Independent Contractor Management: The Ultimate Guide

Independent Contractor Management: The Ultimate Guide

You are currently viewing Independent Contractor Management: The Ultimate Guide

Businesses in the post-pandemic era are all the more eager to hire independent contractors to achieve their business goals efficiently. A McKinsey research report revealed that 58% of US companies are inclined to employ freelancers in high company roles in the years to come. In fact, 47% of the global workforce has embraced freelancing. So what does it mean for your business? The opportunity to leverage top global talent to get things done in the best way possible! Therefore, to ensure a smooth working relationship with contractors and successful project delivery, adopting an excellent independent contractor management process is essential.

If you have already started working with freelancers or planning to hire one, the first thing that you need to do is to come up with an on-point contractor management strategy. Wondering why? Well, this is because, there is a fine line demarcating the dual processes of contractor hiring and contractor management. You might have done a good job at hiring an excellent team of contractors for your business. However, you may struggle with managing them later. Keeping track of the work the contractors are doing, managing timesheets, handling contractor payroll- may be extremely nerve-wracking. And, that is exactly where the importance of independent contractor management gets emphasized!

So, what is independent contractor management in actuality? What importance does it hold for your business? Let’s find that out here while also understanding why it is critical for your business!

Table of Contents

What is a Contractor?

A contractor is a person or company hired to complete a specific task or project for a client. They are not employees, but independent businesses or self-employed professionals who work based on a contract. This contract outlines the scope of work, timeline, deliverables, and payment terms. If you want to reduce overhead costs, hiring contractors can be a smart strategy. This is because you get the scope to tap into expert skillset and get things done promptly, either on a short-term or long-term basis.

Independent contractors may operate as:

  • Graphic designers
  • Freelance writers and editors
  • Social media managers
  • Software developers
  • Plumbers
  • Electricians
  • Accountants

Contractors often specialize in a particular area, bringing a wealth of experience and expertise you might not have in-house. They can tackle specific tasks efficiently and effectively.  Interestingly, they can hit the ground running, minimizing the need for extensive training. This can lead to faster project completion and improved efficiency.

Suggested Read: Pay International Contractor- Your Go-to Guide 

independent contractor management

3 Key Benefits of Hiring Contractors

Engaging contractors can bring forth a set of golden opportunities for your business, leveraging which you can attain your goals efficiently. Let’s have a glance at the key benefits of hiring contractors:

1. Flexibility

Contractors provide businesses with flexibility in staffing levels, allowing them to scale resources up or down according to project demands and seasonal fluctuations.  Statistical data has revealed that 70% of Small-and-Medium-Sized-Businesses (SMBs) in the US have worked with freelancers at least once. The interesting bit is that 81% of these companies are willing to hire independent contractors again. This easily points to the increasing contractor hiring trends globally owing to the diverse benefits it offers to employers.

2. Cost Savings

Hiring contractors can be cost-effective compared to hiring full-time employees. This is because businesses can avoid expenses such as salaries, benefits, taxes, and overhead costs associated with permanent staff. The popularity of engaging contractors in business is also reflected in a study report that unveils a noteworthy fact. 71% of freelancers have reported a spike in the volume of work they were able to bag online in the recent years.

3. Reduced Administrative Burden

Contractors are typically responsible for managing their own taxes, insurance, and other administrative tasks. As a result, businesses are relieved of the burden of benefits administration and compliance-related paperwork. Hiring freelancers not only aids businesses in getting specific tasks done properly but also helps in saving time. This is because you won’t have to worry about tax deductions and other compliance-related tasks. 83% of companies agreed that freelancers have greatly aided them in their business, as per a report published by LinkedIn.

What is Independent Contractor Management?

