When faced with a challenge beyond the skills of their employees, leaders must answer a difficult question:
Do I hire another full-time employee with the skill to overcome key challenges, or do I hire an independent contractor (or a few) to get this important work done?
Though challenging to answer, it is a question that every employer should be asking themselves, especially in the highly-paid tech industry. You don’t want to rely on a talented/pricey contractor like they’re an FTE and you definitely don’t want a full-time hire who has nothing to do for months out of the year. However, more and more companies are turning to contract labor to meet the demands of doing business.
Opportunities and challenges the increasingly globalized and tech-driven marketplace are evolving in complexity, and new, specialized skills are becoming necessary for companies across industry lines. These demands, combined with the increasing cost and duration of the candidate search, are causing more employers to turn to contract or contingency labor to meet their objectives.
According to a recent study conducted by Accenture:
By various estimates, 20-33 percent of today’s US workforce now comprises independent workers (freelancers, contractors and temps), up from 6 percent in 1989.
Worldwide, companies now spend an estimated $300 billion dollars per year on such contingent labor.
Temporary and contract labor is one of the fastest-growing line items on corporate operating statements.
The U.S. Bureau of Labor Statistics predicts that employment services will count among the fastest-growing segments of the economy in the long term, adding 637,000 jobs in the next 10 years—twice the growth rate for the overall economy during the same period.
The recent emergence of online independent contractor talent platforms that enable companies to access “talent in the cloud”—like Elance, oDesk and TopCoder—is a rapidly growing market, with more than 1 million workers having earned $1- 2 billion over the past 10 years in this industry.
When contracting outside tech talent, or any contingency labor, there are some things that you should always consider. For one, you need to determine how much outside help you will need, as over or under investing will end up costing your bottom line and/or the quality of the work being done.
Another thing that you should always consider when contracting outside talent is liability. Though they may come from a reputable agency or have an impressive online portfolio, they are still an unknown party who may be responsible for moving some of your company’s most important work to completion. Depending on the scope of the work, you may be entrusting the performance of your company to a near-stranger, which is why vetting your tech contractors is of the utmost importance. You can always use a platform like SkillGigs, where we source contractors based on your needs and qualify the talent to ensure they have the actual skills they present on their resumes. You can view the talent in our Tech Contractor Marketplace for free here. But if you’d prefer to go about the process yourself, you’ll find information on how to do that below.
Vetting Tech Contractors
No matter where, when or for how long a tech contractor comes into your company, the employer is potentially liable for this temporary employee and their actions. When these actions are productive output and smiles, then you get all the credit for finding the helpful outside talent. When these actions take the form of conflict, underperformance or even theft of intellectual/actual property, then the liability is yours as well.
If worse comes to worst, and an issue with a contracted employee goes to court (wrongful termination, negligence, retention lawsuit, etc.) deciding liability in most states hinges on whether the employer knew (or should have known) about the contracted employee’s dangerous, negligent or dishonest tendencies. When considering a lawsuit for a negligent hire, courts will consider the “totality of the circumstances,” including the information available to the employer and the duties of the position held by the hire.
This being the case, many employers prefer to conduct the same background screening on contract labor as they do when considering a full-time employee. This way, they can ensure compliance with employment laws and protect themselves from the risks of bringing in a problemed contractor.
If the contractor is self-employed, then you should use the same background checks applied to regular employees in order to ensure compliance with employment laws.
If you are contracting tech talent through an agency, you should always review the agency’s contract for the nature and extent of any screening that is performed on their contractors. Before you agree to the contract, there needs to be a clear understanding of which party will be responsible for conducting a background screen and of the standards that will be used for information uncovered in this screen. These ethics/background standards should be the same that you hold for your full-time employees and they should be compliant with national and state employment laws.
Loose Lips Sink Ships
Another liability that you should consider when contracting tech talent is the potential for the theft of company assets, secrets, research, or any technology that your company is developing. According to a study, 59% of employees who quit or are asked to leave their jobs secretly take proprietary data from their employers. Innovation and information are the currencies of the tech industry, so it is always best to get protection from this liability in writing, instead of betting on good old human nature.
In order to protect your company’s most valuable assets, you should create an air-tight Non-Disclosure Agreement (NDA) for all of your tech contractors. You should review this agreement thoroughly with any employee and/or agency who you contract, including identifying proprietary information and actions taken on discovery of breach of contract.
The last thing you want is for your competitors to get the inside scoop on your upcoming product from the person who you hired to build it.
Quick Skill Check
Finally, to protect you from the perils of contracting a poor-performer, you may also want to apply the same skill tests to tech contractors that you would use to evaluate new tech hires.
This process should not be time consuming. The whole point of contracting tech talent is to get work done ASAP, so your skill check needs to be both quick and effective. The content of the test should be highly related to the tasks you’re contracting them for and should prove that your contractor can (or can’t) exercise the skill sets that you need so badly.
For instance, seeing how well a contractor can code in Ruby on Rails or how quickly they can navigate a database will show you that you’re getting the right person for the job. If they aren’t the right person for the job, then that’s all there is to it. They may bill you for the time it took to complete the test, but that’s better than being billed for a month of mediocre work.
It’s always better to clear your contractors the same way you clear your employees. This protects you from compliance and liability issues and ensures that you don’t hire any troubled or dishonest contingency employees.
Determine the terms of and responsibility for background check.
Create an air-tight NDA.
Test the skills of contractors before the real work begins.
Ronny Cheng is one of the Co-Founder’s of Digital Astronauts and has helped drive lead generation in the software industry for organizations of all sizes — from start-ups to Fortune 500’s. He helped build one of the first online software review websites, specializing in CRM, ERP, and HR software. He’s a nationally published author with extensive experience working with the HR/Recruiting industries largest brands. In his spare time, you can catch him on Instagram doing his best food blogger impersonation.
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