How to manage and pay independent contractors

In the past 10 years, independent contractor payroll and management in Australia has significantly shifted. In the past, these solutions were largely driven and run by procurement as a cost saving exercise. However, in recent times, there’s been a greater emphasis on talent acquisition, HR and legal departments taking a more active role in developing the solution.

Primarily, we see this because of the greater number of contractors in today’s workforce, as well as greater supplier risks, higher expectations of contractor experience and more demand for speed and agility.

In Australia, many contractors are paid directly through recruitment agencies as Pay as You Go (PAYG) employees. Others are self employed as a sole traders, while some are working through their own business as private limited companies. Regardless, if you’re engaging contractors to perform work in your organisation, you’ll need to know the essentials behind how to manage and pay them.

Managing independent contractors

All contractors, regardless of whether they’re sourced through referrals, recruitment suppliers or the talent acquisition team, need to be properly onboarded and inducted into your organisation.

Some things you need to consider include:

  • Do you conduct background screening and right to work checks on a consistent basis?
  • What equipment does the contractor require to do their job?
  • What policies and procedures does the contractor need to sign?
  • Do your contractors have adequate insurances?

Additionally, once they’re all set up and working for your organisation, how are you tracking their performance and satisfaction with the role? While many organisations have established processes for understanding how their permanent workforce is doing, too often they neglect their contingent workforce. Why spend the money replacing a resource when you could instead give them what they need to perform.

Finally, if you’re engaging a large number of workers in your organisation, you need a complete level of visibility. At a minimum, you should be aware of where your contractors are located, how much they’re paid, whether they’re extending at the end of their contract (or leaving early before the end of their contract) and your ratio of agency sourced contractors versus directly sourced, to name a few. This information will help you understand areas of improvement in your contingent workforce and implement initiatives to improve efficiency and cost savings.

Paying independent contractors through payroll

This shouldn’t be a surprise, but the primary reason that contractors are working at your company is to get paid. The best way to keep contractors happy is to make sure they’re paid accurately, on time, every time.

Organisations will already have a comprehensive payroll function for their permanent workforce. However, contractors are usually paid through the recruitment agency that sourced them. This large downstream supply chain means inconsistencies in contractor experience, award interpretation, payroll accuracy and oncosts.

When implementing a payroll process for contractors, organisations should ensure:

  • Consistent and reliable payment cycles with all contingent workers.
  • A detailed payroll calendar, outlining key dates for timesheet submission to ensure timely and accurate pay cycles.
  • There are reminders for both hiring managers and contractors to fill out their timesheet.

Additionally, organisations need to be responsible for payment of all statutory taxes (including payroll tax and super) and insurances. Remember, the Plutus Payroll scam defrauded the Commonwealth of over $105 million in taxes.

Engaging a contractor management company

Over time, clients have opted to partner with CXC and adopt our workforce management model to accelerate efficiency, mitigate workforce and supplier risks, introduce new cost saving initiatives and increase sourcing through building talent pools of known and unknown talent.

CXC’s core solution offering is contingent workforce management and payroll. We are the largest provider in this space in Australia with over 30 years’ experience. Under our model, we become the HR and payroll partner for all contingent workers regardless of source.

CXC ensures consistent and reliable payment cycles with all contingent workers. With multiple checks and balances in place and a dedicated client services team, we have established robust measures to minimise payroll issues.

At set points (such as timesheet and payment confirmations), our system automatically reminds contractors and hiring managers over text or email. When a situation might benefit from a personal touch, CXC account managers contact contractors over the phone or face to face.

As one of the world’s leading providers of contingent worker management solutions, CXC is well positioned to optimise all elements of your contingent workforce engagement. With operations in more than 50 countries across five continents and decades of experience, we can assist with every aspect of your engagement.

If you would like to find out more about how we can help please contact us here.