It’s no secret that there are a wealth of benefits to hiring contractors…
Giving you the ability to tap into specialist skills, streamline your processes, and accelerate specific projects whilst also giving you flexibility in your workforce, it’s no surprise that demand for contractors is on the rise.
However, as this form of work becomes increasingly valuable to companies and more and more businesses look to enhance their existing workforce with the help of contractors, a stumbling block that is arising for many businesses is the knock-on effect that hiring a new type of staff entails; new processes and policies need to be implemented, and it’s crucial to understand the undeniably complex legal landscape you will be navigating in order to reap the benefits that contractors will undoubtedly be able to bring to your business.
Here are the 5 things you need to be aware of when taking on contract staff.
Make an accurate determination
Possibly the most important consideration is determining whether a contractor will fall inside or outside IR35; in other words, is the contractor deemed as an employee, or an independent contractor? The factors that contribute to this determination are usually the nature of the work or project they will be undertaking, the level of influence or control the business will have over the contractor, and the degree of independence the contractor will experience for the duration of the contract.
The outcome of this determination will dictate the responsibilities of both the business and the individual, such as the rights of the employee, the benefits they are entitled to, and the way they are paid.
Inaccurate determination of an employee’s status can land businesses in hot water, potentially leaving them liable for back taxes, penalties and interest, and could even lead to legal proceedings and government penalties if any employment laws have been breached.
A good way for businesses to mitigate risk when choosing to hire contractors is to utilise a contractor agency to assist with the determination. For example, at Heat we are in partnership with QDOS, who streamline the process of IR35 determination using a thorough assessment tool which is accessed by both the individual contract and the hiring business themselves, to ensure that both parties are involved in the decision-making process. The QDOS team of qualified IR35 lawyers and consultants will then carry out a case-by-case status review and verified IR35 assessment which will determine the status of roles on our behalf, ensuring compliance is maintained throughout the engagement and giving peace of mind for both our candidates and clients.
Regardless of whether your requirement falls inside or outside of IR35, you will be able to find a contractor to assist you with the project: we have access to a wide pool of talent who will work on projects either inside or outside.
Ensure you are compliant
Once you have defined the scope of work and decided on a contractor to hire, the next thing you need to be keeping on top of is the compliance that goes alongside working with a contractor and ensuring you are both compliant. Not only does this include ensuring references have been obtained and retained, that the scope of work and project has been clearly defined, and that the contract length and payment terms have been set out; but you also need to obtain proof of right to work, proof of identity, cert of incorporation, VAT certificate, and proof of insurances. One of the major benefits of working with an external agency to source and supply your contractor is that the compliance you are required to undertake will all be taken care of on your behalf: your agency will ensure that all the documents and required checks are complete, offering you peace of mind.
Safeguard your data
Depending on the type of work your contractor will be doing, you may need to ensure you have agreements and contracts in place to protect your Intellectual Property, as well as any sensitive information or data that you would want to conceal from any competitors or other businesses the chosen contractor may opt to work with in the future. The signing of Non-Disclosure Agreements is common when hiring contractors and ensures that any sensitive information or inside intel is legally bound to remain confidential. Similarly, clarity around who is entitled to the Intellectual Property of any work completed during the contract is important to define from the outset for the benefit of both parties.
Ensure you have appropriate insurance in place
Before employing contractors, businesses should review their existing insurance to ensure they are adequately covered against any unexpected liabilities that may arise. Contractor employment may present slightly different risks to employing staff on a permanent basis, so ensure you are covered for the specific nature of work that will be carried out. Businesses could potentially look to add or include liability insurance, professional indemnity insurance, or workers’ compensation insurance in various instances. Either way, it’s a good idea to understand where you stand and consult a professional for advice if needed.
Be prepared to pay
Because of the nature of their work, contractors will charge a premium for their services. This is accounted for due to their skill level, the output demanded from them, the results they command, and their efficiency in achieving them. Equally, on a more practical level, contractors are not entitled to the same benefits that permanent employees receive, such as sick pay, paid annual leave, pension, and other health and lifestyle benefits. The rate that they charge must therefore allow for these, and businesses looking to employ their services must be prepared for this.