The general misconception concerning independent contractor management is that there is no need to direct or train independent contractors the way it needs to be done with employees. Well, that is true to some extent. This is because contractors bring to the fore their unique skillset and are well-aware of the nitty-gritty of the task they are going to complete. However, it is crucial to note that independent contractor management is something way too different. Not following any contractor management strategy is a risk that you undertake as your business gets vulnerable to worker misclassification charges. After all, staying fully compliant is possible only when you have executed a perfect contractor management strategy in place.

Contractor Management refers to a set of procedures that a company follows to ensure that contractors are carrying out their responsibilities in safe working conditions and getting things done as per the company guidelines. It involves a myriad of tasks- selecting qualified contractors, clearly outlining project expectations in contracts, and monitoring their work for quality, budget adherence, and safety. This helps guarantee the project aligns with your company’s standards and goals while also fostering positive relationships with the contractors you depend on.

Most importantly, by following contractor management best practices, you succeed at establishing the identity of workers as contractors. In that way, their identity won’t be misconstrued as full-time employees. This will shield your business from facing misclassifcation charges, penalties and potential lawsuits.

Various Aspects of Managing Contractors

One of the most important aspects of managing contractors is that it helps in shedding light on the obligations of both the parties. The contractor will have clarity about their responsibilities, scope of work and project deadline. On the other hand, you (being the employer) get to stay aware of contractor management best practices, ensuring that they have all the resources needed to complete the project while running the contractor payroll on time.

Management of contractors also entails having clear work expectations. If contractors aren’t fully aware of what is expected from them, it would lead to unnecessary revisions of the work. This would cost you time and extra resources. Managing contractors properly would enable you to find out work errors quite early on, thereby ensuring that the issues get addressed then and there.

Following a solid contractor management plan involves engaging with contractors and letting them perceive a sense of belonging. Having a healthy working relationship with contractors is crucial. In future, when you will feel the need to get any work done, you can avail their services while staying ensured that things will be taken care of in the best way possible.

Suggested Read: Contractor Management Checklist- 15+ Items to Tick Off 

How Does Independent Contractor Management Work?

Many employers and business owners still follow the primitive method while managing contractors. Navigating through the maze of contractor management through spreadsheets manually is going to be a mammoth task. As is obvious, you will be having lots of things on your plate already. And, you can’t afford to spend your time onboarding each contractor, taking care of the documents submitted by them and keeping up with their work progress manually. Further, generation of invoice will be a sheer pain.

To avoid errors, store crucial documents at a centralized platform, automate contractor payroll and enable auto-generation of invoices, using a contractor management software is going to be the prudent thing to do. It will help you eradicate any kind of task-management confusion while ensuring that you stay updated of what your third-party workforce is up to.

The most remarkable thing about using a contractor management software is that you get to automate the entire contractor payroll process. No calculation errors, no fear of getting documents misplaced! Since these platforms function in compliance with data security guidelines, you can be certain of the fact that contractor data will be kept 100% secure. To make contractor management seamless and hassle-free while enjoying cost savings, using a contractor management software is going to be a smart move.

Automate contractor payments

Top 5 Reasons Why Independent Contractor Management is Important

Contractor management is crucial for businesses owing to several reasons. Apart from expediting operational processes and aiding in cost savings, managing contractors can fetch great value to businesses in miraculous ways. Let’s see what these are:

1. Aids in Risk Management

Managing contractors with due efficacy aids you in quick identification of risks related to contractor activities. You get the chance to assess potential threats and devise strategies to thwart these by mitigating risks and keeping these at bay. By implementing safety protocols and ensuring compliance with regulations, you succeed in protecting your business  from safety hazards, legal liabilities, and financial risks.

2. Reinforces Work Quality Assurance

When you embark on managing contractors, you get to be certain of the fact that they have delivered work of the desired quality that aligns with your company’s standards and expectations. After all, setting clear expectations and conducting regular inspections form a core part of the process of management of contractors. This ensures maintenance of quality control over contractor deliverables.

