managers who hire and collaborate with external workers also have primary responsibility for legal compliance. This places the compliance with local, national, and possibly international employment laws in the hands of managers who aren’t trained to address it and may not even be aware that they are expected to do so. This places companies at a significant risk of being sued because compliance with these laws is placed in the hands of managers who aren’t trained to address it.
Another finding from the Microsoft Dynamics 365 poll was that the majority of managers have teams that consist of both internal and external personnel. This shouldn’t come as a surprise; contracting isn’t the best option for every task or every person, which is why there aren’t very many firms or teams that are made up solely of freelancers. It is essential for leaders to plan for and prepare managers for friction between different types of employees who have diverse ties with the business since one in three managers report that they have not been enabled to manage blended teams effectively.
For instance, if managers don’t point out that internal compensation packages include benefits that contractors don’t receive, in-house employees may bristle at having smaller paychecks than contractors on the same team if the managers don’t point out that internal compensation packages include benefits. Leaders need to devise plans to ensure that freelancers are effectively integrated into their teams without crossing the line between the roles of contractor and employee. These plans should involve consulting with the legal department on a regular basis to determine what is and is not permitted. For instance, it may be OK to provide external employees with access to the company’s shared workspace as well as a corporate e-mail account, but this should not extend to other business services.
Last but not least, the same adaptability that makes working with contractors appealing may also make long-term planning challenging. In particular, it can be difficult to maintain constant and predictable funding as contractors come and go.
There are six actions to take in order to develop a mixed workforce.
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Make the ties between the organisation and its external personnel more clear.
Deliverables produced by a worker are the defining characteristic of a transactional partnership. The managers are responsible for articulating clear objectives and goals for the contractor, determining the boundaries of the contractor’s obligations, and doing routine check-ins to evaluate the contractor’s success. Team leaders are responsible for not only supplying contractors with the knowledge, connections, and resources they require to achieve their goals, but also for responding to inquiries and offering feedback on a frequent basis. This guarantees that the contract is successful and that both parties receive what they want from it, which is work that is completed on time, is of high quality, and is performed under terms and circumstances that are reasonable, all while being sold at an affordable price.
The amount of time that was put into the project might be used to define a related relationship. Contractors who are going to spend a significant amount of time on a project (like helping to develop a series of webinars, for instance) are just as dependent on the connections they have as they are on the knowledge and resources they have at their disposal. It is necessary for them to be completely integrated into the team by actions like as being given internal e-mail accounts, being invited to participate in team meetings, and being encouraged to be treated as peers by in-house coworkers. However, managers are also required to present clearly defined timetables with results as well as specific deadlines for completion. In addition, in order to preserve their non-employee status in the eyes of the law, they must refrain from interfering with the duties that the contractors are obligated to do for their other customers.
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Make sure that the managers have an understanding of the needs and the dangers.
It would be beneficial for managers to have access to training and leadership management courses that focused on the legal landscape in order to make them feel more competent when it came to developing and managing mixed-race teams. In order to avoid “shadow HR,” it is important to establish clear procedures about when it is appropriate to engage a contractor and when it is appropriate to hire employees internally. In order to underline that external workers are not employees and will not be categorised as such, it is important to clarify the beginning and ending dates of each contract (as well as projects, if those dates change).
To provide a uniform and self-guided onboarding process for contractors, you might want to think about employing an onboarding system. By automating the process of delivering important information such as nondisclosure agreements, relevant contacts, invoicing and payment processes, and appropriate policies and procedures for safety and compliance, this protects managers as well as the business.
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Make use of tools that cater to the individual requirements of your contractors.
When you roll out new productivity tools for your internal workforce, you should make sure that such products are also suitable for use by external personnel. In order to allow regular check-ins and coordination, you should integrate your contractors into your messaging, videoconferencing, and any other communication platforms that you use. Create processes that are able to handle project-based work while also providing the opportunity to track progress in relation to performance targets.
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Give the contractors a means to proactively satisfy your wants with their services.
A lot of companies now have something called a talent marketplace where they post openings for internal jobs. These postings include not just full-time jobs but also part-time jobs, fellowships, chances to volunteer, and other kinds of career growth opportunities. By opening up this marketplace to workers from outside the company, you can more effectively link them with other employment opportunities that are a good fit for their abilities. However, the platform should require managers to specify whether or not each listing is open to freelancers. Alternatively, the platform could show contractors only the opportunities for which they are eligible, such as a posting for a full-time short-term contract position that could not be considered an extension of their current contract. By giving applicants the opportunity to search for other positions, you save yourself from having to hire other contractors in the future. And because many independent contractors take on projects in order to get a feel for a potential employer or a foot in the door at a company where they would like to work full-time, showcasing the available opportunities in your talent market can also increase the number of candidates you have available for internal positions.
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Consider the use of external employees to be an important component of your staffing strategy.
To assist with planning and budgeting, data should be kept track of on the number of contractors being recruited and the projects for which they are being hired. Keep a record of both current and former freelancers (as well as the agency from which you recruited them, if that information is relevant) so that you may evaluate their work, determine whether or not to collaborate with them again, and provide an explanation for your decision. The next step is to ensure that this information is readily available throughout the company in order to compile a database of potential candidates for any future initiatives or vacant jobs.
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Request people’s honest feedback.
If you are developing a formal strategy for expanding your external workforce, you need continuous feedback on how well it is working. This feedback should indicate whether or not you get what you need from them, as well as whether or not they get what they need from you. This will allow you to adjust your strategy as necessary. Make use of employee listening techniques in order to assess the experiences that contractors have had working with your company. You may learn how to extract more value out of your strategy and enhance your employment brand for external workers by applying the same exit interview and survey methods you use with internal employees to study the experiences of external workers at the conclusion of their contracts.
Amit Gaurav, is a 20-year veteran of the information technology industry, serves as Sr. Director of the MENA and APAC for Routeget Technologies Limited. He is responsible for the overall performance of the company’s operations in the entire APAC, MENA, and Indian subcontinent.
In this role, Amit is responsible for the long-term strategic development and execution of the company’s global operations and engineering efforts. Among his key priorities is ensuring the alignment of core business functions, including corporate financials with global supply chain operations and delivering continuous improvement – Lean – across the operations and engineering functions. Other focus areas include establishing and maintaining the policies and initiatives related to Quality, Health, and Safety.
Amit Gaurav has a wealth of experience in business management, new business acquisition, and account management. His success and extensive experience in Enterprise solutions suite and business development management are power-packed.
A family man, proud father of cutie “Aahana” and a through-and-through Barcelona & CSK supporter, Amit enjoys nothing more than kicking back at the weekend to play games with his daughter.
Amit Gaurav, is a 20-year veteran of the information technology industry, serves as Sr. Director of the MENA and APAC for Routeget Technologies Limited. He is responsible for the overall performance of the company’s operations in the entire APAC, MENA, and Indian subcontinent.
In this role, Amit is responsible for the long-term strategic development and execution of the company’s global operations and engineering efforts. Among his key priorities is ensuring the alignment of core business functions, including corporate financials with global supply chain operations and delivering continuous improvement – Lean – across the operations and engineering functions. Other focus areas include establishing and maintaining the policies and initiatives related to Quality, Health, and Safety.
Amit Gaurav has a wealth of experience in business management, new business acquisition, and account management. His success and extensive experience in Enterprise solutions suite and business development management are power-packed.
A family man, proud father of cutie “Aahana” and a through-and-through Barcelona & CSK supporter, Amit enjoys nothing more than kicking back at the weekend to play games with his daughter.
