Best Practices For Managing Your Independent Contractors

construction worker

Note: This post was originally published on OPEN Forum.

If you’re like many small business owners, you hire at least a few independent contractors, instead of regular employees.

And, why not? With independent contractors, you don’t have to take care of payroll taxes, unemployment insurance, and a host of other taxes and benefits.

So, you not only save a bundle, but you also have a lot more flexibility than you do with a full-fledged staffer.

It’s no wonder that the use of contingent workers is growing at record levels, according to SurePayroll, a Glenview, Ill., payroll processing company that serves small businesses.

There is a hitch, however. When it comes to legal requirements and management considerations, an independent contractor is completely different from a regular employee.

By definition, they’re not a full-time part of your organisation. Plus, they probably work for some – perhaps many – other companies, so their loyalties aren’t the same.

What’s more, legal definitions of independent contractor status restrict how you can supervise them.  

As a result, independent contractors require a different management approach. 

Learn the rules—and how they affect your supervisory tactics

Be smart about how you pay

For one thing, Alter suggests compensating independent contractors based on reaching certain goals or on a fixed fee, rather than by the hour. That's because you're generally paying them for completing a project, not for doing ongoing work.

You also don't want to pay them for time spent, say, fixing a computer problem; that's something they need to take care of without a meter running.

At the same time, you should not under-pay just because they're independent contractors. Your goal is to create a partnership. You'll undermine the relationship -- and create resentment -- if your compensation level is Scrooge-like.

For that reason, you need to do your research beforehand to get an idea of acceptable pay levels.

Use a similar hiring process to the one you use for employees

Look for individuals with staying power

That means selecting candidates who seem likely to continue working as independent contractors for a while, rather than people simply biding their time until they get a regular job.

And, while they should have a track record, it's also not a good idea to hire someone who has so much on their plate that they'll give your company short shrift.

You should ask such questions as how long they've been doing this type of work, their future plans, and other clients they work for.

Start with small, non-critical projects

To make sure they're a good fit, give them small tasks to begin with.

When you see they're reliable, then start assigning bigger or more complex projects.

Stay in touch after the project is over

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