3. Ensures Compliance

A streamlined approach to independent contractor management aids you in ensuring that your business stays fully compliant with legal, regulatory, and industry standards. Protecting your company from getting trapped in the murky fiasco of legal battles and fines is critical to safeguarding your brand value. To keep reputational damage at bay, adopting independent contractor management strategies is essential. By verifying contractor qualifications, ensuring adherence to licensing and certification requirements, and monitoring compliance with contractual obligations, you can avoid fines, penalties, and legal disputes.

4. Promotes a Cordial Working Relationship

Independent contractor management fosters positive relationships with contractors, suppliers, and other stakeholders. As a part of the contractor management process, when you go on establishing clear communication channels, providing feedback and support, and resolving conflicts promptly, you are actually paving the way for a healthy working relationship with your freelancing workforce.

5. Ensures Project Success

Contractor management contributes to the success of projects by ensuring that contractors are adequately trained, equipped, and supported to perform their tasks effectively. When you set clear work expectations, it is anticipated that contractors will complete the work in a way they have been asked to. Further, by providing necessary resources, and monitoring progress, you can achieve project objectives on time and within budget.

Suggested Read: 1099 Employee- A Complete Guide to Knowing the A to Z of It!

Contractor management

Essential Elements of an Effective Independent Contractor Management

To breathe life into a robust independent contractor management system, the following elements are a must:

1. Proper Communication

As per studies, 70% of people are of the view that wasted time is one of the worst consequences of poor communication. No wonder why clear communication is considered to be a fundamental element of effective contractor management! It aids in facilitating understanding, alignment, and collaboration between internal stakeholders and contractors. It involves conveying information, expectations, and feedback in a concise, transparent, and timely manner, ensuring that all parties are on the same page regarding project objectives, requirements, and deliverables.

Clear communication encompasses both verbal and written communication channels, such as meetings, emails, project updates, and documentation. It involves actively listening to contractors’ concerns, addressing questions or uncertainties promptly, and providing regular updates on project progress. By fostering open and transparent communication, businesses can enhance trust, build stronger relationships, and mitigate misunderstandings or conflicts.

2. Respect & Trust

Respect and trust serve as foundational pillars of effective independent contractor management. Wondering why? This is because fostering positive relationships and collaboration between businesses and contractors won’t be possible without mutual respect. Respect entails acknowledging the expertise and autonomy of contractors, valuing their input, and treating them with professionalism and dignity.

Trust is built through transparency, reliability, and consistency in communication and actions. When businesses demonstrate respect and trust towards contractors, it cultivates a culture of mutual understanding, cooperation, and commitment to shared goals.

Contractors feel empowered to perform their best work, contribute innovative ideas, and proactively address challenges, knowing that their efforts are valued and respected. It is advisable to refrain from doubting their skills or raising questions on their capabilities. Treat them as your internal team members. Not placing trust on your contractors’ expertise may make them feel undervalued. This will have a negative repercussion on the work.

3. Specified Roles and Responsibilities

Clearly defined roles and responsibilities are essential for effective contractor management, providing clarity, accountability, and alignment within the project team. By clearly outlining each contractor’s role, tasks, and expectations from the outset, businesses can ensure that all parties understand their contributions and how they fit into the overall project objectives.

For instance, in developing a website, clear delineation of roles ensures efficient collaboration and timely delivery. The project may involve roles such as:

  • a project manager responsible for overall coordination
  • a web designer for crafting the site’s visual layout and user interface
  • a developer for coding and implementing functionalities
  • a content creator for generating text and multimedia content

By assigning specific responsibilities to each contractor, the team can work cohesively towards achieving the desired outcome. This clarity prevents misunderstandings, avoids duplication of efforts, and promotes accountability.

4. Feedback and Evaluation

As per survey results, 75% of workers believe that feedback is crucial to their work. To hatch a successful contractor management strategy, it is important to pay heed to regular feedback and evaluation of contractor performance. By regularly soliciting feedback from contractors and conducting thorough evaluations of their performance, you can ensure alignment with project objectives and identify areas for optimization.

