What is 'Contracting'?
Posted on 15 May 2013
Contracting is an employment engagement that differs from permanent salaried employment engagement in a few key ways.
Firstly, the contractor is self-employed in the eyes of the law, effectively a one man company. To a reasonable extent, this means a piece of contract work is an agreement between two (or more) companies. The contractor, therefore must fulfil the obligations of a company. More importantly, a contractor is not covered by the Employment Relations Act (2000) or the Holidays Act (2003), which both deal with annual leave, public holidays, sick leave and bereavement leave. Self-employed contractors don’t have the same protection as employees under the law but are still legally protected by the terms of the signed contract.
When that contractor is engaged through a specialist like us, here at Potentia we become the contractor and the IT contractor becomes the subcontractor. In this process, we provide additional contractually binding service and value adds that further protect both the client and subcontractor.
With the slightly dry stuff out of the way, let’s move to the key drivers for the existence of contracting.
With fewer constraints on employment terms, employers can set start and end dates according to their resource needs. This liberating opportunity gives companies greater freedom to achieve their objectives and enables them to expand and contract their workforce quickly according to a pre-determined schedule. If for any reason things change suddenly along the way, they can terminate contractors by giving the agreed notice, typically around a couple of weeks. This provides the ability to scale, to bring on more of a type of resource for a period and release them quickly if need be.
This is the major driver. The second relates to the profile of the typical contractor. These people tend to be among the most skilled, most experienced, smartest and most motivated professionals in the industry. For many businesses, hiring a contractor means bringing one of the best onboard to get a job done efficiently, often within a limited time frame.
The third driver is all about bringing in highly desired skills and expertise that don’t currently exist in the business and may not need to exist beyond a certain point in time. This is especially common for IT projects where technologies are hugely varied. Not only is contracting considered a viable alternative, it’s often a better one.
There are many other benefits, but these are the key drivers for the existence of contracting.
Examples of typical contracting scenarios:
- A systems integrator wins significant new deals which require them to scale up staff numbers for the duration of the client project
- A product vendor has a deadline to deliver a new software release that they won’t meet with their current team resources and knows it can’t hire permanent staff quickly enough
- A large corporate is implementing a new finance module and needs software specific consulting expertise in the scoping phase
- A corporate has signed off new projects and needs to double their BA capability to see them through to the end of the projects
- A business that is struggling to find the right permanent salaried employees fast enough and is falling behind in the delivery may decide to hire contractors to cover them in the interim.