The rise of the gig economy is reshaping the American workforce. Today, almost 50% of Millennial workers are involved in temporary positions and short-term engagements. By 2027, independent contractors are projected to become the majority of the workforce.
This creates new opportunities for Project Managers. Hiring independent contractors can help reduce costs and also requires less investment than employees. Through tapping into this talent pool, Project Managers can gain more resources to ensure successful projects.
Here are five important questions every Project Manager should ask themselves before hiring independent contractors:
1. Do I have an effective screening program for independent contractors?
From an outsider’s perspective, a company’s employees and independent contractors are viewed the same. Any actions from an independent contractor will reflect on your company. Consequently, more companies are recognizing the importance of screening independent contractors.
NAPBS Executive Director Melissa Sorenson said, "We have witnessed a significant shift … with many [employers] initially avoiding or limiting the screening component based on the premise that the workers are not employees. Over the past couple of years, that philosophy has changed, with a realization that whether the individual is an employee, independent contractor or otherwise, the worker represents the employer's brand, and screening—particularly when access to people or sensitive material is involved—is a critical risk mitigation tool, regardless of the worker's classification."
Through Verified First’s integration with Deltek solutions, this can be accomplished seamlessly. Without leaving the Deltek platform, you may request authorization, order a background check, and access results directly from the applicant profile page inside your Deltek account. Verified First collects background check authorization directly from the candidate and you can select the type of background check you need to run.
This streamlined process improves turnaround time, allowing you to put contractors to work ahead of schedule. For a busy Project Manager, this can make a difference between success and failure.
2. Do I have a plan to manage turnover and lack of loyalty?
Independent contractors have a higher turnover rate than employees. Because they have freedom over who they work with, contractors may leave you for a different project. Additionally, contractors are typically hired for short jobs. With such a short time to work with your company, it’s difficult to cultivate loyalty.
These issues can be addressed in different ways. Consider ways you can help your contractors align with your company’s goals and values. If they buy in to your mission, it helps foster loyalty that goes beyond a contract. Determine the best way to keep lines of communication open. It’s important to have a structure in place — whether you use email, phone, or in-person meetings. Finally, look for ways to create engagement with your independent contractors. This can be created through incentives or programs to help your contractors feel like part of your team.
3. Do I have the correct contracts and paperwork in order to hire an independent contractor?
It’s important to have a written contract that outlines the freelance relationship. This needs to list expected results from the project, fees, and date(s) of completion. Because of laws around intellectual property, contractors own work they create. To have ownership, you must add language in your contract that says the product is a work made for hire.
The contract should also list:
- If independent contractors are using their own tools or equipment.
- If independent contractors may hire others without your approval.
- If independent contractors provide liability insurance to their workers.
Don’t forget to note the contractor’s business and tax I.D. number. It’s a best practice to create a new contract for each new project. Finally, have both parties sign all contracts.
4. Do I have the structure in place to stay compliant with federal regulations?
Businesses who hire independent contractors are far more likely to be audited. Independent contractors pay their own taxes every quarter. Because this can create irregular payment schedules, the government has specific requirements for independent contractors. If you do not turn in the appropriate tax documents, it can lead to hefty IRS fines.
You must collect and turn in the following documents:
- Form W-9. A properly completed W-9 must be kept on file for each independent contractor. Unless contractors exempt themselves from tax withholding, you are legally required to withhold taxes at 28%.
- Form 1099-MISC. Even if you do not deduct taxes from your independent contractors, you need to file this form if you pay your contractor $600 or more a year.
- Form 1096. The 1096 is used to transmit paper Forms 1099. It must be submitted no later than January 31 each year, along with applicable returns that it summarizes. Note that you don’t have to file a Form 1096 if you e-file 1099 forms.
5. Do I have the right tools to effectively manage my independent contractors?
Because of the dynamics of working with contractors, it’s critical to have an effective system in place. Unlike traditional employees, you have less oversight over contractors. You have less control over the specific details of projects and how they are completed. Additionally, they often work on multiple projects. If they choose not to make your project a priority, it becomes even more important to manage their time.
An effective project management system will allow you to optimize work from your contractors. To consistently meet deadlines, you must plan instead of react. When looking for a project management solution, ask if it can:
- Show everything you need to know about your project on a single screen.
- Provide a way for teams to provide project updates on any device.
- Use alerts and dashboards to keep engagements on schedule and budget.
Having a solution that helps you execute projects successfully will pay for itself. Furthermore, the improved process will help you establish a stronger relationship with your independent contractors.
Streamline Your Process With the Right Tools
If you’re ready to hire a contractor, you can set yourself up for success with the right process.
Remember, an improved project management process isn’t the only way you can create new efficiencies. When onboarding independent contractors, don’t neglect the screening process.
Deltek’s integration with Verified First allows you to quickly screen independent contractors. Through putting them to work faster than your competitors, you gain a built-in advantage. If you’re ready to save time through integrated, effective solutions, fill out the form below.