3 Top tips for hiring new contractor employees

Hiring contractor employees can be a flexible, cost-effective way for small and medium-sized businesses (SMBs) to grow, scale quickly, and handle specific projects. Contractors provide businesses with specialised expertise, adaptability, and short-term solutions without the long-term commitment of full-time employees. However, managing the hiring process for contractors requires a different approach compared to permanent employees, particularly in terms of defining roles, managing contracts, and ensuring compliance.

In this comprehensive guide, we’ll explore three essential tips for hiring new contractor employees. From clearly defining the scope of work to using tools like applicant tracking systems (ATS), and ensuring legal compliance, we’ll guide you through the key steps to making the most of contractor hires.

For a deeper understanding of optimising your hiring process, check out GoHire’s guide on how to hire employees.

1. Clearly define the scope of work and contract terms

The first and most important step in hiring a contractor is to clearly define the scope of work. While it’s common to focus on what tasks the contractor will handle, it’s equally important to outline the timelines, deliverables, and payment structures. This will help prevent misunderstandings, delays, and scope creep (where the contractor is expected to do more than initially agreed).

Why is defining the scope of work important?

Unlike full-time employees who may take on a variety of roles and responsibilities as needed, contractors are hired to perform specific tasks or complete a particular project. Without a detailed job scope, you risk either overburdening the contractor or underutilising their skillset, both of which can result in lower productivity and dissatisfaction on both sides.

By having a clear scope of work, you’ll ensure that:

• Everyone understands their role: The contractor knows exactly what’s expected, and you, as the employer, know what you’re paying for.
• The project stays on track: With clear deliverables and timelines, you can better monitor progress and make adjustments if necessary.
• There’s accountability: If issues arise, both parties can refer back to the scope of work and the contract terms to ensure everything is handled fairly and professionally.

How to create an effective scope of work

Creating a comprehensive scope of work starts with a clear job description. Break the project down into smaller tasks and outline the skills needed to complete each one. For example, if you’re hiring a web developer, include specific tasks like “design homepage layout,” “implement responsive design,” and “integrate e-commerce functionality.”

Next, define the timeline for each task. Include clear deadlines or milestones that will trigger payments or reviews. This can help keep the project on schedule and ensure that everyone is working toward the same goal.

Lastly, agree on payment terms. Contractors may prefer to be paid hourly, per project, or on a retainer basis, depending on the scope and duration of the work. Ensure that both parties are aligned on when and how payments will be made.

Legal considerations

Make sure your contract includes:

• The legal status of the contractor (i.e., they are not an employee).
• Clauses protecting your intellectual property (IP).
• Clauses outlining who is responsible for taxes and other legal obligations.

For more insights on avoiding common hiring mistakes, explore GoHire’s guide on common career page mistakes. This will help you ensure that expectations are clear from the start, which is particularly important when hiring contractors.

2. Use an applicant tracking system (ATS) to streamline the process

Hiring the right contractor can be time-consuming, especially when you have multiple applications coming in from various job boards, freelance platforms, and referrals. This is where an applicant tracking system (ATS) can make a huge difference. An ATS automates much of the hiring process, helping you sort through candidates more efficiently, manage their applications, and streamline communication.

Benefits of using an ATS for contractor hires

1. Centralised application management: With an ATS, you can keep all applications in one place, making it easier to manage candidates from different sources. This is especially helpful if you’re posting jobs across multiple platforms, such as LinkedIn, Upwork, or your company website.

2. Automated candidate screening: An ATS can automatically filter out applicants who don’t meet your minimum qualifications, saving you hours of manual screening. This allows you to focus only on the most qualified candidates.

3. Efficient interview scheduling: Contractors are often working on multiple projects simultaneously, which can make scheduling interviews difficult. An ATS can automatically send calendar invites, manage time zones, and even handle follow-ups, ensuring that you keep the hiring process moving smoothly.

4. Improved candidate experience: Contractors, like full-time employees, value a smooth and professional hiring experience. Using an ATS can help you provide timely feedback, clear communication, and a structured process, which can enhance your company’s reputation and help you attract better talent.

GoHire’s ATS allows SMBs to streamline the hiring process, from job posting to application management and interview scheduling. By using an ATS, you can save time, improve organisation, and reduce the chances of missing out on top contractor talent.

3. Verify qualifications, experience, and ensure compliance

Once you’ve found a contractor who seems like a great fit, the next step is to verify their qualifications and ensure compliance with labour laws. Contractor hires differ from employee hires in several key areas, including tax reporting, legal classification, and responsibilities.

Verifying qualifications and experience

Contractors are often brought in for their expertise in a specific field, so it’s critical to verify their skills before finalising the hire. Here are a few steps to follow:

• Check certifications and licenses: If the role requires specific certifications or technical expertise (e.g., a marketing contractor with Google Ads certification), verify these credentials early in the process.
• Request portfolios or case studies: Ask the contractor to provide examples of past work that align with your project’s needs. This will give you insight into their capabilities and whether they have the experience to handle the task.
• Contact references: If possible, speak to past clients or employers who can verify the contractor’s professionalism, reliability, and quality of work.

Ensuring compliance with contractor regulations

Contractors are not employees, and this distinction carries important legal implications. Misclassifying a contractor as an employee—or vice versa—can lead to legal and financial penalties, especially when it comes to tax reporting.

Some key areas to review include:

• Independent contractor status: Make sure that the contractor is legally recognised as self-employed. In many regions, including the UK, contractors are responsible for paying their own taxes. You’ll need to ensure that your contractor agreement reflects this status to avoid any confusion with HMRC or other tax authorities.
• Payment terms and tax forms: Be clear about how the contractor will be paid. Depending on the country, you may need to issue specific tax forms at the end of the year (e.g., a 1099 form in the US).
• Protecting your intellectual property: Ensure your contract includes a clause that protects any intellectual property (IP) created during the contract period. Without this, the contractor could claim ownership of the work they deliver for you.

Staying compliant with local laws can be complicated, especially if your business operates internationally or hires remote contractors. For a smooth hiring process, check out GoHire’s guide on recruiter best practices to ensure you’re following best practices for contractor classification and compliance.