For example, in a marketing campaign led by external contractors, feedback sessions may involve assessing campaign effectiveness, audience engagement metrics, and return on investment. Upon analyzing this feedback, you can refine strategies, adjust tactics, and optimize resource allocation to maximize the campaign’s impact and achieve desired outcomes.

Furthermore, ongoing evaluation will give you the scope to recognize and reward high-performing contractors, address any performance issues promptly, and maintain accountability and transparency in contractor relationships.

What are a Contractor’s Obligations?

Obligations of a contractor differ greatly from that of an employee. After all, independent contractors are self-employed professionals offering services only for certain particular tasks in which they are skilled. The independent contractor agreement stands as the foundational document stating the rights and responsibilities of both the contractor and the employer.

A contractor’s obligations lie in the following areas:

1. Delivering the Work as Agreed

Completing the work as agreed upon by the contractor forms one of their core responsibilities. It is mandatory for them to complete the project according to the specifications outlined in the contract, including quality standards, timelines, and budget. They are free to utilize subcontractors to get certain aspects of the work done. However, the overall responsibility for the project’s completion remains with the contractor whom you have hired.

2. Adhering to Regulations and Safety Standards

Contractors are obligated to comply with all relevant building codes, safety regulations, and industry standards throughout the project. This ensures the safety of workers, the public, and the finished project itself.

3. Procuring Necessary Permits and Insurances

Contractors are typically responsible for acquiring any permits or licenses required for the project. Moreover, they need to possess adequate insurance coverage to protect against potential liabilities like property damage, accidents, or worker injuries.

4. Providing Qualified Workers and Equipment

Contractors must ensure the workers or subcontractors they assign to the project have the necessary skills, certifications, and experience to perform the job safely and effectively. After all, they are also responsible for providing or maintaining the necessary equipment and materials for the project.

5. Maintaining Clear Communication and Records

Maintaining proper communication is a critical factor in carrying out a collaborative activity. Throughout the project, the contractor needs to maintain open communication with the client (that is, you). This includes providing regular progress reports, addressing concerns promptly, and keeping detailed records of the work performed.

Fulfilling these obligations, on the part of the contractors, is essential to ensure the smooth and successful completion of projects.

Suggested Read: Invoice for Contractors

Independent contractor management

What are Your Obligations to Your Contractors?

As a business recruiting independent contractors, you have several obligations to ensure compliance with laws, regulations, and ethical standards. Your responsibilities towards your team of contractors will be in accordance with the terms laid down in the independent contractor agreement.

Let’s have a look at certain general obligations that you have towards your freelancing workforce:

1. Ensuring Correct Worker Classification

Make sure that the worker is properly classified as an independent contractor and not an employee. This distinction is crucial for tax purposes and determines who is responsible for various benefits and protections. Committing worker misclassification, even if it is an inadvertent mistake, may attract costly problems. To prevent the risks of penalties and lawsuits, preventing worker misclassification has to be your top priority. The best way to stay compliant and insulated from misclassification charges is by taking the aid of an independent contractor management software. A smart solution will help you in not only steering clear of misclassification risks but will also automate every kind of mundane processes that you need to carry out on a daily basis.

2. Adherence to Payment Schedules

Pay the independent contractor the agreed-upon compensation for the work performed in accordance with the terms and conditions outlined in the contract. It is way too crucial to adhere to payment schedules and methods as specified in the contract. Further, ensure that you have complied with tax regulations, as necessary. This may involve issuing 1099 forms for tax reporting purposes.

3. Ensuring Proper Safety & Health Parameters

Providing a safe work environment for the independent contractor while ensuring compliance with occupational health and safety regulations is a must. After all, it is your prime duty to ensure that contractors are able to thrive in a healthy work environment.

4. Maintaining Confidentiality & Intellectual Property Protection

Don’t forget to protect sensitive information, trade secrets, and intellectual property belonging to your organization. You can do so by including confidentiality provisions in the contract and implementing appropriate security measures.

