Contracting – Pitfalls
Posted on 17 September 2013
Last month we looked at where the wins are in contracting for companies and contractors alike. As always, wherever there’s an upside there are pitfalls aplenty. Really, they can be seen as risks: potential consequences of an altered lay of the land.
Contracting – employer pitfalls
Culture: This is a well-known risk and easy to understand. Bring in some hotshot contractors for a period of time with a low level of integration with existing team members… well yeah it can have some impact on your culture particularly if it is not managed well and if a high proportion of your team are contractors.
Cost: On the face of things it’s a lot more expensive to engage contractors. Right? Well maybe not. Have a look at the total cost of engagement and balance that with the flexibility you get in employment terms. For some companies, the cost is close to that of permanent staff employment.
Temptation to avoid managing performance: This is a strangely common phenomenon. Many managers treat their contractors differently, not providing feedback, guidance, discipline or advice. This can lead to rogue elements in their contract workforce. Simple solution: manage contractors as you would any employee.
Loss of subject matter expertise and even IP: If innovation and solution expertise are in the hands (and heads) of your contractors and them alone… it may walk out the door with them. Don’t let it. Pair them up with permanent employees, document as much as possible and mandate thorough handovers.
Contracting – risks for the contractor
Being on the outside: The other side of the culture thing. It can be like being in Siberia as a contractor. Harness your people skills and bridge the divide.
Career development is lateral not vertical: Typically, companies will engage contractors who are low risk – they have all of the skills and experience to hit the ground running for a particular job. This tends to mean you won’t get hired to do things you don’t yet have expertise in (including leadership) which can limit your own growth.
Administration overheads: You’re running your own single person enterprise so there’s the legal, tax and accounting compliance aspects which need managing. Find some good professionals to support you.
No sick leave, annual leave or statutory holidays: The reality is that these are built into the premium you’re paid for your work, however in practice you may feel short changed when you need a holiday or if you’re sick. With regard to holidays, you’ll tend to need to fit these in between contracts though if you’re upfront with your next contract employer they may accommodate your upcoming break.
High expectation to deliver: One of the key reasons that you’re hired as a contractor is to get something done well and quickly. Companies expect plenty of bang for their buck so there’s no room for slacking!
Risk of being jobless + you’re always looking for your next contract: Finite pieces of work, that’s typically what you sign up for in contracting. This can mean you’re always on the hunt for the next gig and if you can’t find one in time or if the market dips you might be jobless for a time.
Indemnity & Liability: Most independent contractor agreements that you sign will require you to accept liability for breaches of statutes or regulations that may happen during your contract. In addition, you’ll probably be expected to indemnify one or multiple parties for direct or even indirect losses and damages that they may incur due to any breaches or negligence on your part. Serious stuff? Well yeah, you need to be across this and understand these scenarios from both a legal and insurance perspective. You’ll probably need to carry insurance, which of course carries a small cost too.
Like I said earlier the points above are more risks that need attention and management and can be proactively addressed to avoid issues. Hopefully, now you have a fairly balanced view of contracting and are better informed to use it to your advantage.