Research in the US points to a substantial rise in the contingent labour force (contractors, independent freelancers), to a point where the average company’s workforce will achieve equal par between permanent and contingent workers within the next 3 to 4 years. Contractor headcount is estimated to have grown by 43% between 2011 and 2015. Deloitte’s Human Capital Trends 2016 study indicates more than half of HR expect their need for contractors to grow over the next five years.
Steve King of Emergent Research and Gene Zaino of MBO Partners writing in Havard Business Review, cite two core factors that are driving this. The first of these, is that companies need a flexible workforce to compete more effectively. Talent and expertise when you need it, removed cost when you do not. Organisations are finding that much of their change activity is project based and therefore be it in IT, Engineering, Finance, HR or any other function, the availability of high value skills for a limited period, makes great commercial sense.
Secondly, and as our own research continues to illustrate, many skilled professionals in the functions above, as well those working in Science, Supply Chain, Marketing and Law, like the greater flexibility, the choice and variety of employers and the higher net compensation that this career path affords. Inevitably therefore, the use of contractors will shortly represent a significant component of the resourcing and talent management strategies of most competitive companies. For firms that are new to contracting, the most common concerns that arise around the use of agile professionals are capability, culture, commitment and cost. Much of it is the fear of the unknown and as we explain to our own clients and set out here, these concerns can easily be overcome.
On the issue of capability, your contractor must be able to hit the ground running and while we always encourage their attendance at an induction programme, when chosen well, they should not need the same level of training to get up and running as a permanent hire might. Ensure that all your contractors are subject to a Non-Disclosure Agreement or any other confidentiality arrangements that you would make for your staff. Managing contractors is not the same as managing a firm’s permanent employees, the relationship is very different, centered around short term project completion versus longer term employee growth and engagement values.
Start your contracting assignment by setting out in a statement of work, clear delivery expectations, much as you would with a valued supplier. It is imperative to build in to this document, examples of behaviours that reflect your cultural values and to ensure the contractor is capable of living to these. Contractors often work closely with your permanent employees and differences in their behaviour from organisational norms and can create resentment.
A contractor’s overwhelming motivation is to have their work valued by the contracting organisation. So build in consistent short cycle feedback meetings with objective analysis of the contractor’s performance as part of your oversight process. Contractors are generally very self-sufficient and should need less hands-on management. However, feedback builds their commitment and ensures you maximise the value received. Contractors are people too and need to be treated as a contributing part of your team.
Don’t try and hire a contractor at an equivalent rate to a permanent employee. If they do come at a similar price, you are simply under hiring. Contractors cost and are worth more, due to their flexibility, impact and high levels of expertise. When set up as a day rater under a limited company, there are no costs for you related to benefits, holiday pay or employers PRSI.
No longer the preserve of IT and Engineering firms nor simply a route to cover absent employees, contracting is an essential resourcing strategy for all functions in competitive firms. Future workforces will be compositions of permanent and contract employees, particularly during transformational periods.