5. Paying Heed to Documentation

Maintaining accurate records, documentation, and reports related to the independent contractor engagement is way too vital. Crucial documents include contracts, invoices, work orders, etc. Using an independent contractor management software helps you in storing these documents at a centralized location. In that way, you can access these documents easily at times of need without having to search for these files at multiple places.

Independent Contractor Management

What are the Challenges of Using Both Contractors and Full-time Employees?

Using both contractors and full-time employees in a workforce can present several challenges for businesses. It is important to stay abreast of these potential challenges so that thwarting these become easier if you get confronted with any of these roadblocks in the days ahead.

1. Coordination and Communication

Managing a mixed workforce of contractors and full-time employees can create communication and coordination challenges. Differences in work arrangements, schedules, and reporting structures may lead to miscommunication, delays, and inefficiencies in project execution.

2. Cultural Integration

Contractors may not always align with the organizational culture or values to the same extent as full-time employees. Integrating contractors into the company culture and fostering collaboration and teamwork among diverse workforce segments can be quite daunting.

3. Legal and Compliance Risks

Navigating legal and compliance risks associated with employing contractors and full-time employees is going to be outright challenging. Misclassification of workers, failure to comply with labor laws, and differences in benefits and protections between contractors and employees can expose your business to legal liabilities and penalties.

4. Resource Allocation

Balancing the use of contractors and full-time employees to meet fluctuating work demands can be complex. You need to strategically allocate resources to optimize workforce productivity, minimize costs, and maintain flexibility in response to changing business needs.

5. Retention and Turnover

High turnover rates among contractors or full-time employees can disrupt workflow, hinder project continuity, and impact overall productivity. Retaining top talent and fostering loyalty among both contractors and full-time employees is essential for long-term business success.

The best way to beat these challenges lies in taking the aid of a contractor management software. It will help you streamline the entire process of managing both full-time employees and contractors. Things won’t get overlapped and you will have peace of mind while strategizing the core operations for your business.

Suggested Read: Types of Employment Contracts- Check Out All the Types Today 

Best Practices for Successful Independent Contractor Management

Following certain best practices to ensure top-notch contractor management is a must to maximize their performance to bring about excellent results. We have compiled a series of steps that you can adopt to boost your game of managing contractors. Managing multiple projects and staying updated with your third-party workforce will become a whole lot easier with these measures:

1. Select the Right Contractors

Choosing the best contractor out there is a must to ensure project success. If you don’t choose the right contractor, things will go south. To hop on to a working relationship with a contractor that emerges to be successful, assessing a contractor’s skills and experience is a must. In that way, you will be able to gauge if that contractor is going to be a perfect fit for your organization. You can do so, by taking the following steps:

  • Ask them for references and check those duly
  • Assess their previous work experience
  • Review the licenses and certificates that they have submitted
  • If needed, you may ask them to complete a test task or an assignment to have a clear idea of their expertise

Stay vigilant of the following risk indicators while fixing the deal with a contractor:

  • Offering ambiguous responses to questions asked
  • Demanding an unusually large amount as advance payment
  • Lack of contractor information online
  • Not being able to showcase past client reviews, even while claiming to be experienced in that field
  • Inability to present any proper licenses or certifications relevant to the project
  • Including vague terms in the independent contractor agreement

2. Maintain Proper Communication & Collaboration With Contractors

To strike a balance in the act of managing your workforce, promoting strong collaboration between your core team and freelancers is way too essential. This not only has a positive forbearing on the work at hand but also makes knowledge exchange possible. So, what can you do to amplify communication channels and encourage collaboration between your internal team of full-time employees and third-party workforce? Well, let’s have a look at the following steps:

  • Advocate transparency and a work environment that supports open communication
  • Promote a culture of collaboration
  • Devise a solid contractor onboarding process with the aid of an independent contractor management software
  • Support your workforce with the right resources and equipment, when needed
  • Encourage cross-functional collaboration and organize brainstorming sessions in which both your internal team of employees and contractors get to participate
  • Utilize collaboration tools and platforms to boost real-time synergy between contractors and employees

By implementing these strategies, you can promote communication and collaboration between contractors and internal team members. The result? You will start witnessing more efficient project execution, better outcomes, and stronger relationships within the workforce. And, what more does one need from a collaborative workforce than these remarkable results?

