Use Contractors to Lower Business Overhead
Maintaining a large employee base can be prohibitively expensive. Providing them with space, equipment and benefits, as well as paying their payroll taxes, can easily equal or exceed their compensation. Although there are times when having an employee on-site is essential to the requirements of the job, many tasks, projects, and even positions can easily be filled with contractors who do the same job with little to no overhead expense. Here are some ideas that could help your business save several thousands of dollars each year.
Using Contractors for Specific, On-Going Tasks
Take the job descriptions of all your employees and combine them into one massive document. Next, separate out all stand-alone tasks. Stand-alone tasks are those that do not require knowledge of other areas of the business or depend on the completion or timing of other tasks. As an example, one such task might be bookkeeping. It may be more cost-effective for you to contract out your bookkeeping services than have them completed in-house by someone who requires office space, equipment, and benefits. Overall, this reassignment of tasks could save you the overhead expenses associated with a few full-time employees.
Using Contractors for Special Projects
When special, one-off projects come up in a business, it often results in chaos. With a limited number of employees to share the load, many other important things can go left undone. Because some employees are likely non-exempt, overtime costs due to special projects could also be significant. Hiring a contractor for a limited time, specific to each project, can save thousands of dollars a year. These contractors should have access to your employees for information and support but will basically complete all their work on their own, outside of the office.
Using Contractors for Permanent Positions
In many businesses there are full-time positions that lend themselves well to completing outside the office. For example, insurance companies often contract out their claims processing. Some even contract out their sales function, and if the compensation is commission-based, you only pay for results.
The Human Resource Benefits of Using Contractors
Since independent contractors are not employees, you don’t have to deal with all the same procedural requirements that you do with an employee. For instance, attendance is not an issue. If they don’t fulfill their duties in the time required, they are in breach of contract and you can end the relationship. If you’ve hired them to do sales or other jobs with measurable output, it’s easy to get rid of poor performers. In general, you don’t have to worry about documenting performance, Performance Improvement Plans (PIPs), or other company policies related to coaching, counseling or terminating an employee.
Downside of Using Contractors
Although most of the outcomes of using contractors are positive, there is one obvious downside – you do lose a little control. If you tend to be a micro-manager who is very hands on, then using contractors is probably not a good fit for you. The positive spin on that is, using a contractor might help you learn to loosen the reigns and delegate a bit more, which is probably something you need to do anyway.
Using contractors can be a great way for businesses to lower overhead expenses and save money. If you’re hesitant about taking that plunge, you can start slowly by contracting out a small piece of your workload, like a special, short-term project. Be sure to consult with your human resources manager and/or your attorney to work out the details before getting started.
HB Hot Rods and Hogs was started by Ed Syer in the back of his auto repair shop in Huntington Beach where Ed was building