- Jun 25, 2019,
Businesses of all sizes and across a wide range of industries long ago discovered the benefits of being able to quickly expand the company’s capabilities by supplementing their workforce with contractors. Negating the challenges associated with hiring and training full-time employees, the positive business impact of contractor relationships are undeniable.
However, if you aren’t properly managing contractor payments and agreements it’s easy to start leaking substantial sums of money. Missed opportunities, unhappy associates, considerable costs and more are all possibilities that will have a negative business impact when contractors aren’t managed correctly.
40 Million Strong & Growing
According to a 2017 National Bureau of Economic Research working paper, The Value of Flexible Work: Evidence from Uber Drivers, flexible contract work has increased by 56 percent over the past 10 years, with more than 16 percent of U.S. workers engaged in flexible contract work as their primary job.
The independent contractor talent pool is currently sitting at 40.9 million and since self-employment has become a key source of additional income and a viable work path for many U.S. citizens, it’s unlikely to slow anytime soon. However, ineffective contract management can cost your business up to 9.2% of its annual revenue, according to the IACCM. Not a single company in the world thinks that a negative business impact approaching 10% of revenue is acceptable, yet it’s happening all the time and across the board when it comes to contractor management.
As the independent workforce continues to grow, business leaders must increase their focus on developing and optimizing a strategy for contract management for independent talent. While contractors provide the ability to outsource work on a project-by-project basis, grant access to specialized areas of expertise, and allow significant staffing flexibility, mismanagement of those payments or contracts means that they will quickly seek contract work elsewhere.
The loss of quality contracted talent is generally felt throughout multiple layers of the organization, but mismanaging contractor agreements and payments can also be far reaching. Just as you’ve done your homework on the specialized expert or experienced prospect that you’re attempting to “court” for the position, he or she is going to take the time to research your organization as well.
People love to share “bad news” and in today’s digital world, they can do so in a matter of minutes. Imagine the business impact of negative reviews on Google, Glassdoor, and freelance/contract/employment sites simply due to mismanagement of contractor payments and agreements.
Remember, It’s Not Just Your Business That’s Affected
As mentioned earlier, the independent contractor pool is rather large and growing at a considerable rate. Numerous specialists with in-demand skills are making their living via contract work with more growing dependent on that type of work on a daily basis. When your organization fails to timely manage their payments or contracts, the repercussions on their lives can be extremely negative and all-encompassing.
Having your contract workers’ pay approvals in a separate, cumbersome system that can easily be overlooked and cause payroll to accidentally be processed on Monday instead of Friday may not seem like that big of a deal to some, but those two days can negatively impact their standard of living in ways you may not consider. Not everyone has a safety net or cushion in the bank account. That can be especially true for those that may be turning to the contractor option due to an unexpected life change, layoff, downsize, or other career-altering event. Mismanaging your employees’ compensation, whether full-time, part-time, contract, or temp, is arguably the fastest way to a business impact neither you nor your stakeholder are going to enjoy.
Once a contractor’s personal life is impacted due to contract or pay issues, no matter how little or large, your business is going to feel the affects. Missed work, project slowdown, or the ultimate solution of leaving the relationship altogether will result in a financial business impact for you. If the contractor’s position is key to a project, imagine the nightmare of attempting to replace them as quickly as possible. Whose shoulders will it fall on to find a timely replacement? Can the right talent even be cultivated, trained, and brought up to speed in time to meet project deadlines and satisfy stakeholders?
The bottom line is, failure here could result in failure across the board.
Building Stronger Client-Contractor Relationships
Your success with independent contractors depends on communication, clarity, and honesty. These qualities help build and maintain respect, trust, and confidence in the client-contractor relationship, enabling you to develop a strong connection and lasting association.
To establish a successful relationship with your contractors, utilize these tips:
- Provide a clear RFP — Contracts and Requests for Proposal (RFP) are vital tools that are utilized to find and engage independent professional talent. Your RFP shouldn’t be overly complex or extensive, simply strive to outline project specifications and requirements and clearly present your specific needs.
- Define the business relationship — A service contract is a binding agreement between the independent contractor and you that outlines the work specifications. This includes start/end dates as well as operational and procedural requirements.
- Define the SOW — The Scope of Work (SOW) is an essential part of the service contract because it does the following:
- Defines the functional requirements of the project.
- Outlines what the contractor is and isn’t responsible for.
- Provides detailed timelines and milestones for deliverables.
- Sets expectations for a completed product.
- Protects both the independent contractor as well as your business by establishing rights and responsibilities of both parties and limiting liability.
- Sets milestones and parameters for timely payment.
- Consolidate & expedite contractor management — The speed of your contractor payments and contract management will always have a direct business impact and it’s imperative that these processes are streamlined as quickly as possible. Failure at this juncture can result in project slowdown or stoppage as you scramble to replace that much needed talent.
Slow Contract and Payment Approvals Can Cost You
The sea of independent contractors is deep, but there are countless organizations out there looking to employ the exact same talent that you are. Finding the perfect individual for your project can be a tedious project and it can quickly turn beyond frustrating when that opportunity is missed because of a slow approval process that results in the contractor accepting an alternate position. Especially when you lose them to a rival or direct competitor.
Chances are, at this point you have no option but to start the entire process over again. Missing the “perfect” opportunity will often result in attempting to continue culling through available talent, trying to find that “spark” once more. This is costly in both time and money, causing a business impact from multiple facets and dominoing into delays and possibly even affecting other contracts, contractors, and business down the line.
Capriza — The Positive Business Impact
Capriza ApproveSimple is the integration tool that ensures your contractor payments and management issues are a problem of the past. Money wasted due to communication breakdown, miscalculation, or other antiquated human errors by various departments are no longer an issue.
ApproveSimple puts you in a position to build the team you need, ensure their overall happiness, and form the relationships with the talent you need to complete your projects on time and within budget.
To learn more about how we can help or see a demo of Capriza ApproveSimple, contact us here. Managing your contractors doesn’t have to be complicated or costly and at Capriza, we can help you ensure that it’s not.