3. Reviewing Contractor Performance Periodically

The key to a successful independent contractor management lies in reviewing their performances periodically. Only then will you be able to assess their skills, quality of work, sincerity, and ability to adhere to deadlines. These form the basic parameters that determine the success of a project.

Giving feedback to contractors’ performance is extremely crucial in the sense that they will be able to understand if their work aligns with your goals and expectations. Further, contractor performance evaluation will aid you in spotting errors early on, thereby giving them ample time to reform their mistakes. You will also be assured of receiving satisfactory work outcome that won’t require much edits.

If you are not sure as to how you can review contractor performance, here are some tips that may come handy:

  • Establish clear performance metrics and objectives aligned with project goals
  •  Regularly track contractor progress against agreed-upon milestones and deadlines
  •  Evaluate the quality of work delivered by contractors based on established standards
  •  Assess contractor reliability, responsiveness, and communication throughout the engagement
  • Solicit feedback from internal team members and stakeholders regarding contractor performance
  •  Review adherence to budgetary constraints and cost-effectiveness of contractor services
  • Consider contractor feedback and suggestions for process improvements or optimizations
  •  Address any performance issues or deviations from expectations promptly and professionally
  • Recognize and reward exceptional performance and contributions from contractors
  • Use performance reviews as an opportunity to provide constructive feedback and set goals for improvement

To make the entire contractor performance review evaluation an easy-peasy task, using an independent contractor management software that comes with performance management module will help you save time and optimize project success.

Suggested Read: Employee Misclassification Guide- The Key to Avoiding Penalties 

Management of contractors

Key Features of an Independent Contractor Management Software

Contractor management software offers a variety of features to streamline the entire contractor lifecycle. Here are some key features to look for:

Pre-qualification and Selection

  • Contractor Database: Manage a centralized database to store contractor information, qualifications, certifications, and past performance.
  • Bidding and RFP Management: Electronically send and receive bids, manage Requests for Proposals (RFPs), and evaluate contractor responses.

Independent Contract Management

  • Contract Templates: Create and store standardized contract templates for different project types.
  • Automated Workflows: Set up automated workflows for contract approvals, renewals, and notifications.
  • Electronic Signatures: Allow for e-signatures from all parties involved for a faster and more efficient contracting process.

Project Management and Collaboration

  • Document Management: Securely store and manage all project documents, including contracts, plans, and communication records, in a central location.
  • Communication Tools: Facilitate communication between project teams, contractors, and stakeholders through features like messaging, task management, and file sharing.
  • Project Dashboards: Gain real-time insights into project progress, deadlines, budgets, and contractor performance through visual dashboards.

Performance Monitoring and Quality Control

  • Inspection Management: Create and manage inspection checklists to ensure quality standards are met.
  • Performance Tracking: Track key performance indicators (KPIs) to monitor contractor productivity, safety compliance, and adherence to deadlines.
  • Reporting and Analytics: Generate reports that provide insights into contractor performance, project costs, and overall project health.

Additional Features

  • Mobile Accessibility: Offer a mobile app for field personnel to access project details, submit reports, and track progress on the go.
  • Integrations: Integrate with your existing project management, accounting, or payroll software for a more unified workflow.
  • Security and Compliance: Ensure robust security measures to protect sensitive project information and contractor data, complying with relevant industry regulations.

