In the modern workforce's ever-evolving landscape, the need for contract resource has become integral for many businesses. Whether you require a highly specialised skill set for a project with a finite timeline or are looking for a level of adaptability, especially amidst uncertainty, that permanent employees cannot offer, contractors often present a highly valuable solution.
However, for some, the practical aspects of hiring a contractor may appear daunting. Questions such as "How do I engage a contractor?", and "Which approach best suits my hiring needs?" may arise. Navigating the realm of contract-based recruitment is, in reality, more straightforward than it may seem. This blog offers a simple introduction to hiring contractors and explores the key differences between the different methods that you may use to do so.
There are various methods to engage a contractor, but the most common ones:
1. Fixed-Term Contracts (FTCs)
Individuals working under fixed-term contracts are considered employees of the end client and enjoy employee rights along with associated costs to the business. These employment agreements have a predetermined duration, typically lasting for six months or more.
Pros:
Clarity & Structure: FTCs provide a clear timeline for the engagement, making them suitable for cases where the contract's scope and duration are well-defined, e.g. a 12 month maternity cover.
Team Integration: As contractors working on FTCs are employees of an organisation, they tend to fully embed with that team during their contract. This can improve the culture and team morale.
Cons:
Lack of Flexibility: FTCs designate a fixed time period for the engagement, which may not align with the often uncertain scope and duration of project-led work.
Desirability: Typically FTCs are less appealing to contractors as they don’t get the financial reward of a day rate contract, nor the job security or internal advancement opportunities of a permanent role.
2. Day-Rate Interim Contracts
Day-rate contractors, or interims, are specialists who work independently and provide advisory services. They typically leverage skills acquired from previous contracts to quickly integrate into a project environment and ensure milestones are met. When operating through a limited (Ltd) company, they do not possess standard employment rights, and the only cost to the end client is the daily rate and any associated recruitment fees (if they engage through an agency). When working through an umbrella company, the contractor has employment rights from that entity, but there are no additional costs or employer responsibilities for the end client.
Pros:
Flexibility: Hiring on a day-rate interim basis allows for workforce scalability, making it an excellent choice for businesses facing fluctuating workloads and changing circumstances.
Bypassing Hiring Freezes: In cases of recruitment freezes, businesses can still hire interim resources without impacting employee headcount.
Time Efficiency: Interim managers can usually start swiftly, either immediately or within a week!
Cost Efficiency: Clients only pay for the days worked by a contractor, potentially saving costs during slower periods. There are no employee benefits or additional employment expenses. When using an external agency, clients also avoid a one-off recruitment fee.
Specialisation: Interim contractors often possess extensive expertise, bringing unique experiences from previous engagements and applying these to new projects.
Upskilling Teams: Interim professionals are typically highly experienced and can enhance the skills of team members, leaving the team better equipped after their departure.
Cons:
Less Stability: Interim contractors are usually provided with an estimated timeline for their services, which may not be guaranteed. If circumstances change and you wish to extend their engagement, the contractor is not obligated to do so.
Notice Period (Pro and Con): Interim contractors typically have short notice periods (usually one week). This can result in the contractor leaving before a project is complete, potentially causing a vacancy and the need for a quick replacement. However, this short notice period can also benefit clients, allowing them to offload an interim contractor at their convenience, such as when a project's duration is shorter than initially anticipated.
Deciding Which Type of Contractor to Hire
The type of contractor you decide to hire, will ultimately depend on your bespoke business needs. However, the table below gives a quick guide to help you decide which may suit you best:
While fixed-term contracts have their place, particularly in scenarios with well-defined timelines, day-rate interims can offer distinct advantages to your organisation, depending on your business needs. The flexibility they offer in scaling the workforce, the ability to bypass hiring freezes, cost efficiency, and their specialisation in various fields make them a compelling choice for businesses looking to meet the ever-changing demands of the modern workforce.
However, should you explore the day rate interim route, it's critical to understand IR35 and the importance of conducting an IR35 assessment before engaging with an interim manager. We are more than happy to advise on this process and guide you through to make sure the correct outcome is reached.
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With over 45 years’ experience in contract-based communications and marketing recruitment, VMA GROUP’s is well-placed to support organisations of all shapes and sizes. If you're looking for a high-calibre contractor to join your team, please don't hesitate to get in touch.
