The Risks of Getting Contractor Management Wrong


 As you’ve seen from our article on best practice contractor management, RISK is a major consideration when engaging non-permanent talent. And the risk factors come in multiple shapes and sizes. Here’s just a few:


ARE THEY ON THE BUS? The ‘gig economy’ per se, has reputedly contained a more laissez-faire group of workers. Contractors, as masters of their own domain, can have less awareness or understanding of the macro and micro business goals of their client. And they can be removed from the environment in which they’re contracting, both physically and socially. Hence, there’s a risk they’re not on the same page as everyone else, and so may be less productive, less valuable (in reality or perception) and less attuned to the real needs of the business.


ARE THEY CULTURALLY ISOLATED? Some organisations take the notion of contracting a little too lightly. By appointing a specialist to deliver a set project or outcome, often at a premium, the view that ‘time is money’ can override all else. Akin to point 1 above, if contractors aren’t sufficiently integrated into the workplace culture, their self or workplace-induced isolation may contribute to a less-than-ideal outcome. The best way to overcome this risk is to introduce internal policies for staff to adhere to, so that contractors get a real perspective on the workplace, and a sound experience of how things work. There’s a fine balance here though – a contractor that is TOO integrated into the workplace may, over time, be deemed an ‘employee’…read on.


ARE THEY TOO ENTRENCHED? Misclassification of workers also poses a real risk for organisations engaging contractors. What does this mean? Picture this scenario: you’ve engaged a contractor to a specific department within your business. They’re delivering a defined service or outcome. But their tenure is ongoing. There’s no end in sight. Ostensibly, they could be perceived to be ‘on staff’ (or a ‘deemed employee’). If the ATO thinks so, then your business is at great risk of legal action or severe fines. So….to achieve the maximum potential of your contract workers, integrate them into the culture enough give them a sense of where the business is heading; but not so much that they become ‘part of the furniture’.


safeIS YOUR INTEL SAFE? Think about the IP, company and client data and industry information you may have at your disposal. Think also about how secure or vulnerable this data is. Have you vetted your contractors in a thorough, consistent and secure way? Do your contracts with them protect your business? What level of data can they access on your servers? If you’re feeling uncomfortable about any of this, you need to take action. Now.


misclassificationARE YOU PAYING THE RIGHT LEVEL OF TAX? If your contract workers are classified incorrectly you may be due to pay additional taxes, superannuation and other statutory obligations. Scary stuff if you’re getting it wrong. Any leave of misclassification or incorrect worker categorisation can land you in hot water with the ATO. So get your worker taxation house in order!

Do you have experience with the risks associated with hiring contractors? Any stories to tell? We’d love to hear from you in the comments section below.

Also, keep your eyes peeled for the next installment of risks you face when you’re not managing your contractors properly. Click here to stay in the know.