What are the benefits of contractors, and how does it work?

Nov 22, 2018 Web Developer Business Growth 0

When it comes to setting up and running your own successful business, the staff you have on board are key. While this will naturally be based on a bedrock of permanent employees, you may also want to think about using independent contractors. They offer a whole host of different benefits from employing salaried staff and can be a vital tool for many businesses to use regularly.

What is contracting, and what benefits can it bring to your business?

How does contracting work?

A contractor is simply a person you employ for a limited period of time to complete a set project or fill a role temporarily. Once the set period is up, the contractor terminates their work with you and you pay them any monies outstanding. A key point to note is that contractors are not employees of your company. Many businesses class this as a real benefit as it means that you are not responsible for managing their NI or PAYE contributions.

In terms of how the process works, you would start off as a business by identifying the need for an external contractor to work for you. When this is done, you could hire one directly or go through a recruitment agency, who takes this work away from you.

After you have found a contractor you want to use, you would negotiate with them or their agency over hourly rates of pay, working hours, and what the role involves. Once everyone is happy, contracts would be signed to make the arrangements legal, and they would complete the work for the agreed period.

Consider contractors who work through an umbrella company

One top tip when hiring contractors is to look for those who use an umbrella company to manage their own payroll. While this is not a legal necessity, it makes using contractors much easier.

Instead of having to process timesheets, deal with queries and pay them yourself, the umbrella company does it all for you. You simply pay the agreed monies to the umbrella company. The umbrella company then deducts their fee and any PAYE contributions before passing it on to the contractor or agency. This also gives you an objective third party to speak with if there are any issues over the contractor’s pay or contract.

Why use contractors in your business?

Now that you know what contractors are and how they work in general terms, you may be wondering what benefits they bring with them. Here are some of the best ways that they support business growth:

Cost-savings – although the hourly rate you may pay contractors could be higher than the equivalent permanent staff, you will still save money in the long term. This is because you will only hire and pay them when there is work to be done. This is much more efficient than having permanent staff there all year, even when there is nothing to do. You also do not have all the additional costs that come with permanent staff, such as annual leave entitlement or sick pay.
Business flexibility – key to most businesses now is being able to respond in an agile way to demands. This could be a one-off project you have won that extra staff are needed for or busy periods where you need more people to help out. Contractors are the ideal solution here as they can be hired quickly and start work fast.
Access to specialist skills or equipment – another great benefit that using contractors gives to business is the specialist skills they bring with them. While your permanent staff may have all you need to fulfil your core demands, contractors can allow you to tender for work in other areas with confidence. For many industries such as construction, some one-off jobs will also require special equipment to complete. It is simply not practical to buy this machinery and train people to use it, which is where contractors help out.
Cover for temporary absence – if someone is off sick for a month or goes on holiday for a few weeks, you do not want the hassle of finding a permanent replacement for them. However, at the same time, you do not want to leave your business short-staffed. This is another area that contractors can help in, as they can fill the gap for the period specified until the permanent member of staff returns.

Make contractors a key part of your strategy

While permanent staff play a pivotal role in any business, external contractors also have a big role to fill. They offer a variety of different solutions to common business issues and in a more agile, controllable way. If you use a contractor who is registered with an umbrella company, then you get all these benefits with none of the hassle over payroll. For most businesses, this makes contractors a viable staffing choice.