Managing a Contractor vs an Employee

In order to grow and scale most businesses require a team. You may decide to take on employees, or you may decide to use the services of a contractor, but is there a difference in the way you would manage the two?

How does it work with a contractor?

Contractors are professionals who operate via their own limited companies and are not employees for a larger firm or business.

An employee is someone who works under an employment contract within your business.

The main difference between the two is that contractors are hired temporarily. They do not have employment contracts and therefore work differently to your employees.

A contractor does not have to accept the work that you are offering them whereas an employee must undertake the work that you assign to them. Similarly, an employer does not have to offer work to a contractor, whilst they do have to offer work to an employee.

Although contractors allow you more flexibility of only seeking support when you need it, this can mean that you are unable to find a contractor to take on the work that you have. Having some trusted contractors that you use regularly will mean that you should be able to find help when you need it.

Contractors tend to have far more freedom over their working hours. This is something that will be agreed with the business they are working with. An employee will work the hours that are set by their employer and as laid out in their contract of employment. Having a conversation to arrange working hours with your contractors will mean that you can find working hours which work for you both.

Paying a contractor

The way that contractors are paid is different to the way that an employee is paid. An employee’s salary will be outlined in their contract of employment along with various company policies relating to paid leave and holiday entitlements.

A contractor is likely to be paid per job rather than receiving a salary. They will invoice the company for the individual jobs that they complete and will be responsible for their tax and national insurance. A contractor has no right for sick pay or holiday. Also, as you are likely to be paying per job rather than paying an hourly rate, if there is a problem with the work which has been undertaken, any repairs or adaptations which need to be made should be completed free of charge.

Contractors can work for other companies at the same time as working for you whereas your employees are contracted to work just for you at your premises. Ensuring that you have a clear schedule for the work that you would like the contractor to undertake is important as it is likely that they will have work with other companies scheduled. They will not be able to come at short notice if you suddenly change your plans.

Contractors will often use their own equipment. This is especially likely to be the case if you hire contractors for highly specialized jobs which require specialized equipment. With this in mind, it is important to check that they have their own insurance in place to cover their equipment and the work that they are undertaking with you.

Flexibility vs control

Contractors are also able to choose who completes the work for you. You may have various people undertaking work in your company who are all employed and deployed by the contractor. This may potentially cause issues if a substitution is made and you feel that the person you have working for you is not working at the level you expect.

Employees are governed far more by the conditions which are laid out in their employment contracts. Generally, many of these conditions will have been decided by you and allow you to control how you manage your employees and their work.

You have far less control over the contractors who work for you as they have ownership of their working patterns and generally have greater autonomy. Ensuring that you have clear conversations with your contractors so that you can establish mutual understanding and good relationships will help you to gain the most value for your company from the contractors that you hire.

Getting support with using contractors

Do you work with contractors in your business? If you would like advice and support on how to manage your employees or contractors effectively get in touch for a free no-obligation chat about how Altum HR can help.