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Is it Time to Break Up with your Contractors?

Employee vs Independent ContractorMore and more technology enterprises are outsourcing some of their work to offshore teams. While this trend is prominent in software development -- especially in short life-cycle projects like mobile app development -- it is becoming a noticeable trend in many technology-driven industries.

Contracting with reputable outside professionals can be a good solution for small and mid-sized companies to level the playing field against larger competitors. However, the benefits are usually greatest in the short term. Diminishing returns begin to factor in over time, and it’s usually up to HR to weigh the decision about the employee vs. independent contractor dilemma.

Five Signs it's Time to go with an in-house Employee vs. Independent Contractor

Let’s look at some situations where outside contracting isn’t a good permanent solution

1) Contractors Have Access Sensitive Files or Systems

All contractor relationships involve trust and when a team is remote, that trust is harder to establish. If the data to be worked with is sensitive, risk assessment may lead to the conclusion that is just not in a company’s best interest to sacrifice direct control to save on hiring costs. The time and money saved pale in comparison to the losses incurred if key data is compromised.

2) A Contractor’s Project Has Developed into a Program

In some cases, a contractor relationship is so effective that the products or services generated become central to the enterprise's success. When this occurs, it’s time to transition away from that relationship and take future efforts in-house. The sooner you do, the sooner you’ll be able to integrate the program fully into long-term strategy. This raises the next point:

3) Weigh the Costs and Benefits of Long Term Realities with Short Term Help

A good example of this is provided by the scramble to implement cloud technology just a few years ago. Many executives concluded they didn’t have time to hire or train for this emerging skill set. Instead, a patchwork of outside firms developed core cloud systems. Now, the cloud is central to billions of dollars in transactions annually and many companies lack the in-house knowledge capital to optimize their own systems.

4) Contractors Aren’t Keeping Their Skills Sharp

Are requests taking longer to be fulfilled? Products and services dropping in quality? These are signs your outside assets are falling behind the technology curve. One of the best arguments for proactive hiring is that it ensures team members uphold a company’s core commitment to excellence. Even the most effective contractors will never own the company mission as much as your in-house people.

5) Contractors Are Experiencing “Growing Pains”

Many remote contractor firms are small, specialized teams -- long on skill but short on business savvy. Erratic behavior, such as missing deadlines, swapping out team members or unexpectedly re-negotiating agreements, can all point to a telling shift in the organization that you may not wish to simply “ride out.”

Making the Leap from Contract to In-House

You’ve decided to end the conflict of Employee vs. Independent Contractor, and move toward an in-house model with minimal disruption, it’s a good idea to downshift the contractor relationship slowly. Moving too fast can make it difficult for you to take total ownership of assets that outside professionals have worked on and transition them in. It also takes time to find and train the people who will carry it on.

Be sure to remember the following:

-- Acquire all documentation, best practices and lessons learned from remote teams.
-- Review your staff to discover “natural fits” for the function moving in-house.
-- Consider negotiating to acquire contractors as permanent employees.

If you are a company facing the old “Employee vs. Independent Contractor” dilemma, we have solutions for you. We’re Anderson Sterling Associates. With more than three decades of experience recruiting top talent across a range of industries, today we specialize in recruiting for high technology companies. Not only do we have an established network of relationships with leading tech companies, but our proprietary pricing is often less expensive than our industry peers. Call us to learn how we can help.

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