Using Asanify, a cloud-based independent contractor management software, you can oversee the work your contractors are doing pretty easily. Asanify’s integrations with diverse platforms, notably, WhatsApp, is a game-changer. For on-site contractors, marking their regular attendance, generation of invoice, reviewing their timesheet, etc., will be an easy and quick job. You can also automate contractor payroll processing while enjoying the best-in-class FX rates at the time of disbursing payment to global contractors.

Checklist for Choosing the Right Independent Contractor Management Software

1. Needs Assessment

  • Features: Identify the essential functionalities you require. This could include prequalification tools, contract management, document storage, communication tools, performance tracking, or mobile accessibility.
  • Company Size & Complexity: Consider the size and complexity of your projects and contractor base. Simple software might suffice for smaller teams, while larger operations might need advanced features.

2. Software Functionality

  • Core functionalities: Ensure the software offers features like contractor prequalification, contract creation and storage, document management, communication tools, and reporting.
  • Integrations: Does it integrate with your existing project management, accounting, or payroll software for a streamlined workflow?
  • Scalability: Can the software adapt to your growing needs as your company or projects become more complex?

3. Usability and User Interface

  • Ease of Use: Is the software user-friendly and intuitive for both your team and contractors?
  • Mobile Accessibility: Does it offer a mobile app for on-the-go access for field personnel?

4. Security and Compliance

  • Data Security: Does the software have robust security measures to protect sensitive project information and contractor data?
  • Compliance: Does it comply with relevant industry regulations regarding data privacy and security?

5. Implementation and Support

  • Implementation: Does the vendor offer a smooth implementation process and training resources for your team?
  • Customer Support: Is there reliable customer support readily available to address technical issues or answer questions?

6. Pricing and Budget

  • Cost Structure: Understand the pricing model (subscription fees, per-user costs) and ensure it fits your budget.
  • Free Trial or Demo: Does the vendor offer a free trial or demo to test the software before committing?

Additional factors to consider

  • Vendor Reputation: Research the software vendor’s reputation for customer service, product updates, and industry standing.
  • User Reviews: Read online reviews from other users to gain insights into the software’s strengths and weaknesses.

Suggested Read: 10 Best Contractor Management Software in 2024 [Reviewed]

How Can You save Costs Using an Independent Contractor Management Software?

Using an independent contractor management software offers an array of benefits, as we discussed above. However, the cost savings is one of the most lucrative benefits that an independent contractor management software brings with it. Let’s see how using a contractor management solution can help you in saving business money:

1. Helps Save Legal Fees

While you are drafting contracts to engage a global freelancer, ensuring that the agreement complies with the contract law of the country in which you are operating is essential. In such cases, it is obvious that one will need the assistance of legal experts to ensure that the contract drafted is compliant. However, by relying on a contractor management software, you can stay assured of the fact that you will get access to fully customisable compliant contracts without having to expend any legal consultation charges.

2. Helps Cut Down Contract Management Charges

Managing contractor payroll processing, invoice generation and any other tax forms can be a herculean task, if you do it all alone. You may even feel compelled to take the assistance of any specialized firm to take care of all these. That’s where a contractor management software appears in the picture! Independent contractor management platforms offer built-in features like auto-generation of invoices, tax forms and automates the entire payroll processing to keep calculation mishaps at bay. Using a software also spares you from the burden of paying extra charges to any other outsourcing bodies. Because, an ideal platform offering management of contractor services will contain a whole package of services, including invoice generation, tax documents, among others.

3. Reduces Compliance Risks & Protects Your Business From Penalties

Contractor management software helps ensure compliance with regulations and company policies by centralizing data, automating compliance checks, and generating audit trails. This minimizes the risk of non-compliance penalties and associated costs. So, you can gain peace of mind knowing that there are no chances of being heaped with penalties. No wonder why an independent contractor management process creates wonders for a business by saving unnecessary expenses!

Suggested Read: Terminating a Contractor- Know How to End an Agreement Politely 

1. Enhanced Gig Economy Participation

Studies reveal that over 50% of the US workforce is likely to be a part of the gig economy by 2027. As the gig economy continues to grow, more workers are expected to join the ranks of independent contractors. This trend will necessitate more robust contractor management systems and processes to effectively engage, onboard, and manage a diverse workforce of contractors.

2. Greater Emphasis on Risk Management and Ensuring Compliance

With increasing regulatory scrutiny and legal challenges related to contractor classification and employment laws, businesses will need to prioritize compliance and risk management in contractor engagements. This implies that you need to implement robust compliance checks, monitor contractor relationships for compliance risks, and stay informed of changes in labor laws and regulations.

3. Integration of Technology With Independent Contractor Management

The adoption of contractor management software and technology solutions will continue to rise, enabling businesses to streamline processes, automate tasks, and enhance visibility and control over contractor engagements. Advanced technologies such as artificial intelligence (AI), machine learning (ML), and blockchain may also play a role in improving efficiency and security in contractor management.

4. Agile and Flexible Workforce Strategies

To remain competitive and adapt to changing market dynamics, businesses will adopt more agile and flexible workforce strategies, including leveraging contractors for specialized projects, seasonal workloads, or short-term initiatives. This approach will allow you to scale resources up or down quickly in response to evolving business needs.

5. Focus on Enhanced Contractor Experience

Businesses will place greater emphasis on enhancing the contractor experience, recognizing that satisfied contractors are more likely to deliver high-quality work, remain loyal, and contribute positively to the organization. About 83% of employers offer their workforce a self-service portal to access documents, pay and benefits related information in their dashboard. This points to the fact that global employers are more focused on developing a supportive work environment for contractors.

 


Global contractor hiring

Frequently Asked Questions- Independent Contractor Management

1. How do you manage an independent contractor?

Managing an independent contractor involves certain crucial steps. The first and foremost thing is to come up with a clear contract that outlines the project scope, timeline, and deliverables. Always remember that communication is key. Regular check-ins keep everyone aligned. Make sure to keep a tab on their progress regularly. Further, monitoring their progress is essential to ensure that quality standards are met. Lastly, upon successful completion of the project, fulfill the agreed-upon payment terms. Adopting this independent contractor management strategy will help you foster a successful working relationship and achieve project goals.

2. What is the best way to manage contractors?

The best way to manage contractors is with clear contracts, consistent communication, and close monitoring. This ensures everyone’s on the same page and the project runs smoothly.

3. How do you hold an independent contractor accountable?

Holding independent contractors accountable starts with a watertight agreement outlining expectations. Regular communication and monitoring progress (reports, inspections) ensure they’re on track. Further, you can tie payments to milestones or project completion, thereby creating an incentive for them to deliver high-quality work on time.

4. What are the three controls for independent contractors?

Managing independent contractors relies on three key controls, as defined by the IRS:

  • Behavioral – You define project goals but give them freedom in execution.
  • Financial – You control the budget and payout based on deliverables while they manage their own resources.
  • Relationship – It’s a hands-off approach with a written contract outlining the independent work arrangement, without employee benefits.

5. Can you micromanage a contractor?

No, micromanaging a contractor isn’t ideal. It means excessively controlling their work methods, which can stifle their expertise and hinder progress. Trust the contractor’s skills, focus on clear communication and deliverables, and avoid hovering.

6. How do you deal with difficult contractors?

Dealing with difficult contractors can be tricky. However, by adopting clear communication, you can sort things out. First, calmly address the issue referencing the contract. If communication fails, consider written documentation outlining concerns. As a last resort, you might need to employ dispute resolution clauses in the contract or seek termination if necessary.

7. How do I protect myself when hiring an independent contractor?

Shield yourself when hiring independent contractors with a rock-solid independent contractor agreement outlining scope, deadlines, and deliverables. Further, make sure to verify their qualifications, and confirm their independent status to avoid misclassification issues.

Not to be considered as tax, legal, financial or HR advice. Regulations change over time so please consult a lawyer, accountant  or Labour Law  expert for specific guidance.